TaxTMI 
TaxTMI 
2020 (7) TMI 129
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....ntract business as income from 'Other sources' in place of income from 'Business'. 3. Facts pertaining to this ground are that the assessee is engaged in the business of civil contractor and returned income at Rs. 11,27,050/-. His case was selected for limited scrutiny assessment through CASS because there was mismatch (i) in respect of sales turnover (ii) mismatch on Tax credit and (iii) mismatch on contract receipts/fees. After issuing notice u/s. 142(1) of the Income-tax Act, 1961 ( hereinafter referred to the 'Act' in short), the AO after perusal of 26AS data noted that the assessee has received total amount of Rs. 93,46,927 ( Rs. 88,00,954/- as contract receipt u/s. 194C and Rs. 5,45,973/- as interest u/s. 194A). However, the AO obs....
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....14, wherein also he has shown this interest receipt on this business-FDRs as his business income (by crediting in the P/L account of his business). It was also emphasized and pointed out that these FDRs were made solely for the purpose of above contract business by offering it as collateral securities to the above bank and/or as tender money i.e E/money, Security deposit and so on to different contractees, who insist on it, without which, the assessee would not got the contract. Thus, it was contended by the assessee that interest earned on these FDRs are correctly shown by him by including and treating it as his business income. However, this contention of the assessee was not accepted by the AO. According to AO, the assessee has failed....
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....3/-. The fact is that the assessee has received interest from different FDRs. The AO has noted that the assessee received Rs. 5,45,973/- as interest from FDRs and tax was deducted at source u/s. 194A of the Act. According to AO, the assessee has not reflected this amount of interest income in his ITR. According to AO, this receipt comes under the fold of income from 'Other Sources'. However, according to assessee, since the FDRs are solely made for the purpose of doing his business and since the FDRs are offered as collateral securities to above bank and/or as tender money i.e. E/money, Security Deposit and so on to different contractees, this interest earned should partake the colour of the business income and not from "Other Sour....
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....(Rs. 93,46,927 - Rs. 91,65,482)= Rs. 2,31,445/- because even if the contention of assessee is correct, then he should have shown the contract/business income at Rs. 88,00,954 + Rs. 5,45,973= Rs. 93,46,127.80, thus there is a clear shortfall of Rs. 2,31,445/-. Therefore, in the light of aforesaid discussion, I set aside the impugned order of the ld. CIT(A) and remand the matter back to the AO with a direction to examine the matter afresh regarding the characterization/nature of receipt in the light of the above mentioned case laws as well as the facts which the assessee bring to the notice of the AO. And if the assessee brings the notice of AO the terms of contract etc and is able to show that the FDR's in question was essential/necessary fo....