TaxTMI 
TaxTMI 
2026 (10) TMI 1100
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....on impugned orders for captioned years, upon rival party's concurrent request and for the sake brevity & completeness, these bunch of cross appeals are commonly heard together for being disposed off by a common & consolidated order. In view thereof, our adjudication laid hereinafter with reference to lead AY 2013-14 in ITA 65 & 121/JAB/2018 shall mutatis-mutandis apply to remaining appeals qua assessment years. 3. Tersely stated common fact of the case are that; 3.1 the assessee is a State owned & controlled concern, came into existence in terms of declaration under Town and Country Planning Act, 1973 for Madhya Pradesh Government ['MP-Govt'] to facilitate planned & balanced development of Jabalpur City. The assessee operates under sole administration of housing development ministry of MP Govt. for developing housing and civil amenities for Jabalpur city. In terms of its establishment, on commercial principle the assessee for the assessment years under consideration was predominantly engaged in developing residential dwelling units & commercial complex, open residential spaces, large open spaces to facilitate commercial establishments etc. The planned development also include....
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....ssessee's Appeals : ITA 65 to 67/JAB/2018 1. That the Hon'ble CIT is not justified in estimating the presuming the net profit of the assessee at the rate of 3%. 4. In the course of physical hearing it was solidified that, both the parties have cross aggrieved with reduced % of net profit estimation. The Revenue however additionally seeks to restore the assessability of interest income u/s 56(2) of the Act ['IOS'] instead of impugned adjudication assessing it u/s 28 of the Act. 5. We have heard the rival party's submission and subject to rule 18 of ITAT-Rules, 1963 perused the material placed on records & referred, and considered the facts & issues in the light of settled position of law which was also forewarned to the respective parties for their rebuttal. 6. We note that, the assessee for its business employed 'cash system of accounting' and its books were subjected to audit u/s 44AB of the Act wherein the auditor specifically in form 3CA reported that (Pg-54), the books of the assessee were yet to be Statutorily Audited by Local Fund Auditor (Government Auditor) and hence for the purpose of tax audit he annexed an unaudited income & expenditure account. As per ....
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.... of the books/accounts, resultant profit/loss declared in the return of income out of such books/accounts. The rejection on such ground however can only be triggered or considered when accounts are found substantially incorrect or incomplete. That is to say incorrectness or incompleteness of substantial accounts shall only form reasonable basis for rejection of books. The computation of taxable income is based upon books of accounts, where stock records inarguably forms substantial part of books/accounts. Hence determination of taxable income without reference to such stock/inventory records would be meaningless. 10. In context of rejection of books in the present case for not maintaining stock or inventory records of open plots, housing/commercial units etc., we note that, the Hon'ble High Court in 'Dhondiram Dalichand Vs CIT' [1970, 81 ITR 609 (Bom)] while upholding rejection of books categorically held that, absence of quantitative tally/figures regarding sales & purchases, opening & closing inventory/stock balances etc., was such that it was necessary to exercise powers available for rejection of books and determine the income to the best of judgement. Equally in 'Bastir....
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.... of books came for consideration before the Hon'ble Jurisdictional High Court Vrajlal Manilal & Co Vs CIT' [1973 92 ITR 287 (MP)] wherein it was held that, once books are properly rejected, the income needs to be estimated and in estimating business income, even previous assessment records can form good, best & relevant material. 16. In view of the foregoing touchbearing guidelines provided in the binding judicial precedents (supra), the dispute must cease by setting aside impugned % of NP estimations of both the tax authorities for its remand with a direction to compute business income chargeable to tax on the basis of simple average of % of NP earned/declared on reported turnover / gross revenue receipts (excluding interest income) by the assessee in five assessment years immediately preceding the assessment year under consideration, in place of ad-hoc estimation adopted by both the tax authorities below. 17. But before coming to such conclusion, it not oblivious to the bench that, the assessee filed a writ petition against the order of approval dt. 20/12/2018 granted by the competent authority for subjecting the books of account of the assessee for special audit u/s 142(2A....
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....man 885 (MP)]. 20. On an appeal, the Ld. CIT(A) disapproved the Ld. AO's action and allowed the interest income to be assessed as business income u/s 28 of the Act on a standalone basis of assessee's written statement wherein it merely stated that, the interest forms a business income & same was shown as such in profit & loss account. We note that, while revising the assess ability of interest income so, there is hardly any whisper about the facts vouched and legal support drawn therefore. The impugned adjudication in our considered view prima-facie devoid of facts & merits and contrary to the binding judicial precedents relied by the Ld. AO, hence set-aside. 21. The broad proposition of taxability of income have been greatly explained by their hon'ble lordships in the landmark decision Tuticorin Alkali relied upon the Ld. AO (supra) as; The basic proposition that has to be borne in mind in this case is that it is possible for a company to have six different sources of income, each one of which will be chargeable to income-tax. 'Profits and gains of business or profession' is only one of the heads under which the company's income is liable to be assessed ....