CHOUDHARY & BROTHERS, Jaipur V. DCIT, Jaipur

CO 23/JPR/2016

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 3095 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 26 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-07-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 28-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: P C PARWAL CA DHK
• Keywords: Bogus purchase; Rejection of books of accounts; Business income; Depreciation; Business expenditure; Question of law
• Section: 143(3); 145; 263

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH HKKXPUN] YS[KK LNL; ,OA JH DQY HKKJR] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM AND SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NOS. 551 & 552/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2011-12 & 12-13. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7, JAIPUR. CUKE VS. M/S. CHOUDHARY & BROTHERS, VILLAGE LADANA, PHAGI, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAEFC 0190 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT C.O. NOS. 22 & 23/JP/2016 ( ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 551 & 552/JP/2016 ) FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2011-12 & 12-13. M/S. CHOUDHARY & BROTHERS, VILLAGE LADANA, PHAGI, JAIPUR. CUKE VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAEFC 0190 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI R. A. VERMA (ADDL. CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 07.07.2017. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 24/07/2017. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THESE SETS OF 2 APPEALS AND 2 CROSS OBJECTIONS ARE FILED BY THE REVENUE AND ASSESSEE RESPECTIVELY AGAINST TWO SEPARATE ORDERS O F LD. CIT (APPEALS)-3, JAIPUR DATED 18.03.2016 PERTAINING TO A.YS. 2011-12 AND 20 12-13. SINCE IDENTICAL GROUNDS ARE RAISED IN ALL THE APPEALS, THEY ARE TAKEN UP TO GETHER AND ARE BEING DISPOSED OFF 2 ITA NOS. 551, 552 & CO NOS. 22 & 23/JP/2016 M/S. CHOUDHARY & BROTHERS, JAIPUR. BY THIS CONSOLIDATED ORDER. FIRST, WE TAKE UP REVEN UES APPEAL IN ITA NO. 551/JP/2016 PERTAINING TO A.Y. 2011-12. THE REVENU E HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- ITA NO. 551/JP/2016 (REVENUE): I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN REDUCING GP RATE U/S 145(3) FROM 13% TO 11 .50% WITHOUT CONSIDERING THE FINDINGS OF FACT THE AO IN THE ASSE SSMENT ORDER. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN TREATING INTEREST INCOME FROM FDR & NSC AS BUSINESS INCOME AND PART OF TOTAL RECEIPTS WITHOUT APPRECIATING THE FACTS THAT THE INTEREST INCOME ON FDR & NSC IS INCOME FROM OTHER S OURCES. III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN DIRECTING THE DISCOUNT INCOME FROM SUPPLIE R TO BE REDUCED FROM COST OF THE MATERIAL BECAUSE THE ASSESSEE ITSE LF HAS SHOWN IT AS OTHER INCOME IN THE PROFIT AND LOSS ACCOUNT, IGNORI NG THE FINDINGS OF FACT GIVEN IN THE ASSESSMENT ORDER THAT DISCOUNT IN COME HAS BEEN TREATED THE OTHER INCOME BY THE AO. IV) THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, WI THDRAW OR INSERT ANY GROUND OR GROUNDS OF APPEAL BEFORE OR AT THE TI ME OF HEARING OF THE APPEAL. 2. BRIEFLY STATED THE FACTS ARE THAT THE CASE OF TH E ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT UNDER SECTIO N 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED. WHILE FRAMING THE ASSESSMENT, THE AO REJECTED THE BOOKS OF ACCOUNT AN D ESTIMATED THE PROFIT. THE AO APPLIED NP @ 13% THEREBY HE MADE AN ADDITION OF RS. 19,72,584/-. THE AO ALSO MADE ADDITION ON ACCOUNT OF INCOME FROM INTEREST ON FDR AND DISCOUNTS RECEIVED FROM SUPPLIERS OF MATERIAL, TREATING THE SAME AS IN COME FROM OTHER SOURCES. HENCE, THE AO COMPUTED THE TAXABLE INCOME AT RS. 56,78,516 /- AGAINST THE INCOME OF RS. 3 ITA NOS. 551, 552 & CO NOS. 22 & 23/JP/2016 M/S. CHOUDHARY & BROTHERS, JAIPUR. 7,08,390/- DECLARED BY THE ASSESSEE. AGGRIEVED BY THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT (A), WHO AFTER CONSIDERING TH E SUBMISSIONS, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. WHILE PARTLY ALLOWING THE APPEAL, THE LD. CIT (A) ESTIMATED THE NP @ 11.5% AND DELETED THE ADDITION MADE ON ACC OUNT OF INTEREST FROM FDR TREATING THE SAME AS BUSINESS PROFIT. THE LD. CIT ( A) ALSO DELETED THE ADDITION MADE ON ACCOUNT OF VARIOUS UNVERIFIABLE PAYMENTS. AGAINS T THIS, THE REVENUE HAS PREFERRED THE PRESENT APPEAL AND THE ASSESSEE FILED THE CROSS OBJECTION. 3. THE FIRST GROUND OF THE REVENUES APPEAL IS ESTI MATING THE NP RATE AT 11.5% AS AGAINST 13% ADOPTED BY THE AO. THE LD. D/R SUBM ITTED THAT THE LD. CIT (A) HAS CONFIRMED THE ACTION OF REJECTION OF BOOKS OF ACCOU NT. HOWEVER, HE REDUCED THE ESTIMATION OF NET PROFIT. HE SUBMITTED THAT THE LD. CIT (A) HAS FOLLOWED THE DECISION IN ASSESSEES CASE PERTAINING TO A.Y. 2007-08. HE SUBMITTED THAT THE FACTS OF EACH YEAR ARE DIFFERENT. 3.1 ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN BRIEF. HE SUBMI TTED THAT THE LD. CIT (A) CONSIDERING THE PAST HISTORY OF THE ASSESSEES CASE AND FOLLOWING THE DECISION OF HIS PREDECESSOR AND ALSO THE ORDER OF THE ITAT FOR THE A.Y. 2007-08 HAS SUSTAINED THE NP AT 11.5%. THE SUBMISSIONS OF THE LD. COUNSEL AR E AS UNDER :- 1. IT IS SUBMITTED THAT NET PROFIT RATE BEFORE DE PRECIATION, INTEREST AND REMUNERATION TO PARTNERS AND INTEREST TO THIRD PART IES AS WELL AS THAT AFTER DEPRECIATION, INTEREST AND REMUNERATION TO PARTNERS AND INTEREST TO THIRD PARTIES IS AS UNDER:- 4 ITA NOS. 551, 552 & CO NOS. 22 & 23/JP/2016 M/S. CHOUDHARY & BROTHERS, JAIPUR. A.Y. TURNOVER (IN RS.) NET PROFIT BEFORE DEPRECIATION, INTEREST & REMUNERATION TO PARTNERS & INTEREST TO THIRD PARTIES (IN RS.) N.P. RATE (%) NET PROFIT AFTER DEPRECIATION, INTEREST & REMUNERATION TO PARTNERS & INTEREST TO THIRD PARTIES (IN RS.) N.P. RATE (%) 11 - 12 9,83,53,575/ - 1,08,80,397/ - 10.78 8,47,053/ - 0.84 12 - 13 13,12,14,572/ - 1,54,59,620/ - 11.52 57,05,522/ - 4.25 2. THE CASE OF THE ASSESSEE IS SUBJECT TO THE SCRUTINY SINCE A.Y. 2004-05 AND DECIDED BY THE APPELLATE AUTHORITIES. SUMMARIZED PO SITION OF THE INCOME DECLARED AND ACCEPTED AFTER THE ORDER OF THE CIT(A) /ITAT FROM A.Y. 2007-08 ARE AS UNDER:- PARTICULARS ASSESSMENT YEAR 2012-13 2011-12 2010-11 2009-10 2008-09 2007-08 CONTRACT RECEIPTS (IN RS.) 13,12,14,572 /- 9,83,53,575/ - 17,28,46,412 /- 26,88,37,074 /- 20,13,26,058 /- 16,75,20,136 /- INTEREST RECEIPTS (IN RS.) 29,97,924/- 25,61,068/- 28,67,299/- 6,67,360/- 4,4 1,768/- 1,79,196/- TOTAL RECEIPTS (IN RS.) 13,42,12,496 /- 10,09,14,642 /- 17,53,13,711 /- 26,95,04,434 /- 20,27,87,824 /- 16,76,99,332 /- NET PROFIT BEFORE DEPRECIATION AND INTEREST AND REMUNERATION TO PARTNER (IN RS.) 1,54,59,620/ - 1,08,80,397/ - 2,01,01,939/ - 2,79,53,633/ - 2,01,96,008/ - 1,68,67,510/ - NET PROFIT RATE BEFORE DEP., INTEREST AND REMUNERATION TO PARTNER 11.52% 10.78% 11.44% 10.4% 9.96% 10.06% NET PROFIT RATE BEFORE DEP., INTEREST AND REMUNERATION TO PARTNER FINALLY UPHELD BY ITAT/CIT(A) 11.75% [CIT(A)] PRESENT APPEAL (ITAT) 11.5% [CIT(A)] PRESENT APPEAL (ITAT) 11.5% [CIT(A)] 11.5% [CIT(A)] 11.5% [ITAT] 11.5% [ITAT] NOTE : IN ALL THE YEARS NET PROFIT RATE IS APPLIED ON THE TOTAL RECEIPT INCLUDI NG INTEREST RECEIPT EXCEPT IN A.Y. 2009-10 WHERE IT IS APPLIED ON CONTRACT RECEIPT. IN NONE OF THESE YEARS INTEREST RECEIPT WAS ASSESSED AS INCOME FROM OTHER SOURCES BUT TREATED AS PART OF TH E BUSINESS PROFIT FOR THE PURPOSE OF COMPUTING THE NET PROFIT RATE. FROM THE ABOVE TABLE IT CAN BE NOTED THAT THE NET P ROFIT DECLARED BY THE ASSESSEE IS COMPARABLE WITH THAT OF THE EARLIER YEARS. THE H ONBLE ITAT/CIT(A) HAS ACCEPTED THE NET PROFIT RATE OF 11.5% ON GROSS RECE IPT (CONTRACT RECEIPT AND INTEREST AND OTHER RECEIPT). THE RATE DECLARED IN T HE AY 12-13 IS 11.52% WHICH IS 5 ITA NOS. 551, 552 & CO NOS. 22 & 23/JP/2016 M/S. CHOUDHARY & BROTHERS, JAIPUR. COMPARABLE WITH THE NET PROFIT RATE ACCEPTED BY THE ITAT. HENCE ADDITION MADE BY THE AO BY APPLYING NET PROFIT RATE OF 13% AND SE PARATELY ASSESSING THE INTEREST INCOME AS INCOME FROM OTHER SOURCES IS UNJUSTIFIED AND UNCALLED FOR. 1. IT IS A SETTLED LAW THAT ONCE THE BOOKS OF ACCOUNTS ARE REJECTED, PAST HISTORY OF THE ASSESSEE IS BEST GUIDE FOR ESTIMATION OF THE INCOME . FOR THIS RELIANCE IS PLACED ON THE FOLLOWING CASES:- CIT VS. SH. SINDHUJA FOODS PVT. LTD. (2008) 16 DTR 278 (RAJ.) (HC) DATED 24.10.2008 WHERE ASSESSEES BOOKS OF ACCOUNTS ARE REJECTED AS IT HAS SHOWN BOGUS PURCHASES BUT GROSS SALES FIGURE IS NOT DISPUTED AN D THE CIT(A) AND TRIBUNAL APPLIED THE G.P. RATE OF LAST YEAR FOR MAKING THE B EST JUDGMENT ASSESSMENT, IT CANNOT BE SAID THAT ANY MATERIAL EVIDENCE HAS NOT B EEN CONSIDERED OR ANY IRRELEVANT CONSIDERATION HAS BEEN TAKEN INTO ACCOUN T BY THE TRIBUNAL IN REDUCING THE ADDITIONS MADE BY AO. CIT VS. VAIBHAV GEMS LTD. (2014) 112 DTR 84 (RAJ.) (HC) DATED 21.08.2014 WHILE THE PAST HISTORY BECOMES THE RELEVANT BASIS B UT IF THE AO WISHES TO TINKER WITH THE BASIS OF PAST RECORDS, THEN SOME FLAW HAS TO BE FOUND BY THE AO IN MAKING SOME ADDITION. TRIBUNAL HAS COME TO A CONCLU SION THAT IN THE IMMEDIATE PAST ASSESSMENT YEAR, THE TRIBUNAL ITSELF HAS APPLI ED G.P. RATE OF 2.60% WHEREAS IN THE PRESENT YEAR UNDER CONSIDERATION, THE G.P. R ATE HAS BEEN DECLARED AT 4.85%. AO WAS UNABLE TO POINT OUT AS TO WHAT ARE TH E DISTINGUISHING FEATURES IN BETWEEN THE TWO ASSESSMENT YEA NO SUBSTANTIAL QUEST ION OF LAW ARISES. CIT VS. GUPTA K.N. CONSTRUCTION COMPANY (2015) 116 DTR 377 (RAJ.) (HC) DATED 18.08.2014 IN A CASE WHERE THE PROVISIONS OF SEC. 145(3) ARE I NVOKED, EITHER THE PAST HISTORY OF THE ASSESSEE OR THE HISTORY OF SIMILARLY SITUATE D CASES HAS TO BE CONSIDERED. IN THE INSTANT CASE, THE AO IS ABSOLUTELY SILENT IN JU STIFYING THE ADDITION/DISALLOWANCE MADE BY HIM WHICH HAS RESULTED IN N.P. RATE OF 13.7 %. ASSESSMENT ORDER IS TOTALLY SILENT ABOUT THE NET PROFIT RATE SHOWN BY OTHER SIM ILARLY SITUATED CASES. WHILE COMPARING WITH THE PAST HISTORY, IF THE RESULTS ARE FAIR AND REASONABLE, THEN INVARIABLY NO ADDITION IS TO BE MADE. IN THE RELEVA NT YEAR, THOUGH THE CONTRACT RECEIPTS OF THE ASSESSEE HAVE SHARPLY INCREASED FRO M 10.60 CRORES TO RS.12.32 CRORES IN THE PRECEDING YEAR, THE N.P. RATE HAS INC REASED FROM 5.02% TO 5.38%. THOUGH THE ARGUMENT OF THE REVENUE THAT WHERE THE A SSESSEE MANIPULATES THE ACCOUNTS BY KEEPING THE PROFIT MARGINS COMMENSURATE WITH THE PAST YEARS OR SLIGHTLY MORE THAN BY ITSELF CANNOT BE A BASIS FOR ACCEPTANCE OF RESULTS IS JUSTIFIED, 6 ITA NOS. 551, 552 & CO NOS. 22 & 23/JP/2016 M/S. CHOUDHARY & BROTHERS, JAIPUR. IT IS FOR THE AO TO BRING ON RECORD SOME CONCRETE M ATERIAL/EVIDENCE TO MAKE A PROPER ADDITION. IN THE INSTANT CASE, THE AO HAS FA ILED TO BRING ON RECORD ANY COMPARABLE CASE SO AS TO JUSTIFY THE ADDITION MADE BY HIM. TRIBUNAL HAS SUSTAINED ONLY AN ADHOC ADDITION TO THE EXTENT OF 5 LACS. FIN DINGS OF THE TRIBUNAL IS A PURE FINDING OF FACT BASED ON APPRECIATION OF EVIDENCE. THEREFORE, NO SUBSTANTIAL QUESTION OF LAW ARISES. CIT VS. INANI MARBLES PVT. LTD. 316 ITR 125 (RAJ.) (HC) DATED 19.08.2008 IN THIS CASE, AO REJECTED THE BOOKS OF ACCOUNTS, IN VOKED SECTION 145 & MADE ASSESSMENT BY APPLYING G.P. RATE OF 15% ON THE SALE S DISCLOSED BY ASSESSEE. TRIBUNAL HELD THAT IN THE ABSENCE OF ANY CHANGE IN FACTUAL POSITION NORMALLY THE PROFIT RATE DECLARED & ACCEPTED IN PRECEDING YEAR, CONSTITUTES A GOOD BASIS FOR WORKING OUT THE GROSS PROFIT. ACCORDINGLY, IT APPLI ED G.P. RATE DECLARED & ACCEPTED AT 2.51% IN EARLIER YEAR. HONBLE HIGH COURT HELD T HAT AS THE G.P. RATE OF 2.51% WAS APPLIED IN A.Y. 99-00 & THAT HAVING BEEN UPHELD BY THE TRIBUNAL, THE ORDER OF THE TRIBUNAL FOR A.Y. 00-01 WAS JUSTIFIED. KANSARA BEARINGS P. LTD VS. ACIT 270 ITR 235 (RAJ) DATED 01.05.2003 IT WAS HELD THAT THE LAST YEARS PROFITS DECLARED B Y ASSESSEE IS THE BEST GUIDE FOR APPLICATION OF PROFIT RATE AND WHEN THE GP SHOWN IN THE LAST YEAR WAS BETTER AND AO HAS NOT GIVEN ANY COMPARABLE CASE FOR HIGHER GP THEN HIS ACTION TO MAKE THE TRADING ADDITION CANNOT BE APPROVED. IN VIEW OF ABOVE, THE LD. CIT(A) HAS RIGHTLY REDUCE D THE TRADING ADDITION BY APPLICATION OF G.P. RATE OF 11.5% FOR AY 2011-12 BU T HE IS NOT JUSTIFIED IN APPLYING N.P. RATE OF 11.75% IN AY 2012-13. HENCE, THE GROUN D OF THE DEPARTMENT BE DISMISSED AND THE CO OF THE ASSESSEE FOR AY 2012-13 BE ALLOWED. 3.2. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. WE FIND THAT IDENTICAL ISSUE HAS ALREADY DECIDED BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y. 2007-08 WHEREIN THE TRIBUNAL CONS IDERING THE VARIOUS ASPECTS OF THE MATTER, SUSTAINED THE N.P RATE AT 11.5% BY OBSE RVING AS UNDER :- 7 ITA NOS. 551, 552 & CO NOS. 22 & 23/JP/2016 M/S. CHOUDHARY & BROTHERS, JAIPUR. 8. IT IS SEEN THAT N.P. RATE SHOWN BY ASSESSEE D URING THE YEAR IS 10.07% AGAINST 10.82% IN IMMEDIATELY PRECEDING YEAR . THEREFORE, WE ARE OF THE VIEW THAT INSTEAD OF DISALLOWING VARIOUS EXPENSES UNDER THE INDIVIDUAL HEAD, IT WILL BE BETTER IF A REASONABLE NET PROFIT RATE IS APPLIED. KEEPING IN MIND THE PAST HISTORY OF THE CA SE AND DEFECTS NOTED BY AO, WE ARE OF THE VIEW THAT IF A N.P. RATE OF 11 .5% IS APPLIED THEN IT WILL MEET THE ENDS OF JUSTICE. ACCORDINGLY, THE AO IS DIRECTED TO RE- COMPUTE THE PROFIT BY APPLYING N.P. RATE OF 11.5% A GAINST N.P. RATE OF 10.07% SHOWN BY ASSESSEE. FOR THE SAKE OF CLARIFICA TION, THE LD. COUNSEL OF THE ASSESSEE HAS STATED THAT INSTEAD OF DISALLOWING EXPENSES HEAD-WISE, A REASONABLE N.P. RATE SHOULD B E APPLIED. THIS CONTENTION OF THE ASSESSEE IS REASONABLE. ACCORDING LY WE DIRECT THE AO TO APPLY N.P. RATE OF 11.5% MENTIONED ABOVE. THIS G ROUND OF THE ASSESSEE IS ALLOWED IN PART. THEREFORE, FOLLOWING THE DECISION OF COORDINATE BEN CH IN THE ASSESSEES OWN CASE FOR THE A.Y. 2007-08, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT (A) WHICH IS HEREBY AFFIRMED. THE GROUND OF THE REVENUE IS REJECTED. 4. GROUND NO. 2 RELATES TO DELETION OF INTEREST INC OME TREATING THE SAME AS BUSINESS PROFIT. THE LD. D/R HAS SUPPORTED THE ORD ER OF THE AO. HE PLACED RELIANCE ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT REN DERED IN THE CASE OF CIT VS. BHAWAL SYNTHETICS (INDIA) (2017) 81 TAXMANN.COM 478 (RAJ.) IN FAVOUR OF THE REVENUE. 4.1. ON THE CONTRARY, THE LD. COUNSEL FOR THE ASSES SEE SUPPORTED THE ORDER OF THE LD. CIT (A). THE LD. COUNSEL SUBMITTED THAT THE INT EREST INCOME EARNED ON FDR/NSC IS A PART OF THE BUSINESS INCOME AS THE FDRS WERE M ADE FOR THE PURPOSE OF BUSINESS FOR GIVING BANK GUARANTEES AT VARIOUS DEPARTMENTS F OR GETTING CONTRACTS. THUS, THEY ARE TO BE TREATED AS A PART OF THE BUSINESS INCOME. ALSO, THE FDR WERE MADE BY UTILIZING THE BANK OVERDRAFT LIMIT ON WHICH INTERES T IS PAID TO THE BANK AND WHICH FORMS A PART OF THE BUSINESS EXPENDITURE. THUS, THE INTEREST INCOME ON SUCH FDR 8 ITA NOS. 551, 552 & CO NOS. 22 & 23/JP/2016 M/S. CHOUDHARY & BROTHERS, JAIPUR. WHICH WAS EARNED OUT OF THE FUNDS PLACED WITH THE B ANK BY UTILIZING THE BANK OVERDRAFT LIMIT IS TO BE CONSIDERED AS BUSINESS INC OME AND NOT AS INCOME FROM OTHER SOURCES. THIS HAS ALSO BEEN ACCEPTED IN THE ASSESSE ES OWN CASE FROM A.Y 2007-08 TO 2010-11 BY THE ITAT/CIT (A). IN SUPPORT OF HIS CONTENTIONS, THE LD. COUNSEL PLACED RELIANCE ON THE FOLLOWING DECISIONS :- ACIT VS. GALLIUM EQUIPMENT (P) LTD. (2001) 79 ITD 41 (DEL. TRIB.)(TM) M/S. RAJENDRA MITTAL CONSTRUCTION CO. PVT. LTD. ITA NO. 331/JP/2014 & CO 17/JP/2014 DT. 20.07.201 6. MEHRU ELECTRICALS & ENGG. PVT. LTD. ITA NO. 215/JP/2009 DATED 18.07.2014. HE, THEREFORE, PRAYED THAT IN VIEW OF THE ABOVE, TH E ORDER OF THE LD. CIT (A) BE UPHELD BY DISMISSING THE GROUND OF THE DEPARTMENT. 4.2. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. AFTER GOING THROUGH THE CASE LAW CITED BY BOTH THE PARTIES, WE FIND THAT THE IDE NTICAL ISSUE HAS RECENTLY BEEN DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT RE NDERED IN THE CASE OF CIT VS. BHAWAL SYNTHETICS (INDIA) BY OBSERVING IN PARA 6 OF THE JUDGMENT AS UNDER :- 6. IN THE CASE IN HAND, IT IS NOT IN DISPUTE THA T THE ASSESSEE HAD INCOME OF INTEREST THROUGH FDRS AND WHILE SETTING O FF THAT THE ASSESSING OFFICER AS WELL AS THE ITAT DID NOT EXAMI NE THE ASPECT AS TO UNDER WHICH PROVISION THE ASSESSEE CLAIMED DEDUCTIO N OR SET OFF OF HIS INCOME FROM OTHER SOURCES AGAINST INTEREST PAYABLE ON THE BORROWED FUND. THE REASON GIVEN IS THAT THE AMOUNT PERTAININ G TO FDR WAS NOT SURPLUS AMOUNT BUT PART OF AMOUNT THAT WAS KEPT TO OBTAIN LETTER OF CREDIT FOR PURCHASE OF MACHINERY. WHILE ACCEPTING T HE FACT THAT THE FDR WAS FOR OBTAINING LETTER OF CREDIT TO PURCHASE MACH INERY BUT SO FAR AS 9 ITA NOS. 551, 552 & CO NOS. 22 & 23/JP/2016 M/S. CHOUDHARY & BROTHERS, JAIPUR. INTEREST EARNED THEREON IS CONCERNED, THAT IS NOTHI NG BUT INCOME THROUGH OTHER SOURCES, AS SUCH, THE COMMISSIONER OF INCOME TAX RIGHTLY TREATED THE SAME AS INCOME TAXABLE. SO FAR AS THE SECOND QUESTION IS CONCERNED AS TO WHETHER THE COMMISSIONE R OF INCOME TAX WAS JUSTIFIED IN INVOKING POWERS UNDER SECTION 263 OF THE ACT OF 1961 BY HOLDING THAT THE ENQUIRY CONDUCTED BY THE ASSESS ING OFFICER BEFORE THE ASSESSMENT ORDER WAS NEITHER PROPER NOR ADEQUAT E, WE WOULD LIKE TO STATE THAT THE ORDER PASSED BY THE ASSESSING OFF ICER NOWHERE REFLECTS ABOUT ANY ENQUIRY SAID TO BE MADE. IT SIMP LY REFERS THE EXPLANATION GIVEN BY THE ASSESSEE AND NOTHING BEYON D THAT. THEREFORE, RESPECTFULLY FOLLOWING JUDGMENT OF THE H ONBLE RAJASTHAN HIGH COURT, SUPRA, WE SET ASIDE THE ORDER OF LD. CIT (A) ON THI S ISSUE AND RESTORE THE FINDING OF THE AO. GROUND OF THE REVENUE IS ALLOWED. 5. GROUND NO. 3 IS AGAINST THE DIRECTION OF THE LD. CIT (A) REDUCING THE DISCOUNT FROM THE COST OF MATERIAL INSTEAD OF TREATING THE S AME AS PART OF THE INCOME. THE LD. D/R SUPPORTED THE ORDER OF THE AO. 5.1 ON THE CONTRARY, THE LD. COUNSEL FOR THE ASSESS EE SUPPORTED THE ORDER OF LD. CIT (A). 5.2. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE RECEIVED DISCOUNT FROM THE VARIOUS SUPPLIERS AGAINST THE PUR CHASES MADE BY IT. HE SUBMITTED THAT THE AO WRONGLY TREATED THE SAME AS INCOME OTHE R SOURCES IGNORING THAT WHEN SUCH DISCOUNT IS RECEIVED FROM THE SUPPLIERS, IT NE EDS TO BE REDUCED FROM THE COST OF THE RAW MATERIAL CONSUMED IN CONTRACT WORK. WE FIN D MERIT IN THE CONTENTION OF THE ASSESSEE AS THE DISCOUNT IS NOTHING BUT REDUCTION I N THE VALUE OF THE MATERIAL SO SUPPLIED. THEREFORE, SAME WAS REQUIRED TO BE REDUC ED FROM THE COST OF RAW MATERIAL 10 ITA NOS. 551, 552 & CO NOS. 22 & 23/JP/2016 M/S. CHOUDHARY & BROTHERS, JAIPUR. CONSUMED IN CONTRACT WORK. THEREFORE, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF LD. CIT (A), THE SAME IS AFFIRMED. THIS GROUND OF THE REVENUE IS REJECTED. 6. GROUND NO. 4 IS GENERAL IN NATURE AND NEEDS NO S EPARATE ADJUDICATION. 7. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED. C.O. NO. 22/JP/2016 (ASSESSEE) : 8. THE SOLITARY GROUND IN THE ASSESSEES CROSS OBJE CTION IS AS UNDER :- THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 7,24,7 87/- BY APPLYING THE N.P. RATE OF 11.5% AS AGAINST THE N.P. RATE OF 10.7 8% DECLARED BY THE ASSESSEE. 8.1. WE HAVE DECIDED THIS ISSUE IN THE REVENUES AP PEAL BY AFFIRMING THE ORDER OF LD. CIT (A) BY FOLLOWING THE DECISION OF COORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007-08 THEREBY REJECTING THE GROUND OF THE REVENUE. THEREFORE, TAKING A CONSISTENT VIE W OF THE MATTER, THE GROUND OF THE ASSESSEE HAS BECOME INFRACTUOUS. THUS, THE CROSS OB JECTION IS DISMISSED. ITA NO. 552/JP/2016 (REVENUE) : 9. THE GROUNDS RAISED IN THE REVENUES APPEAL ARISE S FROM THE ORDER OF LD. CIT (A) ARE AS UNDER :- I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN REDUCING GP RATE U/S 145(3) FROM 13% TO 11 .75% WITHOUT CONSIDERING THE FINDINGS OF FACT THE AO IN THE ASSE SSMENT ORDER. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN TREATING INTEREST INCOME FROM FDR & NSC AS BUSINESS INCOME AND PART OF TOTAL RECEIPTS WITHOUT APPRECIATING THE FACTS THAT THE INTEREST INCOME ON FDR & NSC IS INCOME FROM OTHER S OURCES. 11 ITA NOS. 551, 552 & CO NOS. 22 & 23/JP/2016 M/S. CHOUDHARY & BROTHERS, JAIPUR. III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN DIRECTING THE DISCOUNT INCOME FROM SUPPLIE R TO BE REDUCED FROM COST OF THE MATERIAL BECAUSE THE ASSESSEE ITSE LF HAS SHOWN IT AS OTHER INCOME IN THE PROFIT AND LOSS ACCOUNT, IGNORI NG THE FINDINGS OF FACT GIVEN IN THE ASSESSMENT ORDER THAT DISCOUNT IN COME HAS BEEN TREATED THE OTHER INCOME BY THE AO. IV) THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, WI THDRAW OR INSERT ANY GROUND OR GROUNDS OF APPEAL BEFORE OR AT THE TI ME OF HEARING OF THE APPEAL. 9.1. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL ON RECORD. THE GROUNDS RAISED IN THE REVENUES APPEAL ARE EXACTLY IDENTICAL TO EARLIER ASSESSMENT YEAR 2011-12 EXCEPT CHANGE IN FIGURE AND WE HAVE DE CIDED THE SAME BY PARTLY ALLOWING THE APPEAL OF THE REVENUE. WE FIND NO NEW FACTS IN THE ARGUMENTS ADVANCED BY BOTH THE REPRESENTATIVES OF THE PARTIES . THEREFORE, FOLLOWING OUR ORDER FOR THE ASSESSMENT YEAR 2011-12 ON THE IDENTICAL GR OUNDS, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. C.O. NO. 23/JP/2016 (ASSESSEE) : 10. THE SOLITARY GROUND IN THE ASSESSEES CROSS OBJ ECTION IS AS UNDER :- THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 3,10,3 48/- BY APPLYING THE N.P. RATE OF 11.75% AS AGAINST THE N.P. RATE OF 11. 52% DECLARED BY THE ASSESSEE. 10.1. SINCE WE HAVE DECIDED THIS ISSUE IN THE REVEN UES APPEAL FOR THE ASSESSMENT YEAR 2011-12 BY AFFIRMING THE ORDER OF LD. CIT (A) BY FOLLOWING THE DECISION OF COORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007-08 THEREBY REJECTING THE GROUND OF THE REVENUE , THEREFORE, TAKING A CONSISTENT 12 ITA NOS. 551, 552 & CO NOS. 22 & 23/JP/2016 M/S. CHOUDHARY & BROTHERS, JAIPUR. VIEW OF THE MATTER, THE GROUND OF THE ASSESSEE HAS BECOME INFRACTUOUS. HENCE, THE CROSS OBJECTION IS DISMISSED. 11. IN TOTALITY, BOTH THE APPEALS OF THE REVENUE AR E PARTLY ALLOWED WHILE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 24.07.20 17. SD/- SD/- ( HKKXPUN ( DQY HKKJR ) ( BHAGCHAND) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 24/07/2017. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE DCIT CIRCLE-7, JAIPUR. 2. THE RESPONDENT M/S. CHOUDHARY & BROTHERS, JAIPU R. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 551 & 552 AND CO 22 & 23/JP/ 2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 13 ITA NOS. 551, 552 & CO NOS. 22 & 23/JP/2016 M/S. CHOUDHARY & BROTHERS, JAIPUR.