Vikas Builders, Etawah V. Addl. C.I.T., Range-5, Firozabad

ITA 32/AGR/2012

• Counselvise Citation: 3220314 RSA 2012
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-10-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 27-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KK MISHRA
• Keywords: Unexplained cash credit; Business income; Depreciation; Income from undisclosed sources

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 32/AGRA/2012 ASSTT. YEAR : 2007-08 VIKAS BUILDERS, VS. ADDL. C.I.T., RANGE-5, 208-B, FRIENDS COLONY, FIROZABAD. ETAWAH.(PAN: AAEFV 2603 C) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PANKAJ GARGH, ADVOCATE RESPONDENT BY : SHRI K.K. MISHRA, JR. D.R. DATE OF HEARING : 10.10.2012 DATE OF PRONOUNCEMENT OF ORDER : 19.10.2012 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A)-II, AGRA DATED 11.10.2011 FOR THE ASSESSMENT YEAR 2007- 08. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A PARTNERSHIP FIRM CARRYING ON THE BUSINESS OF CIVIL CONTRACTOR. THE A SSESSEE PRODUCED BOOKS OF ACCOUNT, WHICH WERE EXAMINED. THE NET PROFIT DISCLO SED ON THE TOTAL CIVIL CONTRACT RECEIPTS OF RS.8,30,42,868/- IS RS.58,84,105/- AFTE R CONSIDERING DEPRECIATION CLAIM FOR RS.42,03,566/- AND CREDIT INTEREST INCOME OF RS .6,09,366/-. IF INTEREST INCOME IS EXCLUDED FROM NET PROFIT SHOWN, THE NET PROFIT IS 6 .3%. THE AO FOUND THAT THERE ITA NO. 32/AGRA/2012 2 WERE DEFECTS IN THE BOOKS OF ACCOUNT BECAUSE NO PUR CHASE REGISTER, STOCK REGISTER, JOURNAL ETC. WERE PRODUCED. THE ASSESSEE CLAIMED VE RY HEAVY EXPENSES ON BITUMEN, OIL AND FUEL, HIRE CHARGES AND CEMENT AND THE DETAI LS OF THE EXPENDITURE REVEALED THAT ENTIRE PAYMENTS HAVE BEEN MADE IN CASH AND NO SUPPORTING BILLS AND VOUCHERS HAVE BEEN PRODUCED TO VERIFY THE EXPENSES CLAIMED. THERE ARE SUNDRY CREDITORS OF RS.2.85 CRORES, BUT NO ADDRESSES HAVE BEEN FILED. N O MUSTER ROLL OR WAGES REGISTER WAS PRODUCED. THERE IS NO DETAILS OF WORK IN PROGRE SS AND CLOSING STOCK. THEREFORE, FOR WANT OF CROSS VERIFICATION, THE AO APPLIED NET PROFIT RATE OF 7% AGAINST DISCLOSED RECEIPTS AND COMPUTED THE INCOME OF THE A SSESSEE AT RS.58,13,000/-. NO DEPRECIATION WAS ALLOWED SEPARATELY BECAUSE THE NET PROFIT RATE HAS BEEN APPLIED. THE ADDITION WAS CHALLENGED BEFORE THE LD. CIT(A) A ND WRITTEN SUBMISSIONS OF THE ASSESSEE IS INCORPORATED IN THE APPELLATE ORDER, IN WHICH THE ASSESSEE BRIEFLY EXPLAINED THAT THERE IS NO MUCH ELEMENT OF PROFIT I NVOLVED BECAUSE THE COST OF MATERIAL SUPPLIED BY THE GOVERNMENT TO THE ASSESSEE WOULD REDUCE THE PROFIT. IT WAS ALSO EXPLAINED THAT PROFIT HAS INCREASED AS COM PARED TO THE LAST YEAR ALONG WITH TOTAL CONTRACT RECEIPTS. THEREFORE, THE ADDITION IS UNJUSTIFIED. THE LD. CIT(A) CONSIDERING VARIOUS OBJECTIONS OF THE AO REJECTING THE BOOK RESULT, FOUND THAT 7% NET PROFIT RATE IS REASONABLE AND ACCORDINGLY, THE APPEAL OF THE ASSESSEE WAS DISMISSED. THE ASSESSEE ALSO CHALLENGED NOT ALLOWIN G OF DEPRECIATION. THE LD. CIT(A) ALSO CONFIRMED THE ORDER OF THE AO DECLINING TO GRANT DEPRECIATION BECAUSE THE NET PROFIT RATE HAS BEEN APPLIED. ITA NO. 32/AGRA/2012 3 3. THE ASSESSEE ON GROUND NO. 1 & 2, CHALLENGED THE ESTIMATE OF INCOME BY APPLYING 7% NET PROFIT RATE AGAINST THE DISCLOSED R ECEIPTS AND NOT GRANTING OF DEPRECIATION SEPARATELY. 4. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND REFERRED TO PAGE 13 OF THE PA PER BOOK TO SHOW COMPARATIVE FIGURE OF ASSESSMENT YEAR UNDER APPEAL 2007-08, IN WHICH THE NET PROFIT AFTER GRANT OF DEPRECIATION ETC. COMES TO RS.52,74,739/- AND NE T PROFIT RATE DISCLOSED IS 6.35% AND IN THE PRECEDING ASSESSMENT YEAR 2006-07, NET P ROFIT WAS 5.9% ON DISCLOSED RECEIPTS OF RS.4,63,31,937/-. HE HAS SUBMITTED THAT CONSIDERING THE PAST HISTORY OF THE ASSESSEE, THE APPLICATION OF NET PROFIT RATE OF 7% IS EXCESSIVE. HE HAS FURTHER SUBMITTED THAT DEPRECIATION HAS TO BE ALLOWED EVEN IF NET PROFIT RATE IS APPLIED. HE HAS RELIED UPON THE DECISION OF RAJASTHAN HIGH COUR T IN THE CASE OF SHRI RAM JHANWAR LAL VS. ITO, 321 ITR 400, THE DECISION OF H ONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF GIRDHARI LAL VS. CIT, 256 ITR 318, DECISION OF RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. JAIN CONSTRUCTION CO., 245 ITR 527. HE HAS ALSO SUBMITTED THAT IN ASSESSMENT YEAR 2006-07, THE BOOK S OF ACCOUNT WERE REJECTED, BUT NO SEPARATE ADDITION HAS BEEN MADE. ONLY ADHOC DISA LLOWANCE HAD BEEN MADE OUT OF THREE EXPENSES. COPY OF ASSESSMENT ORDER U/S. 14 3(3) DATED 26.12.2008 IS FILED AT PAGE 11 OF THE PAPER BOOK. ON THE OTHER HAND, TH E LD. DR RELIED UPON THE ORDERS ITA NO. 32/AGRA/2012 4 OF THE AUTHORITIES BELOW. THE LD. COUNSEL FOR THE A SSESSEE IN REJOINDER SUBMITTED THAT AFTER ADDITION MADE BY THE AO, THE ADDITION RO UGHLY WOULD BE IN A SUM OF RS.6,00,000/- AS COMPARED TO THE PROFIT DECLARED BY THE ASSESSEE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL ON RECORD. THE AO HAS GIVEN SPECIFIC REASONS FOR REJECTION OF BOOK RESULTS WHICH HAVE NOT BEEN DISPUTED BY THE ASSESSEE BEFORE THE LD. CIT(A) AS W ELL AS IN THE GROUNDS OF APPEAL BEFORE US. THUS, THE REJECTION OF BOOK RESULTS U/S. 145 OF THE IT ACT IS NOT CHALLENGED. NOW, THE QUESTION WOULD BE WHETHER ADDI TION MADE BY THE AO BY APPLYING NET PROFIT RATE OF 7% IS EXCESSIVE OR NOT. THE ASSESSEE CLAIMED DEPRECIATION IN THE PROFIT AND LOSS ACCOUNT AS WELL AS INTEREST AND SALARY PAID TO THE PARTNERS. THE AO ALLOWED INTEREST AND SALARY PAID T O THE PARTNERS IN COMPUTATION OF INCOME. THE DEPRECIATION IS STATUTORY DEDUCTION AND HAS TO BE ALLOWED SEPARATELY WHERE NET PROFIT OR GROSS PROFIT IS APPLIED. THE DE CISIONS OF VARIOUS HIGH COURT CITED BY THE ASSESSEE CLEARLY SUPPORT THE CASE OF T HE ASSESSEE THAT EVEN IF THE NET PROFIT IS APPLIED, DEPRECIATION SHALL HAVE TO BE AL LOWED IN FAVOUR OF THE ASSESSEE. THE GROSS RECEIPTS OF THE ASSESSEE HAVE NOT BEEN DI SPUTED BY THE AUTHORITIES BELOW. THE ASSESSEE HAS SHOWN NET PROFIT OF 6.35% IN ASSES SMENT YEAR UNDER APPEAL AFTER CONSIDERING DEPRECIATION, INTEREST AND SALARY PAID TO THE PARTNERS. THE TOTAL CONTRACT RECEIPTS OF THE ASSESSEE IN THE ASSESSMENT YEAR UND ER APPEAL HAVE INCREASED SUBSTANTIALLY TO 8.30 CRORES AS AGAINST 4.63 CRORES IN PRECEDING ASSESSMENT YEAR ITA NO. 32/AGRA/2012 5 2006-07. IN PRECEDING ASSESSMENT YEAR, NET PROFIT R ATE OF ASSESSEE WAS 5.96%. THEREFORE, BOOK RESULT OF THE ASSESSEE IS BETTER AS COMPARED TO THE EARLIER ASSESSMENT YEAR. EVEN IF BOOKS OF ACCOUNT ARE REJEC TED IN PRECEDING ASSESSMENT YEAR 2006-07 IN SCRUTINY ASSESSMENT U/S. 143(3), TH E AO DID NOT MAKE ANY SEPARATE ADDITIONS AND ONLY ADHOC DISALLOWANCES HAVE BEEN MA DE OUT OF THREE EXPENSES IN A SUM OF RS.1,00,000/-, RS.1,00,000/- AND RS.2,00,000 /-. FURTHER, IN THE PRESENT CASE, THE AO HAS NOT POINTED OUT AS TO HOW MUCH EXPENSES HAVE BEEN DISALLOWED. HE HAS ENHANCED THE PROFIT RATE OF ASSESSEE MAKING ROUGHLY ADDITION OF RS.6,00,000/- AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE. THER EFORE, IN OUR VIEW, CONSIDERING THE HISTORY OF THE ASSESSEE AND THAT THE REVENUE DI D NOT ENHANCE THE NET PROFIT RATE IN THE PRECEDING ASSESSMENT YEAR ON THE SAME FACTS, WOULD LEAD TO IRRESISTIBLE CONCLUSION THAT THE ADDITION IS HIGHLY EXCESSIVE IN NATURE. HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. AERO CLUB, 336 ITR 400 HELD THAT EVEN IF BEST JUDGMENT ASSESSMENT IS MADE, THE ASSESSMENT SHOULD BE ON RATIONAL BASIS AND THE PROFIT MARGIN DISCLOSED BY THE ASSESSEE CANNOT BE R EJECTED ARBITRARILY. CONSIDERING THE HISTORY OF THE ASSESSEE AND ASSESSMENT FRAMED I N PRECEDING ASSESSMENT YEAR 2006-07, WE ARE OF THE VIEW THAT ENDS OF JUSTICE WO ULD MEET IF ADDITION OF RS.1,00,000/- IS SUSTAINED ON THIS ISSUE AS AGAINST THE ADDITION MADE BY THE AO IN ENTIRETY. IN THE RESULT, THE ORDERS OF THE AUTHORIT IES BELOW TO THAT EXTENT ARE SET ASIDE AND MODIFIED AND ON GROUND NO. 1 & 2, THE ADDITION IS RESTRICTED TO RS.1,00,000/-. IN THE RESULT, GROUNDS NOS. 1 & 2 OF APPEAL ARE ALL OWED PARTLY. ITA NO. 32/AGRA/2012 6 6. ON GROUND NO. 3, THE ASSESSEE CHALLENGED THE ADD ITION OF RS.7,00,000/- U/S. 68/69 OF THE IT ACT. THE AO FOUND THAT THE ASSESSEE HAS RECEIVED INTEREST FREE LOAN OF RS.26,00,000/- FROM SHRI SUNIL KUMAR JAIN OF ETA WAH. THE ASSESSEE FILED COPY OF BANK ACCOUNT OF THE FIRM IN WHICH CHEQUES OF RS. 15,00,000/- ON 19.06.2006, RS.4,00,000/- ON 16.09.2006 AND RS.7,00,000/- ON 24 .08.2006 WERE DEPOSITED/CREDITED. ON ENQUIRY FROM PAN COLLECTED F ROM SHRI SUNIL KUMAR JAIN, IT WAS FOUND THAT HE HAS NOT FILED RETURN FOR THE LAST TWO YEARS. THE ASSESSEE WAS ASKED TO PROVE CREDITWORTHINESS OF SHRI SUNIL KUMAR JAIN. THE PARTNER APPEARED AND PRODUCED COPY OF ACCOUNT OF STANDARD CHARTERED BANK, NEW DELHI FROM WHERE TWO CHEQUES OF RS.15,00,000/- AND RS.4,00,000/- WER E ISSUED TO THE ASSESSEE. NO EVIDENCE WAS FOUND FOR RS.7,00,000/-.ON FURTHER ENQ UIRY FROM IDBI BANK, IT WAS FOUND THAT THE CHEQUE/DD OF RS.7,00,000/- WAS MADE ON ACCOUNT OF M/S. PAN ASIAN CONSTRUCTION CO., A PROPRIETARY CONCERN OF MR . RAKESH BHAGAT, DEFENCE COLONY, NEW DELHI. IN RESPONSE TO SUMMON U/S. 131, SHRI RAKESH BHAGAT DID NOT ATTEND THE PROCEEDINGS BEFORE THE AO. THE ASSESSEE FURTHER CLAIMED THAT CHEQUE OF RS.7,00,000/- WAS RECEIVED FROM SUNIL KUMAR JAIN AN D SUBSEQUENTLY, REPAYMENT OF RS.15.50 LACS WAS MADE. SINCE RS.7,00,000/- WAS DEP OSITED IN THE ACCOUNT OF THE ASSESSEE, THEREFORE, THE ASSESSEE WAS LIABLE TO PRO VE THE SOURCE OF THE SAME AND IN ABSENCE OF IT, THE AO MADE ADDITION U/S. 68/69 OF T HE IT ACT. THE ASSESSEE REITERATED THE SUBMISSIONS BEFORE THE LD. CIT(A) TH AT THE AMOUNT OF RS.7,00,000/- ITA NO. 32/AGRA/2012 7 WAS RECEIVED THROUGH DD FROM SHRI SUNIL KUMAR JAIN, BUT HE COULD NOT EXPLAIN AS TO FROM WHERE THE DD IN QUESTION WAS PURCHASED. THE LD. CIT(A), HOWEVER, CONFIRMED THE ADDITION BECAUSE THE DETAILS PROVIDED ON RECORD EXPLAINED THAT THE SOURCE OF RS.7,00,000/- WAS FROM M/S. PAN ASIAN CON STRUCTION CO., A PROPRIETARY CONCERN OF SHRI RAKESH BHAGAT, BUT HE DID NOT CONFI RM THE SAME. THEREFORE, THE SOURCE AND CREDITWORTHINESS OF THE SAME IS NOT PROV ED. ADDITION WAS ACCORDINGLY CONFIRMED. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SAME SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT WHE N THE BOOKS HAVE BEEN REJECTED AND THE PROFIT HAS BEEN ESTIMATED, NO ADDITION U/S. 68 COULD BE MADE AGAINST THE ASSESSEE AND RELIED UPON THE DECISION OF HONBLE HI GH COURT IN THE CASE OF CIT VS. RAGHVENDRA PRATAP SINGH, 14 MTC 415. ON THE OTHER H AND, THE LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 8. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF THE AUTHORITIES BELOW IN MAKING AND CONFIRMING THE ADDITION OF RS.7,00,000/-. THE ASSESSEE CLAIMED BEF ORE THE AO THAT RS.7,00,000/- HAS BEEN RECEIVED THROUGH CHEQUE / DRAFT FROM SHRI SUNIL KUMAR JAIN, BUT HE HAS NOT CONFIRMED THE SAME IN FAVOUR OF THE ASSESSEE. O N ENQUIRY REGARDING SOURCE OF THE CHEQUE/DRAFT OF RS.7,00,000/- FROM THE CONCERNE D BANK IT WAS FOUND THAT THE ITA NO. 32/AGRA/2012 8 SAME CHEQUE/DD WAS MADE FROM THE ACCOUNT OF M/S. PA N ASIAN CONSTRUCTION CO., A PROPRIETARY CONCERN OF SHRI RAKESH BHAGAT. SHRI RAKESH BHAGAT DID NOT ATTEND THE PROCEEDINGS BEFORE THE AO AND DID NOT CONFIRM G IVING OF LOAN ETC. TO THE ASSESSEE. THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE TO SUBSTANTIATE THE CLAIM OF LOAN RECEIVED FROM SHRI RAKESH BHAGAT. SOURCE OF CR EDIT WAS NOT PROVED AND WHATEVER EXPLANATION WAS GIVEN ORIGINALLY WAS FOUND TO BE FALSE. THUS, THE ASSESSEE FAILED TO PROVE THE IDENTITY OF THE CREDIT OR, HIS CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IN RESPECT OF RS.7,0 0,000/-. THEREFORE, THE ADDITION HAS BEEN RIGHTLY MADE IN THE CASE OF THE ASSESSEE. FURTHER, THE ADDITION ON ACCOUNT OF NET PROFIT RATE HAS NO CO-RELATION WITH THE ADDI TION MADE ON ACCOUNT OF UNEXPLAINED CREDIT. THE AO MADE BOTH THE ADDITIONS SEPARATELY BASED ON THE FACTS AND MATERIAL ON RECORD. THE NET PROFIT ADDITION IS MADE ON ACCOUNT OF DISCREPANCIES FOUND IN THE BOOKS OF ACCOUNT, WHICH RELATES TO THE ADDITION MADE TO THE RESULT OF TRADING AND PROFIT & LOSS ACCOUNT. HOWEVER, THE ADD ITION U/S. 68/69 IS MADE ON ACCOUNT OF UNEXPLAINED CREDIT FOUND RECORDED IN THE BALANCE SHEET OF THE ASSESSEE. IT IS DEEMED ADDITION UNDER THE LAW AND HAS NO CONN ECTION, WHATSOEVER, WITH THE INCOME DISCLOSED AS BUSINESS INCOME. THUS, BOTH THE ADDITIONS ARE SEPARATE AND INDEPENDENT AND THE AO HAS CORRECTLY MADE BOTH THE ADDITIONS INDEPENDENTLY. HONBLE SUPREME COURT IN THE CASE OF CIT VS. DEVI P RASAD VISHWANATH PRASAD, 72 ITR 194 HELD ITA NO. 32/AGRA/2012 9 THERE IS NOTHING IN LAW WHICH PREVENTS THE INCOME- TAX OFFICER IN AN APPROPRIATE CASE IN TAXING BOTH THE CASH CRED IT, THE NATURE AND SOURCE OF WHICH IS NOT SATISFACTORILY EXPLAINED, AN D THE BUSINESS INCOME ESTIMATED BY HIM UNDER SECTION 13 OF THE IND IAN INCOME-TAX ACT, 1922, AFTER REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE AS UNRELIABLE. 8.1 HONBLE M.P. HIGH COURT IN THE CASE OF CIT VS. DALURAM PANNALAL MODI, 129 ITR 398 FOLLOWING THE SAME DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. DEVI PRASAD VISHWANATH PRASAD (SUPRA) ALSO DECIDED THE ISSUE AGAINST THE ASSESSEE. IT WAS HELD AS UNDER :- HELD, THAT IN THE INSTANT CASE THE ASSESSEE HAD TO SHOW B Y ADDUCING SATISFACTORY EVIDENCE, THAT THE CASH CREDI TS WERE REFERABLE TO THE UNDISCLOSED INCOME OF THE KNOWN OR DISCLOSED SO URCE, NAMELY, THE BUSINESS, INCOME FROM WHICH HAD ALREADY BEEN ESTIMA TED. THE ITO HELD THAT THE CASH CREDITS REPRESENTED INCOME FROM UNDISCLOSED SOURCES. THIS FINDING WAS NOT SET ASIDE EITHER BY T HE AAC OR BY THE TRIBUNAL. THE TRIBUNAL SEEMED TO ASSUME THAT ONCE T HE BUSINESS INCOME WAS ESTIMATED, THE UNEXPLAINED CASH CREDITS WOULD BE COVERED BY THE INCOME SO ESTIMATED. THIS ASSUMPTION WAS NOT WARRANTED BY LAW. WITHOUT SETTING ASIDE THE FINDING OF THE ITO T HAT THE CASH CREDITS REPRESENTED INCOME FROM UNDISCLOSED SOURCES, THE TR IBUNAL WAS NOT JUSTIFIED IN HOLDING THAT THE AMOUNT OF RS.15,300/- WHICH WAS ADDED AS INCOME FROM UNDISCLOSED SOURCES WAS COVERED BY THE INTANGIBLE ADDITIONS MADE IN THE INCOME OF THE ASSESSEE. THE DECISION CITED BY THE LD. COUNSEL FOR THE ASSES SEE, IN OUR RESPECTFUL VIEW, CANNOT BE GIVEN PREFERENCE AS AGAINST THE DECISION OF HONBLE SUPREME COURT. WE, ACCORDINGLY, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE AUTHORITIES BELOW IN MAKING ADDITION OF RS.7,00,000/- ON ACCOUNT OF UNEX PLAINED CREDIT. ACCORDINGLY, GROUND NO. 3 IS DISMISSED. ITA NO. 32/AGRA/2012 10 9. THE ASSESSEE HAS RAISED FOLLOWING ADDITIONAL GRO UNDS : GROUND NO. 1(D). BECAUSE THE LEARNED ASSESSING OFFICER HAS ERRED IN ADDING A SUM OF RS.6,09,366/-, THE AMOUNT OF INTEREST EARNED ON SEC URITY DEPOSITS GIVEN TO PROCURE CONTRACT WORK, IN ADDITION TO ESTIMATION OF NET PROFIT AT A PROFIT PERCENTAGE, TO THE INCOME OF THE ASSESSEE, W ITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO. 1(E): BECAUSE THE INCLUSION OF INTEREST INCOME SEPARATEL Y BY THE LEARNED ASSESSING OFFICER WHILE COMPUTING THE TAXAB LE INCOME TANTAMOUNTS TO DOUBLE ADDITION. 10. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE INTEREST INCOME EARNED WAS ON ACCOUNT OF SECURITY DEPOSIT IN ORDER TO PROC URE CONTRACT WORK AND ONCE THE ESTIMATE OF PROFIT IS MADE, NO FURTHER ADDITION IS REQUIRED, OTHERWISE IT WOULD AMOUNT TO DOUBLE TAXATION. HE HAS SUBMITTED THAT TH IS FACT IS MENTIONED BY THE AO IN THE COMPUTATION OF INCOME BECAUSE SEPARATE ADDIT ION HAS BEEN MADE ON ACCOUNT OF INTEREST OF RS.6,09,366/-. IN SUPPORT OF HIS CON TENTIONS, HE HAS RELIED UPON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CAS E OF CIT VS. CHINNA NACHIMUTHU CONSTRUCTIONS, 297 ITR 70, IN WHICH IT W AS HELD AS UNDER : INVESTMENT OF AMOUNT IN FIXED DEPOSITS BY THE ASSE SSEE BEING ONLY TO SECURE A BANK GUARANTEE TO BE OFFERED TO KP TCL IN ORDER TO ACQUIRE A CONTRACT WORK, INTEREST ON SUCH FIXED DEP OSITS CANNOT BE TREATED AS AN INCOME FROM OTHER SOURCES AND HAS TO BE TREATED AS BUSINESS INCOME. ITA NO. 32/AGRA/2012 11 HE HAS, THEREFORE, SUBMITTED THAT THE ADDITIONAL GR OUNDS MAY BE ADMITTED AND SEPARATE ADDITION MAY BE DELETED. ON THE OTHER HAND , THE LD. DR SUBMITTED THAT IT IS RAISED FOR THE FIRST TIME AND, THEREFORE, IT CANNOT BE ADMITTED. 11. ON CONSIDERATION OF THE FACTS OF THE CASE AND F INDING GIVEN ON GROUND NO. 1 & 2 ABOVE, WE ARE OF THE VIEW THAT THE ADDITIONAL G ROUNDS ARISE FROM THE ASSESSMENT ORDER AND IT IS CONNECTED WITH THE ESTIM ATE OF INCOME OF THE ASSESSEE. THEREFORE, THE ADDITIONAL GROUND, BEING LEGAL IN NA TURE AND CONNECTED WITH THE ESTIMATED INCOME SHALL HAVE TO BE ADMITTED FOR CONS IDERATION. WE, ACCORDINGLY, ADMIT THE ABOVE ADDITIONAL GROUND. THE AO ADDED RS. 6,09,366/- SEPARATELY IN COMPUTATION OF INCOME AS INTEREST INCOME. THE LD. C OUNSEL FOR THE ASSESSEE EXPLAINED THAT SUCH AMOUNT OF INTEREST WAS EARNED O N SECURITY DEPOSIT GIVEN TO PROCURE THE CONTRACT WORK AND THUS, IT IS THE PART OF THE OF THE BUSINESS INCOME. THEREFORE, IT SHOULD BE TREATED AS BUSINESS INCOME. THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE IS SUPPORTED BY THE DECISI ON OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. CHINNA NACHIMUTHU CONS TRUCTIONS (SUPRA). SINCE WE HAVE CONFIRMED THE ESTIMATE OF BUSINESS INCOME AND RESTRICTED THE ADDITION TO RS.1,00,000/- AND INTEREST IS EARNED BY THE ASSESSE E TO PROCURE THE CONTRACT WORK, THEREFORE, IT CANNOT BE TREATED AS INCOME FROM OTHE R SOURCES, BUT AS BUSINESS INCOME. THE ADDITION MAINTAINED OF RS.1,00,000/- TO THE BUSINESS INCOME WOULD SUFFICE THE PURPOSE AND NO SEPARATE ADDITION SHALL HAVE TO BE MADE IN A SUM OF ITA NO. 32/AGRA/2012 12 RS.6,09,366/-. WE, ACCORDINGLY, SET ASIDE THE ORDER S OF THE AUTHORITIES BELOW AND DELETE THE ADDITION OF RS.6,09,366/- OUT OF COMPUTA TION OF INCOME MADE BY THE AO SEPARATELY. ACCORDINGLY, THE ADDITIONAL GROUNDS OF THE ASSESSEE ARE ALLOWED. 12. NO OTHER POINT IS ARGUED OR PRESSED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY