ITO, Kanpur V. M/S S.T. Advani & Co., Kanpur

ITA 351/LKW/2011

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7288 (ITAT-LUCKNOW)
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-10-2011
• Assessment Year: misc
• Appeal Filed On: 16-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K B AJAJ
• Keywords: Business income; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI B. R. JAIN , ACCOUNTANT MEMBER ITA NO. 351/LKW/2011 ASSESSMENT YEAR: 2006 - 07 ITO 3(4) KANPUR V. M/S S.T. ADVANI & CO. 108/7A, A.P . ROAD, KANPUR PAN: AADFS5547B (APPELLANT) (RESPONDENT) C.O. NO. 25/LKW/2011 [ARISING OUT OF ITA NO. 351/LKW/2011] ASSESSMENT YEAR: 2006 - 07 M/S S.T. ADVANI & CO. 108/7A, A.P. ROAD, KANPUR V. ITO 3(4) KANPUR PAN: AADFS5547B (APP LIC ANT) (RESPOND ENT) DEPARTMENT BY SHRI. P. K. BAJAJ, SR. D.R. ASSESSEE BY SHRI. RAKESH GARG, ADVOCATE DATE OF HEARING: 18.10.2011 DATE OF PRONOUNCEMENT: 25.10.2011 O R D E R PER S UNIL KUMAR YADAV : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) ON A SOLITARY GROUND THAT THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO RESTRICT THE ADDITION AT ` 1.50 LAKHS AS AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER REJECTING THE BOOKS : - 2 - : OF ACCOUNT AND APPLYING THE NET PROFIT RA TE @ 8% ON ADJUSTED GROSS RECEIPT WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD. 2. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION ASSAILING THE ORDER OF THE LD. CIT(A) MAINLY ON TWO ISSUES . O NE IS WITH REGARD TO THE TREATMENT OF INTEREST INCOME RECEIVED ON FDRS AND THE OTHER IS WITH REGARD TO SUSTAINING THE ADDITION OF ` 1.50 LAKHS O N AD - HOC BASIS . 3. SINCE THE APPEAL AND THE CROSS OBJECTION WERE HEARD TOGETHER, THESE ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A CIVIL CONTRACTOR AND HAVE EXECUTED CIVIL WORK FOR VARIOUS GOVERNMENT DEPARTMENTS. THE ASSESSMENT WAS COMPLETED ON A NET INCOME OF ` 39,85,200 AS AGAINST THE REVISED RETURN ED INCOME OF ` 2,10,880 BY THE ASSESSING OFFICER REJECTING THE BOOKS OF ACCOUNT AND APPLYING NET PROFIT RATE OF 8% ON ADJUSTED GROSS RECEIPTS OF ` 5,24,20,446. 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) FOLLOWING THE ORDER DATED 14.8.2009 OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YE ARS 2004 - 05 AND 2005 - 06 HELD THAT THE REJECTION OF BOOKS OF ACCOUNT WAS NOT PROPER AND THE ADDITION MADE BY THE ASSESSING OFFICER ADOPTING THE NET PROFIT ESTIMATED AT 8% CANNOT BE SUSTAINED. THE LD. CIT(A), HOWEVER, MADE AN AD - HOC ADDITION OF ` 1.50 LAKHS UNDER THIS HEAD. 6. NOW THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND PLACED HEAVY RELIANCE UPON THE ORDER OF THE ASSESSING OFFICER IN WHICH HE HAS REJECTED THE BOOKS OF ACCOUNT FOR THE SAME REASON FOR WHICH HE REJECTED THE BOOKS OF ACCOUNT FOR ASSESSMENT YEARS 2004 - 05 AND 2005 - 06. : - 3 - : 7. THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE FACT THAT THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT FOR THE SAME REASONS FOR WHICH HE REJECTED THE BOOKS OF ACCOUNT FOR ASSESSMENT YEARS 2 004 - 05 AND 2005 - 06 IN WHICH THE NET PROFIT WAS ESTIMATED AT 8%. THE TRIBUNAL HAS EXAMINED THE ISSUE IN DETAIL IN ITS ORDER AND FINALLY KNOCKED DOWN THE REJECTION OF BOOKS OF ACCOUNT AND HELD THAT THE PROFIT DECLARED BY THE ASSESSEE SHOULD BE ACCEPTED. TH IS ORDER OF THE TRIBUNAL HAS NOT BEEN REVERSED SO FAR, THEREFORE, THERE IS NO ERROR IN THE FINDING OF THE LD. CIT(A) WITH REGARD TO THE REJECTION OF BOOKS OF ACCOUNT . 8. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS, WE FIND THAT THE LD. CI T(A) HAS DECIDED THE ISSUE FOLLOWING THE ORDER OF THE TRIBUNAL IN RESPECT OF REJECTION OF THE BOOKS OF ACCOUNT. HE, HOWEVER, MADE AN ADDITION OF ` 1.50 LAKHS ON AD - HOC BASIS. ONCE THE BOOKS OF ACCOUNT ARE TO BE ACCEPTED IN THE LIGHT OF THE ORDER OF THE TR IBUNAL FOR ASSESSMENT YEARS 2004 - 05 AND 2005 - 06, THERE IS NO JUSTIFICATION IN MAKING AD - HOC ADDITION. WE, THEREFORE, FIND NO MERIT IN THIS ADDITION AND WE ACCORDINGLY DELETE THE SAME. 9. SO FAR AS THE NATURE OF RECEIPT OF INTEREST ON FDRS IS CONCERNED, WE FI ND THAT IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT THE FDRS WERE PURCHASED ON ACCOUNT OF BUSINESS EXIGENCY AND THEY WERE PLACED WITH THE GOVERNMENT DEPARTMENTS FOR THE PURPOSE OF EARNEST MONEY FOR ACQUIRING TENDERS. THESE FACTS ARE ALSO BORNE OUT FRO M THE CERTIFICATE OF THE CHIEF MANAGER, BANK OF BARODA. NOTHING HAS BEEN BROUGHT ON RECORD BY THE REVENUE THAT THE ASSESSEE HAS PUT THE SURPLUS MONEY IN FDRS IN ORDER TO EARN INTEREST. IF THE FDRS ARE PURCHASED ON ACCOUNT OF BUSINESS EXIGENCY, THE INTERE ST EARNED THEREON CANNOT BE TERMED TO BE THE INCOME FROM OTHER SOURCES. WE ARE, THEREFORE, OF THE VIEW TH AT THE : - 4 - : INTEREST GENERATED ON THE S E FDRS IS A BUSINESS INCOME OF THE ASSESSEE. ACCORDINGLY THE APPEAL OF THE REVENUE IS DISMISSED AND THE CROSS OBJECT ION OF THE ASSESSEE IS ALLOWED . 10. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS AL LOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 25.10.2011. SD/ - SD/ - [B. R. JAIN ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDI CIAL MEMBER DATED: 25.10.2011 JJ: 1810 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR