Amplified Engineers, Malda V. Addl. CIT, Jalpaiguri, Jalpaiguri

ITA 757/KOL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54510 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 16-05-2011
• Court: TRIBUNAL
• Department Lawyers: S K ROY
• Keywords: Business income; Opportunity of being heard; Corroborative evidences
• Section: 145; 144

Judgement Text

1 , A , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- A, KOL KATA [ , . .. . . .. . , , , , !' ] BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER & SRI C.D. RAO, ACCO UNTANT MEMBER # # # # / ITA NO. 757 (KOL) OF 2011 $% &' / ASSESSMENT YEAR 2005-06 AMPLIFIED ENGINEERS, MALDA. (PAN-AACCA6890M) ADDL.COMMISSIONER OF I..T., JALPAIGURI (*+ / APPELLANT ) - $ - - VERSUS - (./*+/ RESPONDENT ) *+ 0 1 !/ FOR THE APPELLANT: / SRI SOMNATH GHOSH ./*+ 0 1 ! / FOR THE RESPONDENT: / SRI S.K. ROY !2 / ORDER ( . .. . . .. . ), !' (C.D. RAO), ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. C.I.T.(A)-VI, JALPAIGURI DATED 29/3/2011 FOR ASSESSMENT YEAR 2005 -06. THE GROUNDS RAISED IN THIS APPEAL BY THE ASSESSEE READS AS UNDER :- 1. THAT FROM THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. C.I.T. (APPEAL) JALPAIGURI, HAS ERRED NOT BY GRANTING A REASONABLE OPPORTUNITY OF BEING HEARD TO YOUR APPELLANT SINCE THE DATE 12.08.2010 A SUO-MOTU ADJOURNMENT WA S MADE BY HIS DEMISED PREDECESSOR C.LT. (APPEAL) JALPAIGURI, DUE TO HIS I LL HEALTH. THE REST OF THE NOTICES MENTIONED IN THE ORDER WERE NOT ALL SERVED TO YOUR APPELLANT. 2. THAT FROM THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. C.I.T. (APPEAL) JALPAIGURI, HAS ERRED BY UPHOLDING THE INVOKING OF SECTION 145 BY THE LD. ADDL.C.I.T. JALPAIGURI FOR NON MAINTENANCE OF STOCK BOOK WHEN B Y HIS OWN ADMISSION YOUR APPELLANT RECEIVED ALL MATERIALS FROM THE CONTRACTE E AND YOUR APPELLANT NOT DEFIED NONE OF THE PROVISIONS OF SECTION 144 OF THE I.T. A CT, 1961. 3. THAT FROM THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. C.I.T. (APPEAL) JALPAIGURI. HAS ERRED BY NOT VERIFYING THE WRITTEN SUBMISSION FOR LOW PROFIT FROM SCRUTINY CASE RECORD THAT THE APPELLANT FIRM EXECUT ING WORK AT THEIR NATIVE VILLAGE WHERE THEIR OWN HOUSE SO AS HOUSES OF THEIR KINS WE RE SUBMERGING BY EROSION OF RIVER GANGA. THE SUB CONTRACT UNDER TAKEN BY THE FI RM CONTAINED MUCH MORE EMOTIONAL ISSUE NOTHING TO MAKE PROFIT. 2 4. THAT FROM THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. C.I.T. (APPEAL) JALPAIGURI, HAS ERRED BY UPHOLDING THE ORDER OF ADDL. COMMISSIO NER OF INCOME TAX, JALPAIGURI OF THE ADDITIONS MADE ON THE INTEREST ON PERFORMANCE G UARANTEE AGAINST THE WORK AS AN INCOME OTHER THAN INCOME FROM BUSINESS. 2. GROUNDS NO. 1 TO 3 ARE AGAINST REJECTION OF BOOKS OF ACCOUNT BY INVOKING PROVISIONS OF SEC. 145 OF THE ACT AND THEREBY ESTIM ATING THE NET PROFIT AT RS.6,81,496/- BY APPLYING RATE OF 4% ON THE TOTAL T URNOVER AS AGAINST NET PROFIT DECLARED BY THE ASSESSEE AT RS.2,95,350/- @ 1.73%. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE, A PARTNERSHIP FIRM, I S CARRYING ON A BUSINESS OF EXECUTING CIVIL WORKS UNDER SUB-CONTRACT. RETURN FO R THE ASSESSMENT YEAR UNDER APPEAL WAS FILED SHOWING TOTAL INCOME OF RS.2,95,35 0/-, WHICH WAS PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, IN RESPONSE TO NO TICE U/S. 143(2)/142(1) OF THE ACT, THE ASSESSEE PRODUCED ITS AUDITED BOOKS OF ACC OUNTS AND OTHER SUPPORTING EVIDENCES BEFORE THE A.O. THE ASSESSEE-FIRM HAD SHO WN GROSS CONTRACTUAL RECEIPTS AS PER BILL RAISED BY THE CONTRACTEES FROM THE SAID ACTIVITIES AT RS.1,70,37,407/-, EXCLUDING MATERIAL SUPPLIED BY TH E CONTRACTEES, AND NET PROFIT WAS DECLARED @ 1.73% AFTER ADJUSTING ALL EXPENSES I NCURRED IN CONNECTION WITH EXECUTION OF THE SUB-CONTRACT WORKS AND RUNNING OF ESTABLISHMENT THEREOF. HOWEVER, THE A.O. OBSERVED THAT THE ASSESSEE HAS NO T MAINTAINED ANY STOCK REGISTER AND LABOUR MUSTER ROLL. FURTHER, THERE WA S NO CORROBORATIVE EVIDENCE IN RESPECT OF SOME OF THE MAJOR EXPENSES CLAIMED BY TH E ASSESSEE LIKE CARRYING CHARGES AND OTHER EXPENSES, WHICH LED HIM TO REJECT THE TRADING RESULTS SHOWN BY THE ASSESSEE BY INVOKING PROVISIONS OF SEC. 145 OF THE ACT AND ESTIMATED THE NET PROFIT AT 4% OF THE GROSS CONTRACTUAL RECEIPTS OF RS.1,70,37,407/- AS AGAINST 1.73% SHOWN BY THE ASSESSEE BY RELYING ON THE DECIS ION OF HONBLE SUPREME COURT IN THE CASE OF S.N. NAMASIVAYAM CHETTIAR VS. CIT [38 ITR 579 (SC)]. 3. ON APPEAL, THE LD. C.I.T.(A) FOLLOWING SOME DEC ISIONS OF THE TRIBUNAL, AS MENTIONED IN HIS APPELLATE ORDER, CONFIRMED THE ACT ION OF THE A.O. IN REJECTING THE BOOKS OF ACCOUNT BY APPLYING SEC. 145 OF THE ACT AN D ALSO IN ESTIMATING THE NET PROFIT AT 3 4% ON THE TURNOVER DECLARED BY THE ASSESSEE. HENCE THIS APPEAL BY THE ASSESSEE ON THE ABOVE ISSUE. 4. AT THE TIME OF HEARING BEFORE US, THE LEARNED C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE DULY AUDITED U/S. 44AB OF THE ACT. HE FURTHER SUBMITTED THAT THE A.O. REJECTED T HE BOOKS OF ACCOUNT MAINTAINED IN THE NORMAL COURSE OF BUSINESS MAINLY ON THE GROUND THAT THERE WAS NO UNIFIED STOCK REGISTER OF THE MATERIAL PURCHASED AND ITS UTILIZAT ION WITHOUT CONSIDERING THE LOGIC OF THE SITUATION THAT THE ASSESSEE EXECUTED THE WORKS AT DIFFERENT SITES AND TIME OF EXECUTION OF WORK WAS ALSO DIFFERENT AND, THEREFORE , THE ASSESSEE MAINTAINED COMPREHENSIVE SITE-WISE REGISTERS SHOWING INFLOW AN D OUTFLOW OF INPUTS AND NO UNIFIED STOCK REGISTER WAS POSSIBLE TO BE MAINTAINED. IN T HIS CONNECTION, THE LEARNED COUNSEL REFERRED TO COPIES OF WORK ORDER PROCURED BY THE AS SESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION PLACED AT PAGES 27 TO 146 OF TH E PAPER BOOK. HE HAS ALSO FILED DETAILS OF PURCHASES MADE DURING THE YEAR AT PAGE 1 54 OF THE PAPER BOOK AND RELATED COPIES OF LEDGER ACCOUNTS OF VARIOUS SUPPLIERS OF S UCH MATERIALS USED FOR ITS EXECUTION OF CONTRACT WORKS AT DIFFERENT SITES AT PAGES 155 T O 172 OF THE PAPER BOOK. THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE HAD INC URRED CONSIDERABLE LABOUR EXPENSES IN THE EXECUTION OF THE CONTRACT WORK AND MONTH-WIS E DETAILS OF SUCH EXPENSES ARE FILED AT PAGE 173 OF THE PAPER BOOK. IN RESPECT OF WAGES /LABOUR CHARGES PAID TO LABOURERS AT DIFFERENT SITES, COPIES OF LEDGER ACCOUNT OF SUCH E XPENSES HAVE BEEN FILED AT PAGES 174 TO 193 OF THE PAPER BOOK. IN REGARD TO THE ALLEGATI ON OF THUMB IMPRESSION OF LABORERS MADE BY THE A.O., THE LD. COUNSEL SUBMITTED THAT AB OUT 22 OR 23% OF THE LABOURERS SIGNED THEIR NAMES WHILE OTHERS FAILED BECAUSE OF I LLITERACY. HE FURTHER POINTED OUT THAT THE EXPENSES INCURRED IN THIS RESPECT WERE IN PARITY WITH EARLIER YEARS. IN REGARD TO THE A.O.S ALLEGATION THAT EXPENSES ON CARRYING CHARGES HAVE BEEN INCURRED BY THE ASSESSEE ON SELF-MADE VOUCHERS WITHOUT ANY THIRD PA RTY SIGNATURE CORROBORATING THE PAYMENT, THE LD. COUNSEL SUBMITTED THAT THE CHARGES INCURRED ON CARRIAGE WHICH WERE MAINLY DONE IN BOAT, TRAVELING EXPENSES, SITE EXPEN SES, CAMP EXPENSES AND PROCUREMENT OF MATERIAL LOCALLY HAD PERFORCE TO BE DOCUMENTED T HROUGH DEBIT VOUCHERS WHICH HAS BEEN ACCEPTED BY THE AUDITOR AND THIS DOES NOT ATTR ACT ANY PREJUDICIAL CONCLUSION IN 4 RESPECT OF DOCUMENTATION AS THESE PAYMENTS WERE MAD E TO PERSONS OF UNORGANIZED SECTOR IN RURAL AREAS, WHICH IS IN TUNE WITH THE TR ADE PRACTICE. IN THIS CONNECTION, HE REFERRED TO DETAILS FILED AT PAGES 194 TO 210 OF TH E PAPER BOOK. HE, THEREFORE, SUBMITTED THAT THERE WAS NO INFRINGEMENT OF THE PRO VISIONS OF SEC. 145 OF THE ACT WHICH ATTRACTS THE MISCHIEF OF THE PROVISIONS OF SE C. 145(3) OF THE ACT. THE LD. COUNSEL FURTHER SUBMITTED THAT THE RATIO OF THE DECISION IN THE CASE OF S.N. NAMASIVAYAM CHETTIAR VS. CIT (SUPRA) RELIED UPON BY THE A.O. IS DISTINGUISHABLE ON FACTS OF THE PRESENT CASE. HE SUBMITTED THAT IN THAT CASE THE A SSESSEE WAS A TRADER OF GRAINS, FODDER AND OTHER FOOD-STUFFS FOR CATTLE ETC. AND ON SUCH FACTS IT WAS HELD THAT KEEPING OF A STOCK REGISTER WAS OF GREAT IMPORTANCE. IT WA S ALSO LAID DOWN THAT THE POWER TO COMPUTE PROFITS UNDER THE PROVISIONS OF SEC. 145 OF THE ACT ARISES ONLY WHERE THE METHOD EMPLOYED IS SUCH THAT THE PROFITS AND GAINS CANNOT PROPERLY BE DEDUCED THEREFORE. THE LEARNED COUNSEL SUBMITTED THAT IN T HE PRESENT CASE THE ASSESSEE IS A SUB-CONTRACTOR AND IT DOES NOT MAINTAIN ANY TRADING ACCOUNT AND, THEREFORE, CLOSING STOCK IS NOT AN ITEM AND, IN FACT, THE METHOD OF AC COUNTING FOLLOWED BY THE ASSESSEE WAS NEVER FOUND TO BE AT FAULT. IN SUPPORT OF HIS SUBM ISSION, THE LEARNED COUNSEL RELIED ON ASHOKE REFRACTORIES P. LTD. VS. CIT [279 ITR 457 (C AL)] AND NISAR BIRI SIKKA NO. 1 VS. CIT [174 TAXMAN 51 (ALL.)]. 5. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTH ER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. HE FURTHER SUBMITTED THAT M OST OF THE VOUCHERS IN RELATION TO VARIOUS EXPENSES UNDER DIFFERENT HEADS WERE SIGNED BY THE EMPLOYEES OF THE ASSESSEE AND NOT BY THE ACTUAL RECIPIENTS AND, THEREFORE, TH E VERACITY OF INCURRING SUCH EXPENSES WAS DOUBTFUL AND ACTUAL PROFIT ON THE BASIS OF SUCH UNVERIFIABLE NATURE OF EXPENSES CANNOT BE ARRIVED AT. HE, THEREFORE, SUBMITTED THA T IN SUCH CIRCUMSTANCES, THE A.O. HAS RIGHTLY REJECTED THE TRADING RESULTS SHOWN BY T HE ASSESSEE BY INVOKING PROVISIONS OF SEC. 145 OF THE ACT AS THE BOOKS OF ACCOUNT WERE NO T PROPERLY MAINTAINED WITH SUPPORTING EVIDENCE AND THEREBY ESTIMATING THE FAIR AND REASONABLE PROFIT AT 4% OF THE TURNOVER DECLARED BY THE ASSESSEE. HE FURTHER SUBMI TTED THAT THE LD. C.I.T.(A) AFTER CONSIDERING ALL THE DETAILS AND EVIDENCES ON RECORD AND TAKING INTO CONSIDERATION THE 5 COMPARABLE CASES HAS RIGHTLY UPHELD THE ESTIMATE OF NET PROFIT AT 4%, WHICH SHOULD BE UPHELD. 5. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDER S OF THE AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE PAPERS FILED IN THE PAPE R BOOK OF THE ASSESSEE. THE REASONS/SHORTFALLS AS STATED BY THE A.O. FOR REJECT ING THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE SUMMARIZED AS UNDER :- A) NO STOCK REGISTER FOR MATERIAL PURCHASED AND DISTRIBUTED IS MAINTAINED. A) ALTHOUGH THE ASSESSEE MAINTAINS LABOUR REGISTER/MUS TER ROLL, BUT THIS REGISTER ONLY CONTAINS THE NAMES OF THE LABOURER, AMOUNT PAI D AND THEIR THUMB IMPRESSION. B) EXPENSES ON CARRYING CHARGES HAVE BEEN INCURRED BY THE ASSESSEE ON SELF-MADE VOUCHERS WITHOUT ANY THIRD PARTY SIGNATURE CORROBOR ATING THE PAYMENT AND WITHOUT ANY QUANTITATIVE DETAILS OF MATERIAL CARRIE D BY DIFFERENT MODE OF TRANSPORTATION, WHICH, ACCORDING TO THE A.O. WAS AN ATTEMPT TO INCREASE THE EXPENDITURE AND THEREBY SIPHONING OFF THE PROFIT. C) OTHER EXPENSES LIKE TRAVELING, CAMP EXPENSES, CONSU MABLE GOODS PURCHASE, SITE EXPENSES ETC. WERE SUPPORTED BY SELF-MADE VOUCHERS WITHOUT ANY THIRD PARTY SIGNATURE CORROBORATING THE PAYMENTS. IT WAS THE CASE OF THE ASSESSEE THAT IT HAS MAINTAI NED INFLOW AND OUTFLOW OF INPUTS AND, THEREFORE, NO UNIFIED STOCK REGISTER WAS MAINTAINED . IT WAS ALSO CLAIMED BY THE ASSESSEE THAT DETAILS OF CARRYING CHARGES TO THE TU NE OF RS.16,37,950/- UNDER DIFFERENT MODES OF TRANSPORT INCLUDING THE NAMES AND ADDRESSE S OF THE RECIPIENTS WERE FILED BEFORE THE A.O. AND WERE DULY DOCUMENTED BY DEBIT V OUCHERS AND THE SAME HAVE BEEN ACCEPTED BY THE AUDITOR. THE LABOUR PAYMENTS OF RS .85,38,760/- WERE ALSO MADE BY VOUCHERS AND MOST OF THE VOUCHERS WERE THUMB IMPRES SED AS THE LABOURERS FROM UNORGANIZED SECTORS ARE ILLITERATE. IT WAS, THEREFO RE, CLAIMED THAT REVENUE AUTHORITIES WERE NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUN T BY INVOKING PROVISIONS OF SEC. 145 OF THE ACT. AS PER SEC. 145(1) OF THE ACT, INCOME CHARGEABLE UNDER HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSION SHALL BE COMPUTE D IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE PROVI DED SUCH ACCOUNTS ARE CORRECT AND COMPLETE TO THE SATISFACTION OF THE ASSESSING OFFIC ER. SUB-SEC. (3) OF SEC. 145 OF THE 6 ACT ALSO SPELLS OUT THAT WHERE THE ASSESSING OFFICE R IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, HE MAY MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SEC. 144 OF TH E ACT. THEREFORE, SATISFACTION OF THE ASSESSING OFFICER IS THE FOREMOST CONDITION FOR ACCEPTING THE TRADING RESULTS OF AN ASSESSEE. IN THE INSTANT CASE, AS STATED ABOVE, TH E A.O. HAS POINTED OUT SEVERAL REASONS AND SHORTFALLS FOR NOT ACCEPTING THE TRADING RESULT S AND IN TURN REJECTING THE BOOKS OF ACCOUNT. IT IS FACT THAT NAMES OF THE PARTIES FROM WHOM PURCHASES WERE MADE AND PAYMENTS THEREOF HAVE BEEN PROVIDED BY THE ASSESSEE . HOWEVER, AT THE SAME TIME THERE WAS NO EVIDENCE BEFORE THE A.O. TO VERIFY TH E DISTRIBUTION/UTILIZATION OF SUCH MATERIALS INASMUCH AS THE ASSESSEE HAS NOT GIVEN SI TE-WISE CONSUMPTION OF MATERIALS. FURTHER, LABOUR PAYMENTS OF RS.85,38,760/- FORM PAR T OF A MAJOR HEAD IN THE TRADING/P & L ACCOUNT CONSIDERING THE GROSS BILL RECEIVED TO THE TUNE OF RS.1,70,37,407/-. THE DETAILS PRODUCED BY THE ASSESSEE IN SUPPORT OF PAYM ENTS TO THE LABOURERS ARE ONLY THE NAMES OF SUCH LABOURERS AND MOST OF THESE ARE BACKE D BY THUMB IMPRESSIONS. FURTHER, NUMBER OF LABOURS DEPLOYED SITE-WISE IS NOT ASCERTA INED FROM SUCH DETAILS OF LABOUR CHARGES AND THE A.O. HAS THUS DOUBTED THE CORRECTNE SS OF SUCH LABOUR PAYMENTS. SIMILARLY IN RESPECT OF CARRYING CHARGES OF RS.16,3 7,590/- FOR TRANSPORTING MATERIALS, IT IS NOT DISPUTED THAT MOST OF THE DEBIT VOUCHERS AR E SELF-MADE AND SIGNED BY THE EMPLOYEES OF THE ASSESSEE AND THERE WAS NO QUANTIT ATIVE DETAILS OF MATERIALS CARRIED BY DIFFERENT MODE OF TRANSPORTATION. IN RESPECT OF OTHER EXPENSES, THE SAME WERE DOCUMENTED BY SELF-MADE VOUCHERS PREPARED BY THE EM PLOYEES WITHOUT ANY SUPPORTING BILLS. THEREFORE, IN OUR CONSIDERED OPINION, THE A. O. WAS HAVING REASONS FOR HIS DISSATISFACTION OVER THE CORRECTNESS OF THE ACCOUNT S VIS--VIS TRADING RESULTS AND INCOME CHARGEABLE UNDER THE ACT CANNOT BE PROPERLY DEDUCED FROM SUCH BOOKS OF ACCOUNT. IN THAT VIEW OF THE MATTER, WE CONFIRM TH E ORDER OF THE LD. C.I.T.(A) IN SO FAR AS UPHOLDING THE REJECTION OF BOOKS OF ACCOUNT MADE BY THE A.O. U/S. 145 OF THE ACT IS CONCERNED. 5.1. THE A.O. WHILE REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE, ESTIMATED THE NET PROFIT AT 4% ON THE GROSS CONTRACTUAL RECEIPTS OF RS.1,70,37,487/- AS AGAINST SHOWN BY THE ASSESSEE AT 1.73%, RESULTING IN ADDITION OF RS.3,86,146/- [RS.6,81,496 7 RS.2,95,350]. THERE IS NO DISPUTE ABOUT THE GROSS RECEIPTS SHOWN BY THE ASSESSEE. WE FURTHER OBSERVE THAT IN THE IMMEDIATELY PRECEDING A SSESSMENT YEAR, I.E. A.Y. 2004-05, THE ASSESSEE FOR THE SAME LINE OF BUSINESS HAD DECL ARED NET PROFIT OF RS. 2,60,890/- ON GROSS TURNOVER OF RS.1,63,62,881/- (PAGE 234 OF THE PAPER BOOK), WHICH WAS ABOUT @ 1.59%. DURING THE YEAR UNDER APPEAL, THE TURNOVER AND CONSEQUENTIAL NET PROFIT WAS HIGHER IN QUANTUM, WHICH YIELDED NET PROFIT RATE AT 1.73%, I.E. RS.2,95,350/- (PAGE-220 OF THE PAPER BOOK). THEREFORE, CONSIDERING THE TOT ALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND RESULTS OF THE EARLIER YEAR, WE ARE OF THE CONSIDERED OPINION THAT IT WILL MEET THE ENDS OF JUSTICE IF THE RATE OF NET PROFIT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION IS TAKEN AT 2% ON THE GROSS CONTRACTU AL RECEIPT OF RS.1,70,37,487/-. WE, THEREFORE, DIRECT THE A.O. TO RECOMPUTE THE TOTAL I NCOME ACCORDINGLY. 6. THERE IS ONE MORE GROUND IN THE ASSESSEES APPE AL IN RESPECT OF ADDITION OF RS.61,622/- MADE ON THE INTEREST ON MONEY KEPT WITH THE CONTRACTEE AS PERFORMANCE GUARANTEE AGAINST THE WORK AS AN INCOME OTHER THAN INCOME FROM BUSINESS. THE A.O. HAS ESTIMATED THE INCOME FROM CONTRACT RECEIPTS AND THE N SEPARATELY ADDED THE SAID INTEREST INCOME AS INCOME FROM OTHER SOURCES REJECT ING THE ASSESSEES CLAIM OF BUSINESS INCOME. THE LD. C.I.T.(A) CONFIRMED THE ADDITION, BUT HE HAS STATED THAT IN THE METHOD ADOPTED BY THE A.O. THERE IS NO IMPACT IF THE INTER EST INCOME IS CONSIDERED AS BUSINESS INCOME OR OTHERWISE. WE OBSERVE THAT THE ASSESSEE HAD KEPT SOME MONEY DEPOSITED WITH THE CONTRACTEE AS PERFORMANCE GUARANTEE FOR EX ECUTION OF WORKS AND CLAIMED THE SAME EXCLUSIVELY TO CARRY ON SUCH BUSINESS. THEREFO RE, THE INTEREST ACCRUED ON SUCH GUARANTEE MONEY WAS CLAIMED AS BUSINESS INCOME. WH ETHER THE INCOME ACCRUING ON SUCH DEPOSIT WOULD CONSTITUTE BUSINESS INCOME STANDS ANS WERED BY THE DECISIONS OF HONBLE SUPREME COURT IN THE CASES OF CIT VS. BOKARO STEEL LTD. [236 ITR 315 (SC)] AND CIT VS. KARNAL CO-OPERATIVE SUGAR MILLS LTD. [243 ITR 2 (SC )], WHICH WERE FOLLOWED BY HONBLE DELHI HIGH COURT IN THE CASES OF CIT VS. KOSHIKA TE LECOM LTD. [287 ITR 479 (DEL)] AND IN A RECENT DECISION IN THE CASE OF CIT VS. JAYPEE DSC VENTURES LTD. [(2011) 335 ITR 132 (DEL)], WHEREIN IT WAS HELD THAT DEPOSITS OF MA RGIN MONEY BY THE ASSESSEE WITH THE BANKS WAS INEXTRICABLY LINKED TO THE FURNISHING OF THE BANK GUARANTEE BY THE ASSESSEE AND, THEREFORE, INCOME FROM INTEREST ON DEPOSITS CO NSTITUTES BUSINESS INCOME AND NOT 8 INCOME FROM OTHER SOURCES. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, WE ARE OF THE VIEW THAT INTEREST INCOME OF RS.61,622/- IS TO BE T REATED AS ICOME ROM BUSINESS. SINCE WE HAVE ALREADY DIRECTED THE A.O. TO ADOPT THE RATE OF NET PROFIT AT 2% ON GROSS CONTRACTUAL RECEIPTS OF THE ASSESSEE AS ITS BUSINES S INCOME, IN OUR OPINION, NO SEPARATE ADDITION OF RS.61,622/- IS REQUIRED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. !2 '3! 4 3$ 5 6 THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON 26.8. 2011. SD/- SD/- ( ) ( . .. . . .. . ) !' (MAHAVIR SINGH) JUDICIAL MEMBER (C.D. RA O), ACCOUNTANT MEMBER ( (( ( ' ' ' ') )) ) DATE: 26-08-2011 !2 0 .7 8!7&9- COPY OF THE ORDER FORWARDED TO: 1. *+ / THE APPELLANT : AMPLIFIED ENGINEERS, PRANTA PALLY, PO & DIST. MA LDA 2 ./*+ / THE RESPONDENT : ADDL. C.I.T., C.R. BLDG., NASYABASTI, JALPAIGURI 3. 2$ () : THE CIT(A), JALPAIGURI 4. 2$/ THE C.I.T., JALPAIGURI 5 =5 .$ / DR, ITAT, KOLKATA BENCHES, KOLKATA 6 GUARD FILE . /7 ./ TRUE COPY, !2$3/ BY ORDER, (DKP) > ? / DY/ASSTT. REGISTRAR .