MR. PRAMOD KUMAR KHANDELWAL,AGRA V. DY.C.I.T.-1, AGRA

MA 5/AGR/2021

AI Insights

The case involves Mr. Pramod Kumar Khandelwal, the proprietor of M/s Mahalaxmi Industries (Electricals), who filed Miscellaneous Applications against the Tribunal's earlier orders concerning the estimation of net profit and the assessment of interest income from bank FDRs for the assessment years 2010-11 and 2011-12. The Tribunal had previously estimated the net profit at 8% of gross receipts after rejecting the books of account under section 145(3) of the Income Tax Act. The assessee contested this estimation and the separate addition of interest income from FDRs. The Tribunal, after reviewing the submissions and the material on record, partly revised the net profit rate to 6% and corrected the typographical error regarding the telescopic adjustment but dismissed the claim related to the interest income from FDRs.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 779474 (ITAT-AGRA)
• Duration Of Justice: 4 year(s) 4 month(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 15-10-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 14-06-2021
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMAR
• Assessee Lawyers: WAY OF VERBAL PRONOUNCEMENT IS
• Keywords: Business income; Rejection of books of accounts; Source of fund
• Section: 143(3); 145

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, DB: AGRA (Through Physical / Virtual Hearing) BEFORE SHRI SUNIL KUMAR SINGH, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER M.A. No.- 5 /Agr/2021 Arising Out of ITA No.- 201/AGR/2016 [Assessment Year: 2010-11] Mr. Pramod Kumar Khandelwal, Prop. M/s Mahalaxmi Industries (Electricals), 27/3, Pt. Moti Lal Nehru Road, Agra. VS Dy. Commissioner of Income Tax-1, Income Tax Department, Agra PAN- ACXPK7647Q Assessee Revenue M.A. No.- 4 /Agr/2021 Arising Out of ITA No.- 200/AGR/2016 [Assessment Year: 2011-12] Mr. Pramod Kumar Khandelwal, Prop. M/s Mahalaxmi Industries (Electricals), 27/3, Pt. Moti Lal Nehru Road, Agra. VS Dy. Commissioner of Income Tax-1, Income Tax Department, Agra PAN- ACXPK7647Q Assessee Revenue Assessee by None Revenue by Shri Anil Kumar, Sr. DR Date of Hearing 18.07.2025 Date of Pronouncement 15.10.2025 Printed from counselvise.com MA No.- 4 &5 /Agr/2021 Pramod Kumar Khandelwal 2 ORDER PER BRAJESH KUMAR SINGH, AM, These two Miscellaneous Applications (hereinafter referred to as the ‘M.A’), has been field by the assessee against the Tribunal’s order dated 12/04/2021 in ITA No.- 201/Agr/201 and 200/Agr/2016. None appeared on behalf of the assessee and these applications are being disposed by hearing the Sr. DR and after perusing the material available on record. In both these cases, two issues were considered as crystalized by the Tribunal for adjudication, which are reproduced as under: “ 1. Estimation of net profit @ 8% of total gross receipts after rejection of the books of account by invoking the provisions laid down under section 145(3) of the Act, leading to addition of Rs. 14,05,188/ 2. Assessment of interest income from bank FDR of Rs.2,53,050 under the head income from other sources and resultant double addition as being claimed to be shown by the assessee as business income in the business receipts.” 1.1 The above amounts are as per ground nos. 3 and 5 of the concise grounds of appeal filed by the assessee in ITA No. 201/Agr/2016 for A.Y. 2010-11, and the facts and the Printed from counselvise.com MA No.- 4 &5 /Agr/2021 Pramod Kumar Khandelwal 3 submissions made by the assessee in M.A. No.- 05/AGR/2021, relating to this appeal are discussed for the sake of convenience and brevity. 1.2 The assessee in its M.A. submits that as per the grounds of appeal filed by the assessee following issued had crystalized for adjudication before the Tribunal as stated in para 5 of page no. 3 of its M.A. “5. a) That from the grounds of appeal it is evident that following issues are crystalized for adjudication in such appeal:- 1. Estimation of net profit 8 8% of total gross receipts after rejection of the books of account by invoking the provisions laid down under section 145(3) of the Act, leading to addition of Rs.14,05,188. 2. Justification of adoption of 8% net profit rate in the type of business carried on by the assessee, without quoting any comparable case or without assigning any logical or rational reason and by complete disregard to the past established history. 3. Income from interest on fixed deposits which have been furnished as security in terms of contract should have been considered as 'Income from business'. 4. The Telescopic adjustment of trading addition should have been allowed with the income of Rs.9,60,000 declared by the assessee. 5. While computing the assessed income the AO has wrongly included interest from bank FDR of Rs.2,53,050 twice. Printed from counselvise.com MA No.- 4 &5 /Agr/2021 Pramod Kumar Khandelwal 4 1.3 It was further submitted that by some oversight the Tribunal only considered two issues for adjudication as mentioned at page 7 and 8 of its order which are reproduced as under: - \"3. From the grounds of appeal, there are two issues crystalized for adjudication in both the appeals of the assessee as follows: 1. Estimation of net profit @ 8% of total gross receipts after rejection of the books of account by invoking the provisions laid down under section 145 (3) of the Act, leading to addition of Rs.14,05,188/-. 2. Assessment of interest head income from bank FDR of and from other sources Assessment Rs.2,53,050 under the income resultant double addition as being claimed to be shown by the assessee as business income in the business receipts.\" 2. The Tribunal noted the fact of the present case relating to the 2 issues for adjudication before them for A.Y. 2010-11 in para no. 4 of its order, which is reproduced as under: “4. Brief facts as per record are that the After considering the assessee's reply and perusal of bill/voucher of expenses and purchase, the Assessing Officer (hereinafter referred to as \"the AO\") found that the vouchers are self made and paid in cash which is fully not verifiable. He has noted that during Assessment Year 2009-10 assessee's case was completed u/s 143(3) @ 8% on gross receipt as agreed by the assessee. For the Assessment Year 2010- 11 assessee's case was also completed @ 8% on gross receipt after rejecting the books of accounts for the reasons that assessee's bill/vouchers were fully not verifiable. Similarly, for the Assessment Year 2011-12, the assessee's books of accounts were rejected u/s 145(3) of the Act and income was estimated @ 8% on gross receipts after distinguishing case laws relied upon by the assessee where the AO noted that \"the case laws given by Printed from counselvise.com MA No.- 4 &5 /Agr/2021 Pramod Kumar Khandelwal 5 assessee is not applicable in his case because fact of the case is different\". Accordingly, the AO applied 8% net profit rate on gross contract and assessed business income besides treating Bank FDR interest income as income from other sources in both the assessment years under consideration.” 2.1 Thereafter, the Tribunal noted that the above additions made by the AO was confirmed by the Ld. CIT(A). After considering the entire facts, the Tribunal applied a net profit rate of 6% on the gross receipts of the assessee, as against @ 8% applied by the AO, for estimation of business income in both the assessment years i.e. A.Y. 2010-11 and 2011-12. The relevant finding of the Tribunal in para no. 13 on page no. 21 and 22 of the order is reproduced as under: “ 13. After carefully considering the facts of the case in totality and perusing the case laws applicable and we found that even account books are rejected the past history of the assessee vis-a-vis the gravity of discrepancy is the best guide for adoption of net profit rate to the gross receipt for estimation of the income of the assessee Even if past history of the assessee is adopted, it cannot be said that the assessee had not suppressed the income. The findings recorded by the AO and the Ld. CIT (A) are essentially the findings of fact and are based on relevant material GR on record in the absence of complete information about name and address of the creditors or the expense voucher, how the authorities can be expected to carry out examination and verification of such transactions of the assessee. In the present case, though decision in the case of \"Jugender Singh Yadav\" Supra relied by the learned DR, is not squarely applicable to the facts of the appellant's case, however such decision definitely has bearing over the such cases of estimation of income after rejection of books of accounts by way of invoking provisions of section 145(3) whether assessment order mention 143(3) or 144. Mere typing mistake or quote of section Printed from counselvise.com MA No.- 4 &5 /Agr/2021 Pramod Kumar Khandelwal 6 does render the assessment proceedings void. In view of peculiar facts of the case, it is fair and reasonable to apply a net profit rate of 6% on the gross receipt of the assessee for estimation of his business income for both the assessment years separately. Accordingly, the AO is directed to apply NP rate of 6% and thus this issue is partly allowed in favour of the assessee.” 2.2 In the M.A., it has been submitted by the assessee that the Co-ordinate Bench made a ‘verbal announcement’ in the Open Court on 24.03.201 that on the basis of past established history of the assessee shown at page 1 of the Paper Book Compilation, and as detailed in para no. 5.1 of its submission directed the AO to apply net profit at the rate 3.35% as against 8% net profit applied by him. The relevant para no. 5.1 of the M.A. on page no. 13 filed by the assessee is reproduced as under: “ 5.1 That while coming to such an unjust conclusion, which is completely contrary to the facts of the assessee's case, Your Honours' at paras 10.1 to para 10.2 at pages 17 to 19 by some oversight inadvertently have made various uncalled for and unwarranted observations, which are even not at all related to the case of the assessee's, and have apparently resulted into such an unjust conclusion, which is not in consonance with your Honours' following 'Verbal pronouncement', for such an issue, made in the open Court on 24.03.2021. Now on the basis of the facts of the case and in the light of various judgments including of jurisdictional Hon'ble Allahabad High Court and the Co-ordinate Bench of this Bench itself, on the basis of past established history of the assessee show at page 1 of paper compilation, we held that after the rejection of books, the application of net profit rate @ 3.35% rate worked out on the basis of average rate of net profit rate declared by the assessee for three years i.e.in AY 2008-09 assessed at 4.36%, in AY 2009-10 there Printed from counselvise.com MA No.- 4 &5 /Agr/2021 Pramod Kumar Khandelwal 7 were peculiar fact, in AY 2010-11 3.03% and in AY 2011-12 2.60%. So as per such past history, the average rate works out to 3.35% and accordingly the AO is directed to apply 3.35% net profit rate as against 8% net profit rate applied by him.” 3. We have heard the Sr. DR and perused the material available on record. We find that the Tribunal, after discussing facts, and after giving reasons applied a net profit rate of 6% on the gross receipts of the assessee. Further, as contended by the assessee regarding the claim of verbal announcement, the order sheet noting on 24.03.2021 of the hearing of the appeal in ITA No. 200 & 201/Agr/2016, has been perused by us and the claim made by virtue of ‘verbal pronouncement’ to apply net profit at the rate of 3.5% as against 8% applied by the AO is not supported by the said order-sheet recordings. Therefore, the submissions made by the assessee do not point out any mistake apparent from the record on this issue, and therefore, the M.A. on this issue is not maintainable. 4. As regards the second issue, the Tribunal gave its finding in para nos. 14 and 15, which are reproduced as under: “ 14. As regards to the 2nd issue that for the Assessment Year 2010-11, the assessee may be allowed the telescopic adjustment of trading addition with the other income voluntarily Printed from counselvise.com MA No.- 4 &5 /Agr/2021 Pramod Kumar Khandelwal 8 declared by the assessee and thereafter offered for taxation as submitted by the Counsel that the assessee has declared Rs.9,60,000 as income from other sources which should have been considered as 'Income from Business' by the learned AO, more so when during the year the assessee apart from business income had no other source of income. 15. The AO is further directed to give credit to the income disclosed in the return of income from bank interest as against adoption of the full interest income from banks, FDRS, NSC where other income declared by the assessee at Rs.12,17,040 duly includes interest income from FDR Rs.2,53,050, as claimed but added such interest income from FDR Rs.2,53,050 separately once again in arbitrarily way. The AO may examine and assessed correct income from other sources at Rs.12,17,040 as against Rs.14,70,090 claimed by the ld. Counsel for the assessee after verification. 4.1 The assessee’s submission in this regard on page nos. 13- 15 of its M.A. is reproduced as under: “Issue-4- Ground no. 4 The Telescopic adjustment of trading addition should have been allowed with the income of Rs.9,60,000 declared by the assessee. At para 7 page 16 7. On the 2nd Issue that for the Assessment Year 2010-1, the Ld. Counsel submitted that the assesses has declared Rs.9,60,000 as income from other sources which should have been considered as Income from Business by the learned AO, more so when during the year the assessee apart from business income had no other source of income. The assessee may be allowed the telescopic adjustment of trading addition with the other income voluntarily declared by the assessee and thereafter offered for taxation.\" Held: Printed from counselvise.com MA No.- 4 &5 /Agr/2021 Pramod Kumar Khandelwal 9 Para 14 page 22 \"14. As regards to the 2nd issue that for the Assessment Year 2010-11, assessee may be allowed adjustment of trading addition with the other income voluntarily telescopic declared by the assessee and thereafter offered for taxation as submitted by the Rs.9,60,000 as income from other sources which should have been considered as 'Income from Business' by the learned AO, more so when during the year the assessee apart from business income had no other source of income.\" Counsel that the assessee has declared It seems that by some oversight inadvertently while deciding such issue, on account of typographical mistake in second line word 'may' in place of shall', has been typed.” 4.2. We have heard the Sr. DR and perused the material available on record. The Tribunal in para no. 14 on pg.- 22-23 of its order allowed telescopic adjustment of the trading addition with the other income voluntarily declared by the assessee, and also noted, that the income of Rs. 9,60,000/- declared as income from other sources should have been be considered as ‘income from business’, moreso, when during the year the assessee apart from business income had no other sources of income. However, the assessee submits that it seems that by some oversight inadvertently while deciding such issue, on account of typographical mistake in second line word 'may' in place of ‘shall', Printed from counselvise.com MA No.- 4 &5 /Agr/2021 Pramod Kumar Khandelwal 10 in para 14 has been typed. This submission is found to be acceptable and to avoid any ambiguity in the direction in the order, we substitute the word ‘may’ with ‘shall’ in the said para and para no. 14 of the order of Tribunal is substituted as under: “14. As regards to the 2nd issue that for the Assessment Year 2010-11, the assessee shall be allowed the telescopic adjustment of trading addition with the other income voluntarily declared by the assessee and thereafter offered for taxation as submitted by the Counsel that the assessee has declared Rs.9,60,000 as income from other sources which should have been considered as 'Income from Business' by the learned AO, more so when during the year the assessee apart from business income had no other source of income.” 4.3 Thus, the M.A. application of the assessee on this issue is allowed to the above extent. 5. Further, the assessee submits that the issue no. 3 in as stated in para 5 on page no. 3 of its M.A., i.e. Income from interest on fixed deposits which have been furnished as security in terms of contract should have been considered as 'Income from business', was not adjudicated by the tribunal. The relevant submissions of the assessee are reproduced as under: That it seems that by some oversight inadvertently, such issue has been left to be adjudicated in the assessment order, despite it was argued in length by the AR and in the synopsis and paper compilation in support of such issue the AR had Printed from counselvise.com MA No.- 4 &5 /Agr/2021 Pramod Kumar Khandelwal 11 submitted written submissions and cited various judgments relied upon in this regard. Even on 24.03.2021 on this issue, your Honours' have made the following verbal pronouncement:- \"We have noted that in case of the assessee he had made investment in bank fixed deposits for furnishing these as security with the contractee strictly in the terms of the contract awarded to him and thus was solely for the purposes of business carried on by the assessee. In view of facts of case and various decision of High Courts and the coordinate Bench of ITAT, Agra itself, interest earned on such bank fixed deposits is directed to be charged under the head 'Income from business'.\" 5.1 We have perused the material available on record. We find that the claim of the assessee by way of verbal pronouncement is not supported by the order-sheet noting dated 24.03.2021. thereafter, the MA application of the assessee on this issue is not maintainable and the same is dismissed. 6. In view of the above facts, the M.A. filed by the assessee being M.A. No. 5/AGR/2021 arising out of ITA No.- 201/AGR/2016 for A.Y. 2010-11 is partly allowed in terms as above. 7. The facts and issues in M.A. No. 4/Agr/2021 are identical to those adjudicated in M.A. No. 5/Agr/2021, on the issue of estimation of net profit @ 8% as considered by the Tribunal and Printed from counselvise.com MA No.- 4 &5 /Agr/2021 Pramod Kumar Khandelwal 12 the issue as discussed in para no. 5 of this order. The findings and reasoning given therein shall apply mutatis mutandis to the present M.A. as well. The second issue regarding the interest income from FDR is not there in MA no. 4/AGR/2021. 8. In the result, both the M.As. filed by the assessee are partly allowed. Order pronounced in the open court on 15th October, 2025. Sd/- Sd/- [SUNIL KUMAR SINGH] [BRAJESH KUMAR SINGH] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 15.10.2025. Pooja Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, AGRA, Printed from counselvise.com "