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2013 (12) TMI 56 - ITAT HYDERABADCivil contract works – Estimation of income @ 8% - Held that:- Assessee has not produced books of account before the AO and in the absence of books of account, it is difficult to verify the reasons for earning lesser profit as contended by Assessee – Following order of The Special Bench of the ITAT in the case of M/s Arihant Builders Vs. ACIT [2006 (11) TMI 253 - ITAT INDORE] - Estimation of income at 8% of the turnover is reasonable - The coordinate benches of the Tribunal is accepting the estimation of income ranging from 8% to 12.5% depending upon the facts of the case and nature of contracts undertaken – In the absence of proper reasons for earning lesser profit, the AO is justified in estimating income at 8% on the gross receipts made – Decided against assessee. Sale of land - Addition of income – Held that:- Assessee had contract receipts as well as profit on sale of land, which is also as part of business income - Assessee has not offered this income either under other sources or claimed benefit of capital gains. Therefore, profit on sale of land is part of the business activity of Assessee company - Purchase of land and sale of land is a separate business activity and, therefore, the profits or losses on that business activity has to be considered separately. Even though, the income was estimated on contract receipts by rejecting books of account, on the basis of statements of accounts filed before the revenue authorities if they come to a conclusion that certain other business incomes are also earned, the same are necessarily to be brought to tax separately - Profit on sale of land has no nexus with the profit on contract receipts and accordingly, inclusion of profit on sale of land separately by making addition is justified – Decided against assessee. Addition u/s 40(a)(ia) – Tax not deducted at source – contract labour payment and fees paid to auditors - Held that:- These amounts are not labour contract payments but direct labour payments made by the company - As for as income estimation on contract receipts are concerned, Ii has already been upheld the estimation of income at 8% in this case - Once the books of account are rejected, while computing incomes from section 30 to 43D of the IT Act, there is no necessity for disallowing any further amounts – Following CIT Vs. Banwari Lal Banshidhar [1997 (5) TMI 37 - ALLAHABAD High Court] - No disallowance could be made in view of the provisions of section 40A(3) read with rule 6DD(j) of the Income- tax Rules, 1962, as no deduction was allowed to the assessee - When the gross profit rate was applied, that would take care of everything and there was no need for the AO to make scrutiny of the amount incurred on the purchases made by the assessee - When a net profit rate is applied, there remains no scope for further disallowance of any expenditure – Decided in favour of assessee. Other income – Business income or income from other sources – Held that:- As Assessee has not proved that these incomes are part of the Contract business income and no details have been placed on record either before the AO or before the CIT(A) or even before the Tribunal - Except relying on legal principles, Assessee has not brought on record any factual details on this addition – It is therefore confirmed that the incomes are to be taxed under the head 'other sources' even though books of account are rejected to the extent of estimating business income on contracts – Decided against assessee. Share application money – Held that:- Following Kale Khan Mohammad Hanif V. CIT [1963 (2) TMI 33 - SUPREME Court] - The amounts of the cash credits could be assessed to tax as income from undisclosed sources in addition to the business income computed by estimate. The taxing authorities were not precluded from treating the amounts of the credit entries as income from undisclosed sources simply because the entries appeared in the books of a business whose income they had previously computed on a percentage basis. It purchased property and the sellers agreed to take the amount as share application money and to this effect entries were passed by way of journal entries - They were not in a position to furnish any confirmations at the time of assessment or appeal before the CIT(A). It was, therefore, submitted that if the matter is remanded to the file of the AO, Assessee would be in a position to file necessary evidence – The issue was restored for fresh decision.
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