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2015 (1) TMI 1473 - KARNATAKA HIGH COURTRevision u/s 263 by CIT - as per CIT unexplained cash credits in the capital account cannot be considered as business income arising out of the assessee’s contract activities - assessee has shown huge expenditure under various heads in the profit and loss account. The Assessing Authority should have probed into these and critically examined the correctness of the same. There is nothing on record to show that the AO has gone through any material in respect of such transactions - HELD THAT:- The material on record discloses that, ₹ 35.38 crores is the gross bill. The assessee is working under the main contractor M/s IVRCL. They deducted a sum of ₹ 22.99 crores from the bill of the assessee on account of the materials supplied and expenditure incurred by them. Only a sum of ₹ 12.38 crores was actually paid to the assessee. On that basis a sum of ₹ 4,95,970/- was the income offered by the assessee in the return of income. However, the Assessing Authority after scrutiny of the entire material on record added a sum of ₹ 80,64,764/-. Thus, the total income was determined at ₹ 85,60,730/-. The said income with reference to the contract receipts of ₹ 13.37 crores works out to 6.4%. Therefore, the contention that it works out to 0.12% is erroneous. Even in respect of the main contract, in respect of civil contracts 8% is taken normally as the income earned out of such contracts. When such a contractor gives the work to a sub contractor normally about 5% is taken as the income of the contractor. In the instant case it works out to 6.4%. The tenor of the order of the Commissioner under Section 263 discloses that, because the net profit shown in the Profit and Loss Account was only ₹ 4.63 lakhs which works out to 0.12% the proceedings are initiated. Factually it is incorrect. In those circumstances, in the absence of any other material which was before the Commissioner he was not justified in recording a finding that the assessing authority has not applied its mind, not verified the expenses, not verified the receipts and looked into the book and, therefore, a case for interference under Section 263 is made out cannot be accepted. - Decided in favour of the assessee and against the revenue.
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