2013 (9) TMI 1132 - HC - Income Tax

Addition as contract profit and interest from FDR being income from other sources - ITAT confirmed deletion of addition - Held that - The deletion of addition as contract profit and as interest from FDR was on the grounds that the A.O. has already allowed deduction on account of interest and salary paid to the partners. The depreciation and interest paid to third party was allowed as further deduction even if profit rate of 8% has been applied. The CIT(A) has given same treatment while computing the business income of assessee. On interest on FDRs the CIT(A) noted that the addition was made by the Assessing Officer without giving any opportunity of hearing to the assessee. The FDRs were purchased for security purpose for obtaining the contracts which is connected with the business activities of the assessee. No substantial question of law.

Summary

Issues:
Appeal under Section 260A of the Income Tax Act, 1961 against the judgment and order dated 29.4.2013 passed by the Income Tax Appellate Tribunal in ITA No.128/Alld/2012 for the assessment year 2009-10.

Analysis:
The main issue in this case was whether the Income Tax Appellate Tribunal (ITAT) erred in law and on facts in confirming the order of the Commissioner of Income Tax (Appeals) in deleting the addition of Rs. 44,86,635/- as contract profit and Rs. 3,46,477/- as interest from Fixed Deposit Receipts (FDR) being income from other sources. The ITAT relied on a previous decision and found no justification to interfere with the order of the CIT(A) in deleting the additions. The assessee had not produced relevant records before the Assessing Officer, leading to the rejection of book results. The Assessing Officer had applied a profit rate of 8% based on the progressive turnover and profit shown by the assessee. The CIT(A) allowed deductions based on previous decisions and noted that the addition of interest on FDRs was made without giving the assessee an opportunity to be heard. The CIT(A) justified the deletion of the addition on account of interest due to the purpose of purchasing FDRs for security in obtaining contracts related to the business activities of the assessee.

The judgment emphasized that the Assessing Officer had already allowed deductions on account of interest and salary paid to partners, and further deductions were allowed for depreciation and interest paid to third parties even with the application of an 8% profit rate. The CIT(A) maintained consistency in treatment while calculating the business income of the assessee. The decision to delete the addition of interest from FDRs was supported by the fact that the Assessing Officer had not provided a hearing opportunity before making the addition. The purpose of purchasing FDRs for security in obtaining contracts related to the business activities of the assessee was considered a valid reason for the deletion of the interest addition.

In conclusion, the High Court found no question of law arising from the order for consideration in the appeal and dismissed the income tax appeal. The deletion of the addition of contract profit and interest from FDRs was upheld based on the justifications provided by the CIT(A) and the specific circumstances surrounding the case.