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2014 (7) TMI 1237 - AT - Income TaxTrading addition - rejection of books of account - Held that:- After rejection of books of account facts of the earlier years are found to be same and similar, then it would be reasonable to adopt net profit rate of the earlier year without mentioning the words. However, when the assessee further explained the fall in ratio of profit and same is plausible, it is also to be considered as has been held in the case of CIT Vs. Amrapali Jewels P Ltd. [2011 (10) TMI 470 - RAJASTHAN HIGH COURT] in which it has been held that abnormal increase in the turnover definitely compromises its margins and same has to be definitely considered while making fair estimation. It has been found in this case that during the relevant period, the assessee has made heavy investment in plant and machinery which is evident from the closing balance of the fixed assets which were produced before the A.O. The steep rise in the cost and consumption are also relevant which are found to be correct. The fact that from the table itself it has been noted that in A.Y. 2007-08, net profit ratio was 3.85% and it has been accepted by the A.O. showing that in this assessee’s case, there has been variance in the net profit rate for various reasons applicable to that particular A.Y. The ld. CIT(A) has considered these factors and has given part relief to the assessee. Thus it would be fair and reasonable to sustain a lumpsum addition of ₹ 2.5 lakhs to answer the fall in net profit. Accordingly, we partly allow the assessee’s ground raised in its cross objection and cannot allow revenue. Treating the interest income arising from compulsory FDRs deposits as income from other sources - Held that:- It is an undeniable fact of this case that the deposits were made for obtaining contracts in question and as per the settled position of law in this regard, this interest income has to be treated as income from assessee’s business and not income from other sources. In this regard, we may refer to the decision of the Hon'ble Delhi High Court in the case of CIT Vs. K & Co. [2013 (4) TMI 284 - DELHI HIGH COURT] for ready reference. Otherwise we have been taking this view consistently in contractor’s cases. Accordingly, we allow this ground of appeal of the assessee.
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