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L. Suryakantham and L.G. Trinadha Rao Versus ACIT, Circle-2, Visakhapatnam and DCIT, Central Circle-2, Visakhapatnam Versus L. Suryakantham and L.G. Trinadha Rao

Reassessment u/s 153A/153C - Held that:- We are of the opinion that the A.O. has made reassessment u/s 153A/153C of the Act on the basis of information/material available in the return of income, without referring to any seized material. A.O. had no jurisdiction to make additions u/s 153A of the Act for the assessments which are not pending as on the date of search. In this case, the search was conducted on 14.7.2009. The assessment for the assessment years 2004-05 to 2007-08, were not pending a .....

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contract receipts - Held that:- CIT(A) has rightly estimated the net profit of 10% in respect of trading business and 12.3% in respect of contract receipts by taking into account the net profit declared by the assessee for the assessment year 2006-07. We do not see any error or infirmity in the order passed by the CIT(A) as far as estimation of net profit for assessment year 2008-09 and 2009-10. Hence, we inclined to uphold the order of the CIT(A) and rejected the ground raised by the assessee a .....

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ion of the A.O. in estimating the 15% on the total turnover is rejected and business profit admitted by the assessee are directed to be accepted. The facts remains before us. The assessee has not brought on record any evidences to prove that the findings of the fact recorded by the CIT(A) is incorrect. The CIT(A) after considering the relevant facts has directed the A.O. to accept the return filed by the assessee. We do not see any error or infirmity in the order passed by the CIT(A). Hence, we .....

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or the purpose of estimation of net profit. Similarly, in respect of miscellaneous receipts, the assessee has not made out any case by on record that these miscellaneous receipts are part of main business activities of the assessee. In the absence of any records, the A.O. has rightly treated the miscellaneous receipts as income from other sources. Therefore, we are of the opinion that the A.O. has rightly treated the interest on fixed deposits and miscellaneous receipts under the head income fro .....

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. Though, these items are considered as incidental to the activity of the assessee, the foreign exchange gain is essentially a part of business receipts for the purpose of estimation of net profit. Therefore, we are of the opinion that the A.O. was not correct in making separate additions towards foreign exchange gain, when the net profit is estimated on gross receipts. The CIT(A) without appreciating the facts has upheld the order of the A.O. Therefore, we direct the A.O. to delete the addition .....

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e claim of the assessee. We do not see any error or infirmity in the order passed by the CIT(A) with regard to the deduction of depreciation. Hence, we inclined to uphold the order of the CIT(A) and reject the ground raised by the assessee.

Charging of interest u/s 234A & 234B - Held that:- The A.O. without adjusting the seized cash, has computed the interest u/s 234A& 234B of the Act. Though, the assessee claims that the A.O. has not adjusted seized cash for the tax liability, the as .....

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311/Vizag/2012, I.T.A.Nos.356 to 359/Vizag/2012 - Dated:- 19-4-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri G.V.N. Hari, AR For The Respondent : Shri T.S.N. Murthy, DR ORDER PER BENCH: These cross appeals filed by the two different assessees as well as revenue are directed against the separate, but identical orders of CIT(A)-1, Hyderabad for the assessment years 2004-05 to 2010-11. Since, the facts are identical and issues are commo .....

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, 1961 (hereinafter called as the Act ) on 14.7.2009 in the residential and business premises of the assessee. Pursuant to search, the case was centralized with Central Circle-2, Visakhapatnam. Accordingly, notice u/s 153A/153C of the Act was issued calling for the return of income for the assessment years 2004-05 to 2010-11. In response to notice u/s 153A of the Act, the assessee has filed his return of income on 23.3.2011. The case has been selected for scrutiny and accordingly, notice u/s 143 .....

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confronted to the assessee while recording a statement u/s 132(4) of the Act, the assessee admitted that the statement s found reffered to the labour, fabrication and welding payments incurred for the period and also represents the actual payment made and inflated expenditure, under each head of expenditure. The assessee further agreed that he has inflated 10% under the head labour payments which he was utilized for investments in unaccounted assets and cash seized during the course of search. W .....

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ued a show cause notice and asked to explain in the absence of books of accounts and other details the expenditure claimed shall not be disallowed. 4. In response to show cause notice, the assessee filed his written submission dated 20.12.2011 and submitted that there was no incriminating material seized during the course of search and as such no additions can be made u/s 153A of the Act. It is also stated by the assessee that the incriminating material found and seized during the course of sear .....

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In other words, the assessee submitted that in the case of assessments, which are abated, the A.O. has jurisdiction to assess or re-assess the total income of those assessment years and in respect of completed assessments, the A.O. has no jurisdiction to re-assess the total income unless there was a seized material. The assessee further submitted that in respect of assessment year 2004-05 to 2007-08, the assessment has been completed and no proceedings were pending before any authorities. The ti .....

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Therefore, the proposed action of estimation of net profit of 15% and 10% in respect of contract receipts and trading results is quite high. The assessee further submitted that during the course of search proceedings, he has admitted additional income towards disallowance of 10% labour charges and accordingly disclosed additional income agreed before the search proceedings and paid the taxes. Therefore, the A.O. was not correct in proposed estimation of net profit by rejection of books of accoun .....

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53A of the Act and the Board circular no.7 of 2003 dated 5.9.2003, it is abundantly clear that provisions of section 153A of the Act were introduced to overcome the controversies raised in the old procedure of block assessment with regard to the meaning of undisclosed income and income relatable to material found during the course of search, etc. The present procedure provides that the completed assessment would be resurfaced and the pending assessment or reassessment relating to any assessment .....

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ement of Hon ble A.P. High Court, in the case of SBH reported in 171 ITR 232. The A.O. has further relied upon the decision of ITAT, Delhi Bench in the case of Shivnath Rai Harnarain (India) Ltd. Vs. DCIT (2008) 304 ITR 271 and also Ms. Shyam Latha Kaushik (2008) 306 ITR 117. With these observations, the A.O. has rejected the contention of the assessee that the A.O. has no jurisdiction to reassess the income of completed assessment years unless there was a seized material. 6. The A.O. further he .....

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. further observed that during the course of search proceedings, the department has gathered information which reveals that the assessee has inflated 10% labour expenditure, which was accepted by the assessee and disclosed additional income before the search party. Therefore, it is very clear that the assessee is habitual of not maintaining any regular books of accounts and also vouchers in support of the expenditure debited in the P&L account. Considering the inability of the assessee to fu .....

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s of accounts and other relevant details, rejected the financial results and resorted to estimation of net profit. The A.O. after considering the relevant details available on record estimated the net profit of 10%, in respect of trading business and 15% in respect of gross contract receipts net of all permissible deductions under the Income Tax Act. While doing so, the A.O. has relied upon the decision of Hon ble A.P. High Court, in the case of M/s. Indwell Constructions Vs. CIT reported in 232 .....

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the assessee submitted that the assessment order passed by the A.O. u/s 143(3) r.w.s. 153A of the Act is bad in law, as the same said to have been passed u/s 144 r.w.s. 153A of the Act. The assessee further submitted that the assessing officer is not at all correct in making additions to the returned income as the assessment for the assessment year 2004-05 to 2007-08 is not pending as on the date of search, consequently not abated. More so, the materials relevant to these assessment years have n .....

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o attract the provisions of section 153A of the Act. The law mandates the assessing officer to make additions only on the basis of material found during the course of search. Since, there was no seized materials found during the course of search, the A.O. has no jurisdiction to assess or reassess the income of completed assessment, which was not pending as on the date of search. In support of his arguments relied upon plethora of judgements and also the ITAT, Special Bench decision in the case o .....

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machinery spare parts and the net profit margin in this line of business is varies from 3 to 5%. As against this, the A.O. has adopted net profit of 10% arbitrarily for all the assessment years without any basis. Similarly, the A.O. has adopted 15% uniform net profit for all the 6 assessment years in respect of contract receipts without any basis. The assessee further submitted that he is into the business of execution of works contract for defence organizations and the profit element in this co .....

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ions towards income from other sources, being interest on fixed deposits, miscellaneous income and foreign exchange gain, when the income from the business is estimated on the gross receipts. The assessee further submitted that the interest was earned on the fixed deposits kept in the bank towards bank guarantee. Therefore, the interest earned on fixed deposit should be considered as part of business receipts and no separate additions can be made under the head income from other sources. As rega .....

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ding that there is no such provisions in the Act for the A.O. to confine his reassessment only for the abated assessments and not for the pending assessments. The CIT(A) further held that the assessment for the assessment years 2004-05 to 2007-08 were completed u/s 143(1) of the Act and no regular scrutiny assessment took place before the date of search. For the first time, the scrutiny assessment proceedings have been initiated after search action u/s 132 of the Act. It is an undisputed fact th .....

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imself has admitted the inflation of labour expenditure and disclosed additional income and further followed by furnishing returns of income. Hence, there is a clear under statement of income particulars relating to the business in the normal course and only after search, the fact of inflation brought in to light. Initiation of action u/s 153 of the Act is a mandatory provision, which does not allow any discretion to the assessing authority. After initiation of such assessment proceedings, the a .....

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net profit from the business, the CIT(A) held that the assessee has failed to produce books of accounts and relevant vouchers in support of financial results declared in the return of income. When assessee has been asked to furnish comparable cases, he could not produce any comparable cases so as to compare the net profit declared from his business. In the absence of specific details and comparisons, there is no other alternative except to go by the normal results obtained in the various spare p .....

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ssessment year 2004-05, 2005-06, 2007-08 & 2009-10. However, the commission income of ₹ 2,03,780/- for the assessment year 2004-05 and ₹ 84,195/- for the assessment year 2007-08 require to be deleted from the total income, as the same cannot be assessed again after estimating the net profit. 12. As far as contract receipts are concerned, the CIT(A) held that the assessee was subject to survey u/s 133A of the Act for the assessment year 2006-07. During survey, the department has n .....

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essment year 2006-07. The assessee could not adduce proper evidences to substantiate various claims made in the return. Though he has vehemently objected to the estimation of income of 15%, he is unable to produce any comparable cases. It is the case where estimation is the only solution to arrive at the total income of the assessee on contract receipts. The assessee is engaged in the business of execution of works contract for defence organizations. It is very difficult to get comparisons, acco .....

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of accounts, the A.O. was right in estimating the net profit. Further as contested by the assessee, the A.O. has estimated 15% net profit which is on the higher side. As discussed in the previous paragraphs, for the assessment year 2006-07, the assessee has admitted additional income towards inflation of labour expenses. The net profit declared for the A.Y. 2006-07 after additional income works out to 12.3%. In the absence of independent comparables, it is always preferable to take own compariso .....

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crores towards inflation of labour charges. The said disclosure was given on the expected turnover of ₹ 40 crores. However, at the end of the year, the assessee could achieve the turnover of ₹ 25.75 crores only and incurred labour expenditure of ₹ 3,64,83,127/-. Although, there is a merit in the contention of the assessee about excess disclosure of income towards inflation of labour payments, the same cannot be entertained in view of the fact that the assessee consciously disc .....

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esponse to notice u/s 153A of the Act. Therefore, the action of the A.O. in estimating 15% on the total turnover is rejected and the business profit admitted by the assessee is directed to be accepted. 14. As regards the separate additions towards income from other sources being interest income, miscellaneous receipts and foreign exchange gain, the CIT(A) held that the action of the A.O. is proper and does not require to be interfering due to the fact that the interest earned on fixed deposits w .....

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f the assessee in respect of depreciation cannot be entertained. Similarly, as regards the charging of interest u/s 234A & 234B of the Act, the CIT(A) held that these sections are mandatory as well as consequential in nature. There is no discretion available to the A.O. for levy/non-levy of the interest under these sections, therefore, directed the A.O. to modify the charging of interest consequential to relief given on the main issues. Aggrieved by the CIT(A) order, the assessee as well as .....

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assessment years and the only issue challenged from these grounds of appeal is lowering the estimation of net profit by the CIT(A). The assessee has challenged the validity of assessment orders by way of ground nos.1&2 and also additional ground for the reason that the A.O. has passed assessment order without furnishing seized documents. The A.O. has passed assessment order u/s 143(3) r.w.s. 153A/153C of the Act, whereas the A.O. ought to have passed the assessment order u/s 144 r.w.s. 153A .....

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tional grounds are dismissed as not pressed for all the assessment years. 16. The next issue came up for our consideration is additions to returned income, where the assessments are not pending as on the date of search. The assessee raised a common ground for all the assessment years, except for the assessment year 2008-09 and agitated the additions made by the A.O. to the returned income, where assessments are not pending and there was no seized materials and also in the cases of abated assessm .....

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s can be made for the returned income without any seized materials. The department could not found any seized documents to show that there is unaccounted income, assets or money for those assessment years. In the absence of incriminating documents, the return filed by the assessee, which is not pending as on the date of search cannot be tinkered. There is no material found during the course of search and seizure so as to attract the provisions of section 153A of the Act and making arbitrary addi .....

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ndatory on the part of the A.O. to reassess the income of completed assessments, only on the basis of material found during the course of search. Unless there is a seized materials, the completed assessments cannot be disturbed. The Ld. A.R. further submitted that the law is very clear that in the cases, where the return of income has been filed by the assessee, whether intimation u/s 143(1) of the Act or assessment u/s 143(3) of the Act was passed or not and the time limit for issue of notice u .....

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a seized material found during the course of search which indicates the inflation of labour expenditure and also unaccounted investment in properties. The Ld. D.R. further submitted that in those assessment years which are under appeal, no regular scrutiny assessment was made before the date of search. It is also an undisputed fact that the assessee could not produce any books of accounts and supporting vouchers for expenditure claimed in the profit & loss account. It is also a fact that in .....

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pt in the form of unaccounted cash which was seized during the course of search. Hence, the assessee cannot claim that there was no seized material so as to reassess the income of those assessment years. The Ld. D.R. further submitted that section 153A of the Act is a mandatory provision, which does not allow any discretion to the assessing officer. The A.O., after search has to reopen the assessment of all the six years and free to examine the facts of the case for the purpose of computing the .....

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x of the case is that there was a search action u/s 132 of the Act. During the course of search, incriminating documents found reveals that the assessee has inflated labour charges for the assessment years 2008-09 & 2009-10. Based on the documents found during search, the assessee has accepted that he has inflated 10% labour charges and which is common in this line of business. Consequent to search action u/s 132 of the Act, the assessee case has been centralized and accordingly fresh assess .....

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vouchers in support of expenditure claimed. In response, the assessee filed written submission and stated that the books of accounts are not available and hence cannot be furnished. Therefore, the A.O. issued a show cause notice and asked to explain why the net profit from the business shall not be estimated. In response to show cause notice, the assessee has filed a written reply and contended that the income for the assessment year 2004-05, 2005-06 and 2007-08 cannot be tinkered with, as there .....

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there was seized materials. 20. The A.O. has passed reassessment orders u/s 153A/153C of the Act for all the six assessment years immediately preceding the year in which search was conducted. According to the A.O., as per the provisions of section 153A of the Act, there is no limitation or restriction provided in the new procedure of search assessments on the powers of A.O. for making assessment/reassessment and the A.O. is not required to confine his assessments on the material found during the .....

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he profits afresh after considering the relevant facts available on record. It was the contention of the assessee that the A.O. cannot disturb the completed assessments unless there was a seized material. The assessee further contended that where assessments are not pending as on the date of search and time limit for issue of notices u/s 143(2) of the Act has been expired, irrespective of the fact that those assessments have been completed u/s 143(1) or 143(3) of the Act, then the A.O. has no po .....

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d assessments, the natural meaning assigned to it should be given to interpret the provisions in such a way that which shall not cause undue hardship to the tax payers. The provisions of section 153A of the Act explained the procedure of assessments, abated assessments and the manner in which the assessment should be framed, which was further supported by circular no.7 of 2003 issued by the CBDT. When the law has explained the position of abated assessments, then the same way the completed asses .....

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e assessment will be made on the basis of books of accounts or other relevant documents found during the course of search, but not produced in the course of original assessment. 22. In the present case on hand, on perusal of the document available on record, we find that the assessment for the assessment year 2004-05 to 2007-08 were not pending as on the date of search. The fact that the assessment has been completed u/s 143(1) & 143(3) of the Act are not material. The time limit for issue o .....

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t year 2004-05, 2005-06 & 2007-08. 23. It is pertinent to discuss herein the case laws relied upon by the assessee. The assessee has relied upon the ITAT, special bench decision in the case of All Cargo Global Logistics Ltd. Vs. DCIT (2012) 137 ITD 287. The coordinate bench of this Tribunal, while deciding the issue in favour of the assessee held as under: In assessments that are abated, the AO aretains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which ass .....

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pon, A.P. High Court decision in the case of CIT Vs. M/s. AMR India Ltd. in ITTA No.354 of 2014 dated 12.6.2014. The Hon ble High Court held that the A.O. has no jurisdiction to reagitate the assessments which were already completed and subsiding. The relevant portion is extracted below: We have heard Sri J.V. Prasad, learned counsel for the appellant, and gone through the impugned judgement and order of the learned Tribunal. It appears that the learned Tribunal found on fact that after completi .....

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sion of ITAT, Visakhapatnam in the case of A.T. Rayudu in ITA No.373 to 379/Vizag/2014. The coordinate bench, under similar circumstances held the issue in favour of the assessee. The relevant portion is reproduced hereunder: 22. In this regard, it is also pertinent to refer to the following observations made by the Special bench in the case of All Cargo Global logistics Ltd (supra):- 57 (f) In the case of Parashuram Pottery works co. Ltd Vs. ITO (106 JTR 57)(SC), it has been mentioned in the la .....

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an make additions in the case of concluded assessments on the basis of incriminating materials is also based upon the decision rendered by Honble supreme Court in the case of Parashuram Pottery works Co. Ltd (supra). 23. We have earlier noticed that the Hon ble jurisdictional Andhra Pradesh High Court has also upheld by the orders passed by the Tribunal by following the decision rendered by the Special bench in the case of All Cargo Global logistics Ltd (supra) in the following cases:- (a) Sree .....

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ry, the above said three decisions of the jurisdictional High Court comes to the support of the assessee s contentions with regard to the legal proposition agitated before us, besides the decisions rendered by various other High Courts. Accordingly, we are of the view that the scope of enquiry in the case of unabated assessments, i.e., the assessment years in which proceedings are not pending, is that the undisclosed income should be ascertained only on the basis of materials found during the co .....

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the case of unabated assessments, once they were reopened us 153A of the Act. In our view, in the case of unabated assessments, the total income should be determined by the assessing officer by combining the income already assessed/disclosed in the return of income and the undisclosed income, if any, found during the course of search proceeding. Even otherwise, it is settled proposition of law that the assessee is entitled to take support of the decision in his favour, when two contradictory vi .....

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we are of the opinion that the A.O. has made reassessment u/s 153A/153C of the Act on the basis of information/material available in the return of income, without referring to any seized material. Therefore, following the special bench decision (supra) we hold that the A.O. had no jurisdiction to make additions u/s 153A of the Act for the assessments which are not pending as on the date of search. In this case, the search was conducted on 14.7.2009. The assessment for the assessment years 2004-0 .....

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imation of net profit from the business. The Ld. A.R. submitted that the A.O. is not correct in estimating the income at a very high percentage of 10% on trading business of machinery spare parts and 15% on contract receipts without disclosing the basis for adopting such rate of net profit. The Ld. A.R. further submitted that the A.O. has estimated the income by applying the net profit rate without bringing any comparable cases and also without any basis. The assessee is into the business of tra .....

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d the income by rejecting the explanations offered by the assessee. The Ld. A.R. further submitted that the A.O. has totally ignored the fact that the assessee has given sub contract works to various other contractors which runs into several crores of rupees. It is quite common that the net profit margin in the sub contract works is 4% to 6%. Inspite of explaining the facts before the A.O., he has adopted uniform 15% net profit on total contract receipts which is quite high. Therefore, the A.O. .....

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hat if the above arguments are not accepted, alternatively the net profit from the business should be estimated @ 8% on the total turnover. The Ld. A.R. further submitted that the ITAT, Chandigarh bench in the case of Sri Ashok Kumar Vs. ITO in ITA No.340/CHD/2014, under similar circumstances estimated the net profit at 8%, therefore requested to scale down the estimation of net profit from 12.3% to 8%. 28. On the other hand, the Ld. D.R. submitted that the CIT(A) was erred in scaled down the es .....

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the return of income. Under these circumstances, the A.O. has left with no option but, to estimate net profit. The Ld. D.R. further argued that the Ld. CIT (A) was erred in considering the net profit declared by the assessee for the assessment year 2006-07 as the basis for estimation for other years. The CIT(A) ignored the basic fact that the assessee has not produced any books of accounts for any assessment years. When the books of accounts are not produced and expenditure is not substantiated .....

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under similar cases, the assessee s have disclosed net profit of 15% to 26%. The A.O. after considering the similar comparable cases has adopted minimum net profit of 15% and applied to the assessee s case. Therefore, the A.O. order should be upheld. 29. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The A.O. estimated net profit of 10% on trading turnover and 15% on contract receipts. The A.O. was of the opinion t .....

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on of expenditure persist for other expenditure for all the assessment years. Considering the inability of the assessee to furnish books of accounts and vouchers, it was opined that the book results declared by the assessee cannot be relied upon accordingly, estimated the net profit of 10% on trading receipts and 15% on contract receipts. It was the contention of the assessee that the net profit estimated by the A.O. is arbitrary and quite opposite to the facts of the case. The assessee further .....

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, but failed to furnish any comparable cases to justify his case. It is an admitted fact that the assessee could not produce books of accounts and other relevant documents. It is also an admitted fact that the assessee has inflated the labour expenditure, which was admitted by the assessee and further followed by filing the return of income. Estimation is possible in assessments. There is no hard and fast rule for estimation of income, however, there should be a basis for estimation of income ei .....

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to 8.56% in the original return of income. The assessee has filed revised return u/s 153A of the Act disclosing additional income declared during the course of search towards inflation of labour charges. The net profit declared by the assessee as per the revised returns works out to 11.36% to 11.45% for the assessment years 2008-09 to 2009-10. The financial results of assessment year 2010-11 cannot be compared for the reason that the additional income was applied on estimation basis. During the .....

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entage of assessment year 2010-11 cannot be compared, as there was a difference in estimated turnover and actual turnover achieved during the relevant financial year. Therefore, we are of the opinion that the financial results for the assessment year 2010-11 cannot be a basis for estimation of net profit for the previous assessment years. 31. The assessee has declared a net profit of 12.3% for the assessment year 2006-07. It was the contention of the assessee that during the assessment year 2006 .....

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sessee has accepted the estimation of 12.3% net profit for the assessment year 2006-07 by stating that there was a survey operation and during the course of survey, he has accepted the additional income. Based on such findings, the CIT(A) held that it would meet the ends of justice to estimate the net profit of 12.3% for all the assessment years. The assessee requested for 8% net profit on total turnover. In support of his arguments, relied upon coordinate bench decision of ITAT, Chandigarh Benc .....

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usiness and 12.3% in respect of contract receipts by taking into account the net profit declared by the assessee for the assessment year 2006-07. We do not see any error or infirmity in the order passed by the CIT(A) as far as estimation of net profit for assessment year 2008-09 and 2009-10. Hence, we inclined to uphold the order of the CIT(A) and rejected the ground raised by the assessee as well as revenue for the assessment year 2008-09 & 2009-10. 32. Coming to the assessment year 2010-11 .....

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es only. Therefore, the assessee contended that though it had admitted additional income of ₹ 1.5 crores, because of substantial difference in turnover which is the basis of offering additional income, the proportionate additional income should be deleted. The CIT(A) held that though there is a merit in the contention of assessee that there is a substantial reduction in the turnover for the relevant assessment year, the proportionate additional income towards inflated labour charges should .....

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O. in estimating the 15% on the total turnover is rejected and business profit admitted by the assessee are directed to be accepted. The facts remains before us. The assessee has not brought on record any evidences to prove that the findings of the fact recorded by the CIT(A) is incorrect. The CIT(A) after considering the relevant facts has directed the A.O. to accept the return filed by the assessee. We do not see any error or infirmity in the order passed by the CIT(A). Hence, we inclined to u .....

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ubmitted that the assessee has kept fixed deposits in bank for the purpose of obtaining bank guarantee to be given to the principals for obtaining the contracts. Therefore, the interest earned from the fixed deposits should be assessed as business receipts for the purpose of estimation of net profit. When the A.O. has estimated the net profit on gross receipts, separate additions towards income from other sources being interest on fixed deposits is not correct. The Ld. A.R. further submitted tha .....

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. further submitted that though, assessee kept the fixed deposit for the sake of obtaining bank guarantee, still interest received on fixed deposits is only incidental to the business activity, but not the main activity of the assessee. Therefore, interest on bank deposits and other receipts should be assessed as income from other sources, but not under the head income from business. 35. We have heard both the parties and perused the materials available on record. The A.O. has made separate addi .....

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rect. It was the contention of the A.O. that these receipts are not form part of business activity of the assessee. Whether assessee does business or not the interest on fixed deposits are separate receipts which need to be considered under the head income from other sources. We do not see any merits in the arguments of the assessee, for the reason that just because fixed deposits are kept for the purpose of obtaining bank guarantee, the interest earned on such fixed deposits cannot be held as p .....

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under the head income from other sources. 36. Coming to the foreign exchange gain. The assessee earned foreign exchange gain in the course of import of machinery spare parts. It was the contention of the assessee that foreign exchange gain is earned because of his main business activity of import of machinery spare parts, therefore, should be considered as part of business turnover for the purpose of estimation of net profit. It was the contention of the A.O. that the assessee has not directly .....

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tion can either reduce the cost of materials or shown the gain separately in the financial statements. Though, these items are considered as incidental to the activity of the assessee, the foreign exchange gain is essentially a part of business receipts for the purpose of estimation of net profit. Therefore, we are of the opinion that the A.O. was not correct in making separate additions towards foreign exchange gain, when the net profit is estimated on gross receipts. The CIT(A) without appreci .....

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ssee has not produced any evidence substantiating the claim of depreciation on various assets. During the course of appellate proceedings, the assessee could not produce any evidence substantiating the claim of depreciation. The CIT(A) held that in the absence of credible evidences, the claim of the assessee in respect of depreciation cannot be entertained. The facts are same even before us. The assessee has failed to brought on record any evidences to prove that the findings of the fact recorde .....

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rging interest u/s 234A & 234B of the Act, without adjusting the seized cash towards tax liability for the assessment years 2008-09, 2009-10 & 2010-11. The Ld. A.R. further submitted as per section 234B(2) of the Act, the A.O. has to adjust the seized cash towards the tax liability in the order of preference for the existing tax liability and tax on account of additional income. In case there is no existing tax liability, then seized cash should be adjusted for the tax liability of the a .....

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34B of the Act, without adjusting the seized cash found during the course of search. The A.O. was of the opinion that the charging of interest u/s 234A & 234B of the Act is mandatory and consequential in nature. Therefore, there is no discretion for the A.O. to charge interest and accordingly, computed the interest u/s 234A& 234B of the Act as per the provisions of the Act. It was the contention of the assessee that the A.O. should have adjusted the seized cash to the existing tax liabil .....

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