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TMI Blog2017 (1) TMI 1194X X X X Extracts X X X X X X X X Extracts X X X X ..... and vouchers for verification. During the course of assessment proceedings, on verification of books of accounts and other details filed by the assessee, the A.O. noticed that most of the expenditures in respect of labour charges, work expenses, mess charges and other indirect expenses are not supported by proper bills and vouchers. The A.O. further observed that the assessee has kept self-made vouchers in support of major expenditure and accordingly, opined that the books of accounts maintained by the assessee are not amenable for verification and hence, rejected books of accounts under the provisions of section 145(3) of the Act and estimated net profit of 8% on gross contract receipts net of all deductions. In addition to estimation of net profit, the A.O. has made separate additions towards income from other sources being interest earned on fixed deposits under the head income from other sources. 3. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee has filed written submissions. The assessee further contended that the A.O. was erred in rejection of books of accounts without pointing out any specific defects i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee's case, as in those cases, the net profit has been estimated at 12.5%, whereas in this case, the A.O. has adopted net profit of 8% and hence, separate deductions towards depreciation is incorrect. In so far as, additions towards interest on fixed deposits, the CIT(A) upheld the action of the A.O. in bringing interest income under the head income from other sources. Aggrieved by the CIT(A) order, the assessee is in appeal before us. 5. The Ld. A.R. for the assessee, submitted that the Ld. CIT(A) was erred in upholding the action of the A.O. in estimating net profit of 8% on gross receipts. The A.R. further submitted that the book results declared by the assessee are very reasonable and the assessing authority ought to have accepted the same without applying the provisions of section 145(3) of the Act, as the A.O. did not follow the procedures for invoking the provisions of section 145(3) of the Act. The A.R. further submitted that the A.O. rejected books of accounts summarily without pointing out any specific defects in the books of accounts, just because few expenditures are supported by self-made vouchers. But, the fact is that the assessee has maintained bills and vouchers fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication. The A.O. further was of the opinion that the assessee fails to produce bills and vouchers in support of major expenditure, therefore, opined that book results declared by the assessee are not showing true and correct profit from the business and hence, rejected books of accounts and estimated net profit of 8% on gross contract receipts. It is the contention of the assessee that the A.O. was erred in rejecting books of accounts without pointing out any defects in the books of accounts, which warrants invoking the provisions of section 145(3) of the Act. The assessee further contended that he had maintained regular books of accounts and also produced bills and vouchers in respect of major expenditure. Further, in respect of labour and like charges, it is impossible to produce supporting bills because of nature of expenditure, therefore, the A.O. was incorrect in summarily rejecting books of accounts and estimation of net profit. 8. Having heard both the sides and considered materials on record, we find that the A.O. has rejected books of accounts for the reason that the assessee has failed to produce necessary bills and vouchers in respect of expenditures. The A.O. has obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ambit of the provisions of section 44AD of the Act, as its contract receipts exceed the specified limit, the analogy provided in the provisions of section 44AD of the Act can be adopted for estimation of net profit because the nature of business carried out by the assessee. The nature of business carried on by the assessee is squarely fit into the specified businesses referred to in the provisions of section 44AD of the Act. Since, the presumptive rate of net profit of 8% incorporated in section 44AD of the Act, reflects the legislative approved rate of net profit, which can be considered as fair and reasonable to estimate income from civil contract business, where the books of accounts are not found reliable by the assessing officer. In this case, admittedly, the A.O. had rejected books of accounts for the reason that the assessee has failed to produce supporting bills and vouchers in respect of expenditures. It is also an admitted fact that the assessee himself has admitted about 8% net profit in the earlier period net of all deductions including depreciation. Therefore, considering the overall facts and circumstances of the case, we are of the view that the rate of net profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss contract receipts, therefore, the A.O. was erred in making separate additions towards interest income under the head income from other sources. The Ld. D.R. referring to the case law relied upon by the assessee, in the case of DCIT Vs. R.R. Constructions (supra), argued that the issue has been already decided by the ITAT, in favour of revenue, wherein it was observed that interest on fixed deposits is assessable under the head income from other sources and hence, the A.O. has rightly made additions under income from other sources and his order should be upheld. 13. Having heard both the sides and considered material on record, we find that the A.O. made separate additions towards interest on fixed deposits under the head income from other sources for the reason that interest receipts does not have any bearing on the contract executed by the assessee. The A.O. further observed that the assessee has earned interest on fixed deposits which were kept in the name of the principals for obtaining contracts. Although, these fixed deposits are kept as security for obtaining contracts, the nature of deposit does not alter the character of income. It is an admitted fact that interest inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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