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TMI Blog2012 (5) TMI 752X X X X Extracts X X X X X X X X Extracts X X X X ..... ve the credit worthiness of the depositors and also the genuineness of the transaction. 2. That the ld. CIT(A) has erred in law and on facts of the case in deleing the addition of Rs. 1,51,400/- which was made in view of provisions of section 40A(3). The assessee had made cash payments/payment through bearer cheque of an amount of Rs. 7,57,000/- and therefore, 20% thereof was added to the income of the assessee u/s 40A(3). Thus, the disallowance has been made according to the provisions of the Act. 3. That the ld. CIT(A) has erred in law and on facts of the case in deleting the addition of Rs. 19,800/- made by the A.O. on account of refund of security, which was not to be deducted from contractual receipts. 4. That the order of the ld. CIT(A), being erroneous in law and on facts, be set-aside and that of A.O. be restored." 3. The assessee has raised the following grounds in its Cross Objection :- "1. That the net profit of Rs. 4,43,575/- (net profit rate of 5.32%) declared by the assessee being properly verifiable, explained and supported with reference to the detailed audited books of accounts and other records and the same being quite reasonable in the line of business c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective opinion and deserves to be deleted. 7. That the learned CIT(A)-I, Agra has further erred both in law and on facts in enhancing the income from contract declared by the assessee at Rs. 4,43,575/- to Rs. 5,43,025/-, even without affording a reasonable opportunity to the assessee of showing cause against such enhancement, thus he has violated the provisions of sub section (2) of section 251 of I.T. Act, 1961, making the whole action illegal. 8. That the assessee should have been allowed deduction of Rs. 12,000/- u/s 80L (specified under chapter VIA) towards bank/NSC interest, more particularly when the same was claimed by the assessee while working out his total declared income. 9. That the authorities below have erred in sustaining charge of interest u/s 234B. The charge of such penal interest is totally unwarranted. Likewise the authorities below have erred in initiating penalty proceedings u/s 271(1)(c) of I.T. Act, 1961. The assessee also seeks permission to modify and/or add any other ground/grounds of appeal as the circumstances of the case might require or justify." 4. The brief facts of the case are that the assessee is a Civil Contractor. During the assessment p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of sub-contractor, the CIT(A) deleted the addition on the ground that the sub-contractor has appeared before the Assessing Officer and confirmed the balance having outstanding. However, in respect of disallowance under section 40A(3) of the Act, the CIT(A) held as under :- "The A.O. has mentioned that Shri Suresh Chand had withdrawn Rs. 1,80,000/- on 20.07.2000 and further Rs. 5,77,000/- on 28.11.2000 from the bank account of the appellant. The appellant had clarified that Shri Suresh Chandra was an employee of the appellant and the amount in question had been withdrawn on behalf of the appellant and were duly recorded in the cash book. This fact has been accepted by the A.O. also. However the A.O. was of the view that the payments were made in cash and hence were not subject to verification. The A.O. has made a disallowance of 20% out of these amounts u/s 40A(3). The ld. Representative of the appellant had clarified that these payments were made for material purchases, labour payment and misc. expenses done by the appellant. These payments were verifiable from the cash books and payment vouchers. The A.O. has applied the provisions of section 40A(3). In may view the section 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7% will be reasonable under the facts and circumstances of the case. The A.O. is directed to apply net profit rate of 7% to the gross contract receipts of the appellant. The taxable income of the assessment year under consideration should be recomputed accordingly. The total income is computed as under a:- @ 7% of contract receipts of 77,57,501/- 5,43,025 Add.: Income from interest on FDR & NSC as per Assessment Order 20,279 Total 5,63,304/- The A.O. is directed to take this amount as the total income for the year under consideration." 9. We have heard the ld. Representatives of the parties and records perused. We notice that the CIT(A) while deciding the issue relating to addition under section 40A(3) of the Act came to the conclusion that section 40A(3) is not applicable to the facts of the case under consideration as the assessee did not make cash payment to any of the parties exceeding Rs. 20,000/-. The Assessing Officer failed to appreciate the system of recording expenditure through his employee. The CIT(A) has deleted the addition after a detailed discussion, the finding of CIT(A) is reproduced above. In the light of the facts, there is no payment exceeding Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otherwise also the CIT(A) has co-terminus power of the Assessing Officer. Therefore, we confirm the action of the CIT(A) as he has done it after providing opportunity of hearing to the assessee. Though the assessee has taken ground no.7 in it's Cross Objection in regard to non-providing of opportunity for hearing by the CIT(A), at the time of hearing before us Ld. Authorised Representative did not press this ground. In the light of the above discussion, we confirm the order of CIT(A) in rejecting the books of account of the assessee. After rejecting the books of accounts, the next step to be taken is estimation of profit for the year. The CIT(A) after considering the provisions of section 44AD and past history of the assessee found that the net profit rate of 7% will be reasonable rate. We notice that the assessee himself has shown the different net profit rates in different years i.e. 6.88% in A.Y. 2002-03 & 3.2% in A.Y. 2003-04. The calculation of net profit rate for the year under consideration comes to 5.1%. We find that the CIT(A) has rightly applied the net profit rate of 7% and contrary to that there is no material on record neither the same has been pointed out by any of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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