TMI Blog2017 (11) TMI 1309X X X X Extracts X X X X X X X X Extracts X X X X ..... er which the assessee has agreed to refund the money along with interest which is evident from the order of decree passed by Hon’ble Bombay High Court. We further notice that SPCL has filed an execution petition before Raigad Court for recovery of dues from the assessee. All these facts go to prove an undisputed fact that SPCL has paid advance to the assessee for procurement of land on certain terms and conditions. Therefore, we are of the considered view that the AO was erred in bringing to tax the impugned advance received from SPCL under the provisions of section 56(2)(vi). The CIT(A), without appreciating the fact has reiterated the findings of the AO to confirm the addition made by the AO. Therefore, we set aside the order passed by the CIT(A) and direct the AO to delete the addition made towards advance received from SPCL u/s 56(2)(vi) of the Act. - Decided in favour of assessee Addition u/s 68 - as per AO if the assessee taken a plea that the impugned amount revceived by the assessee is an advance, then the money received by the assessee represents loan which raises serious doubts about the genuineness of the transactions and section 68 of the Act come into operation - He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of conjectures and surmises without there being any material to show that amount received from SDCL is income of the assessee. Therefore, we are of the view that the AO was incorrect in treating the amount received from SDCL as income of the assessee under the head ‘Income from other sources’. The assessee has incurred various expenditures which have been debited to his P&L Account. Though, the assessee claims to have incurred various expenditures, failed to file complete details of expenditures incurred, to the satisfaction of the AO. Under these circumstances, what needs to be done is reasonable estimates of net profit from the business, taking into account the facts & circumstances. In this case, the assessee is in the business of providing consultancy services. In the case of professional and consultancy services, section 44AD provides for taxation of income from profits and gains of profession on presumptive basis. Though, provisions of section 44AD strictly not applicable to the present case, the analogy provided under the said provisions can be taken as basis for determining the profit. In the cases of profession, profit ranging from 10% to 25% is reasonable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome from the receipts, the issue of carry forward of WIP becomes academic in nature. Hence, we reject grounds raised by the assessee. - I.T.A No.3738/Mum/2013 And I.T.A No.3739/Mum/2013 - - - Dated:- 17-11-2017 - Shri D.T. Garasia (JUDICIAL MEMBER) And Shri G Manjunatha (ACCOUNTANT MEMBER) For The Appellant : Dr K Shivram,Sr Counsel / Rahul K Hakani For The Respondent : Shri R.S. Arneja ORDER Per G Manjunatha, AM: These two appeals filed by the assessee are directed against separate, but identical orders of CIT(A)-35, Mumbai dated 31-01-2011 and 21-07-2012 and they pertain to assessment years 2008-09 2009-10. Since common facts are involved and issues are also common, these appeals were heard together and are disposed of by this common order. 2. At the time of hearing, the Ld.AR for the assessee submitted that there is a delay of 312 days in filing the appeal before ITAT, for which the assessee has filed a petition for condonation of delay alongwith affidavit. In the affidavit, the assessee deposed as under:- AFFIDAVIT I, SHRI NILESH JANARDHAN THAKUR, aged 46 years, Indian inhabitant of Mumbai and having address at I-C, Viceroy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore particularly stated in the decree. Pursuant to this consent decree, I agreed to return immovable properties, fixed deposits, vehicles and monies lying in bank accounts of various concerns controlled by me. 6. That I am also a proprietor of another business called PRS Developers. In this business, 1 was appointed by one S.D. Corporation Pvt. Ltd. vide its letter dated 7t1i December 2007 and also agreement dated 291 August 2008 as its 'Project Consultant' for its project involving development of 'Samtanagar' (consisting of various societies/ buildings) at Kandivali [East), Mumbai 400101 occupying approximately 2,00,0000 square metres of land on plots situate on CTS no. 837 to 840, 55, 56 consisting of about 1,784 tenements. I state that this company paid me advances towards my fees totalling ₹ 95,00, 00,000 {Rupees Ninety Five Crores only) for this consultancy work and deducted tax at source thereon against which payments I was obliged to incur expenditure necessary for executing my assignment. I state that this assignment was also stopped sometime in 2009 or so. 7 That I state that the above developments caused severe disruptions to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt litigations. My situation was such that I had to attend whichever proceedings he was called by the concerned authorities in the nearest time without any option of even thinking of proceedings with other authorities. The calls from the authorities were not just by written notices and summons issued to me but also by frequent calls on my mobile. To make matters worse, whenever the authorities felt that the whereabouts of my brother were not known, I was summoned and questioned by them at shortest notices, even though the matters relating to my brother should not have concerned me. 10. That for the financial year ended 31-3-2008, i.e. Assessment Year 2008-09, 1 ail e income tax department had passed an order on 31-12-2010 assessing me at an income of ₹ 75,44,2 1,627 and raised a demand of ₹ 39,22,46,296. In this assessment order, the Assessing Officer has treated the advances totalling ₹ 43,50,00,000 received by me Shapoorji Pallonji and Co as my taxable income disregarding the fact that these amounts do not belong to me but have been advanced to me by the company to acquire properties on its behalf. In fact, these advances form the very subject matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses. When the news of this affixture was learnt from my neighbours, the affixed order was collected by my employee within a span of two days or so. I remember instructing my member to send the copy of the order to my chartered accountants for necessary action. In my mental distress, I forgot to pursue this and being continuously distracted by proceedings relentless pursued by one government agency or other in the subsequent months, I lost track of the whole matter. It is pertinent that in the period May 2012 to November 2012, I had no opportunity to interact with the income tax department. Otherwise, I would become alerted to look in to my income tax matters as well and would have learnt that my appeal was not fled with the Tribunal. I clarify that it is not my intention to say that attending to income tax matters is not important. But, the pre-occupation of my mind with criminal proceedings initiated by government agencies was so intense because of its frightening implications that it became beyond my mental capacities to direct my attention to other government compliances 14. That it was sometime in December 2012 that I had to attend to appear before the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment order and the Commissioner{Appeals} s order for this year has been passed against me on the same lines as for Assessment Year 2008-09. In this situation, I had decided to pursue my application of condonation of delay aggressively from whatever legal angle in my sight as the fate of the tribunal appeal would make a difference of life and death to me. This included the option of challenging the propriety of service of the appellate order by affixture. 17 That I requested the Commissioner {Appeals} -35 to show me the copies of all documents authorising the affixture of his order for Assessment Year 2008-09 at the exterior of my premises at my premises at 4/153 Yoganand Society on 3rd May 2012 in order to ascertain whether due legal process has been followed by his office to making such affixture After repeated visits to his office, I followed up with a written application dated 14th March 2013 which was filed in his office on 15th March 2013. In this application, I sought copies of his office records evidencing due compliance of the procedure followed for serving the order by affixture as per Rules. I also made it clear in this application that these copies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h asked a specific question, whether any formal order has been passed by the bench for condoning the delay in filing the appeal, the Ld.Senior Counsel fairly accepted that no formal order has been passed. Therefore, the bench has directed the counsels to argue afresh on the issue of condonation of delay. 4. The Ld.Senior Counsel for the assessee submitted that there is a delay of 312 days in filing the appeal for which the assessee has filed petition for condonation of delay along with affidavit explaining the reasons for delay in filing the appeal. The reasons given by the assessee for condoning the delay as stated in the affidavit has been extracted above. 5. The Ld.Senior Counsel submitted that there is a reasonable cause in not filing the appeal within the time allowed under the Act, before the ITAT, as the order passed by the CIT(A) was affixed at the old premises of the assessee, at 4/153, Yoganand Society, Lokmanya Tilak Road, Vazira Naka, Borivali on 03-05- 2012 at which time, the assessee was not present. At that time, the assessee was residing at another address, therefore, he was not aware of the order passed by the CIT(A). Therefore, he was not able to file the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the time. The assessee further submitted that immediately on coming to know of the order passed by the CIT(A), he rushed to the authorities for collecting the order and also co-ordinated with his tax consultants. In the meantime there was a delay of 312 days in compiling of various documents and assisting the tax consultants for preparing the appeal. Therefore, there is a reasonable cause for not filing the appeal within the time allowed under the Act. The assessee further submitted that he is not a habitual offender of not co-operating with the department nor prosecuting the appeal at appellate stage which is evident from the fact that he had filed the appeals for the subsequent years within the time, therefore, the delay in filing appeal cannot be looked into in a narrow compass as if the appeal filed by the assessee is dismissed on technical grounds, the substantial justice required to be done by the Courts would not have been rendered in the given facts of the case. 8. Having heard both the sides, we find force in the arguments of the assessee for the reason that when technicality and substantial justice are pitted against each other, substantial justice should prevai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies and filed the appeal. Therefore, we are of the considered view that there is a reasonable cause for not filing the appeal within the time allowed under the Act. We further observe that the Tribunal is vested with the power to condone the delay in filing the appeal, if it is satisfied with the reasons given for condonation of delay. Therefore, considering the overall facts and circumstances of the case and also respectfully following the judgement of Hon ble Apex Court in the case of Collector, Land Acquisition vs MST Kattiji Ors (supra), by exercising the power u/s 253(5), we condone the delay in filing the appeal and admit the appeal for adjudication, on merits. ITA 3738/Mum/2013 10. The assessee has raised common grounds of appeal for both the assessment years. For the sake of brevity, grounds of appeal for AY 2008-09 in ITA No.3738/Mum/2013 are reproduced below:- 1. On facts and circumstances of the case and in law, the learned Commissioner {Appeals} erred in confirming the addition of ₹ 43,50,00,000 made by the learned Assessing Officer u\s 56(2)(vi) of the Income Tax Act to the Appellant's income in respect of advances received from Shapoorji ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. 6. Both the learned Commiss ioner {Appeals } and the learned As ses sing Of f icer erred in passing their impugned orders without granting the Appellant an adequate opportunity of being heard. The orders passed by them are in contravention of the principles of natural justice and therefore, deserve to be set aside in apea1. 11. The brief facts of the case are that the assessee is an individual, filed his return of income for the assessment year 2008-09 declaring total income at Nil. The case was selected for scrutiny and notices u/s 143(2) 142(1) were issued. In response, the assessee alongwith his authorized representative attended from time to time and furnished various details, as called for. During the course of assessment proceedings, the AO noticed that the assessee is engaged in the business of construction and development through four proprietory concerns, M/s PRS Developers, M/s PR Enterprises, Ishwarya Properties and Ajinkya Hotel Resorts. The AO further noticed that the assessee has shown a sum of ₹ 75,17,50,000 as sundry creditors. To verify the nature and source of credit, the AO called upon the assessee to furnish necessary details of cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of board resolution authorizing the board to procure land and to pay advance to the assessee. 12. The AO, after considering the relevant submissions of the assessee and also taking into account the materials available on record observed that despite giving several opportunities to the assessee to produce books of account, the assessee failed to produce books of account or any other documentary evidence regarding his business activities to substantiate and corroborate its submissions through various letters and books. The assessee initially claimed that he has associated with construction and other activities but has not been able to produce any single evidence in support of his claim. Throughout his submissions, the assessee has been putting undue emphasis on his claim of partnership with SPCL, but he has failed to submit any documentary evidence to substantiate his claim that he is a partner of SPCL. On the contrary, SPCL stated that they have advanced money to procure land and they have paid fee to the assessee. The AO further observed that the only thing which is clear from the facts gathered during the course of assessment is that there is huge influx of funds in assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anner and mode in which the company has given advance to the assessee clearly proves the fact that the money received by the assessee from the company is for without any consideration. 14. The AO has referred various documents filed by the assessee and also statement of the assessee recorded during the course of assessment proceedings to come to the conclusion that the assessee does not have any capacity to carry out the business as narrated in the agreement between the assessee and the company. The AO further observed that it is surprising to note that a corporate giant like SPCL has given huge money to the assessee for procurement of land without any documentation. The AO further observed that SPCL is a corporate giant having its own machinery for legal, technical, marketing / financial departments and huge experience in dealing in property and construction activities, advanced such a huge amount to a man like the assessee raises serious doubts about the nature of transaction. The money was received by the assessee almost three years back, but so far no settlement of the account has been done. No action for recovery has been taken by SPCL. No land has been purchased by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of procurement of land from SPCL. The assessee further submitted that the AO had called for details from the creditor u/s 133(6) for which SPCL has filed all details called for by the AO and categorically stated that it has paid advances to the assessee for procurement of land. The AO, without appreciating the fact has merely on conjectures and surmises brought amount received from SPCL as income of the assessee within the meaning of section 56(2)(vi) of the Act. The assessee further contended that the AO further erred in alternatively bringing the amount under the purview of provisions of section 68 of the Act, despite the assessee has filed necessary evidences to prove the identity, genuineness of transactions and creditworthiness of the parties. The AO completely erred in bringing the amount under the purview of section 68, therefore, by no stretch of imagination, the same can be brought to tax u/s 68 of the Act. The assessee has filed clear details to prove the impugned amount is a business advance from the creditor which is further supported by the deposition of the creditor wherein the creditor has categorically stated before the AO that it has paid money for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wards advance received from SPCL u/s 56(2vi) ignoring all evidence filed by the assessee to prove the transaction is merely an advance received for procurement of land which has been confirmed by both the parties. The Ld.Senior Counsel further submitted that the AO went on discussing this issue purely on conjectures and surmises ignoring the fact that to tax a particular receipt as income of the assessee whether it comes under any of the provisions as narrated by the AO is to be seen. The AO has brought to tax the impugned amount us 56(2)(vi) of the Act without appreciating the fact that the business advances cannot be brought to tax under the provisions of section 56(2) of the Act. The assessee has filed various details to prove the transactions and also filed necessary evidences in the form of agreement with the creditor. The AO ignored all evidences filed by the assessee and also the creditor which is evident from the fact that the AO has discussed the issue on hypothetical manner. The creditor has filed all the evidences before the AO and from it categorically stated that it has paid advance to the assessee for procurement of land. Though the assessee initially stated that he i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation who admitted to have received funds from the SPCL. The ITAT, after considering the facts has deleted additions made by the AO towards disallowance of interest u/s 36(1)|(iii|) on the advance given to the assessee by holding that these advances are business advances, therefore, interest cannot be disallowed for diversion of funds. The Ld.Senior Counsel further submitted that the lower authorities failed to appreciate the facts in right perspective and made additions purely on conjectures and surmises, therefore, the addition made by the AO towards advance received from SPCL should be deleted. 21. The Ld.DR, on the other hand, strongly supporting the order of the CIT(A) submitted that the facts gathered during the course of assessment proceedings and conduct of the assessee as well as SPCL goes to prove the undoubted fact that the monies have been paid for without any consideration and the AO has rightly brought to tax the impugned amount u/s 56(2)(vi). The Ld.DR further submitted that the conduct of the assessee on receipt of the money is crucial for deciding the issue whether the particular amount is a business convenience or money received without any consideration. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards procurement of land. These contrary statements given by the assessee as well as the company give rise to various doubts about the genuineness of the transaction. The AO further observed that on one side, the assessee stated to have received money towards procurement of land for the company, on the other hand, purchased various immovable and movable properties in his personal name and also kept money in FD in various banks. The AO further observed that the company has paid money in the financial year 2007-08 and 2008-09. Though the company has paid huge influx of funds, no agreement has been entered into with the assessee nor has any follow up action been taken to get the lands in its name. No action has been taken even after the expiry of 3 years. No steps have been taken to recover the money from the assessee. No interest has been charged on the money given to the assessee. All these facts leads to an that the company has paid money to the assessee without any consideration. 23. It is the contention of the assessee that he had received money from SPCL under agreement for procurement of lands for the company in Raigad District. The assessee further submitted that he had ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX. BANDRA (EAST), MUMBAI 400051 022-26570219 ------------------------------------------------------------------------------------------------- No.ITO-33(2)(4)/ITAT/Nilesh J. Thakur/20 17-18Date : 09.10.2017 To The Commissioner of Income-tax (DR). ITAT' 'B' Bench, R.No.340, PrathisthaBhavan, Old CGO Building, 3' Floor, M. K. Road, Murnbai - 400 020. ( Through Proper channel ) Sir, Sub: Submission of report in the case of ShriNileshJanardan Thakur for A.Y. 2008-09 and 2009-10 - ITA No. 3738 and 3739/M/2013- Reg. Kindly refer to the above. 2. The report called for by you on the following points is as under:- I. Give a report regarding whether this money is the same money belonging to Shri Nitesh Thakur ? As per the material available on record, I would like to mention here that there is no apparent connection with the money received by the assesse Shri Nilesh J. Thakur with the money belonging to Shri Nitesh J. Thakur) Considering the fact that here is no apparent connection is establishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved without any consideration by an individual or hindu undivided family, in any previous year from any person or persons on a specified date, then the whole of the aggregate value of such sum will be treated as income of the assessee. As a general rule, certain transactions are brought to tax when the provisions of section 56(2)(vi) like gift received from individuals and receipt of properties for inadequate consideration between the parties. Therefore, to decide whether a particular receipt is taxable under the provisions of section 56(2)(vi), the facts of the case have to be examined in the light of the provisions and its intended purpose. In this case, the AO has treated amount received by the assessee from SPCL on the ground that the transactions give rise to suspicion because of the conduct of both the parties. Except this, the AO has not brought out any cogent materials to treat the particular receipt as income of the assessee which is taxable u/s 56(2)(vi) of the Act. To tax a particular receipt u/s 56(2)(vi), which should be in the nature of income as referred under the said provisions. A receipt cannot be taxed merely on conjecture or surmises. The AO needs to bring on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuine, therefore, the AO opined that impugned amount is taxable under the provisions of section 56(2)(vi) of the Act. We do not find any merit in the findings of the A.O. for the reason that merely because the person, who paid the amount does not initiate any action for recovery of money should not be not a reason for making addition towards amount received as assessee s income. The AO has to prove beyond doubt a particular receipt is taxable in the given circumstances within the meaning of the said provision. In this case, the assessee has filed all details which prove that the company is in continuous contact with the assessee for procurement of land. We further notice that the company also filed a petition before Bombay High Court vide suit No.2576 of 2011 for recovery of money advanced to the assessee. The Hon ble Bombay High Court on 19th October, 2011 has passed a decree decreeing the suit on the basis of the consent terms filed by the parties and on the terms and conditions stated in the decree. As per the petition before the Hon ble Bombay High Court, both the parties agreed to settle the dispute as per which the assessee has agreed to refund the money along with interest w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionate interest u/s 36(1)(iii) of the Act. Though the findings of the co-ordinate bench is under different aspect, the amount involved is the same which is paid to the assessee, therefore, once a particular finding has been reached by the Tribunal on facts, a different conclusion cannot be reached at this stage. The relevant portion of the order of ITAT is extracted below:- 4.1 f the factual finding recorded by the Ld . C commissioner of Income Tax (Appeals), we note that (as contained in para-13.4) Shri Nilesh Thakur, during the course of assessment proceedings for AY 2008-09 and 2009-10 duly explained that he received the amounts and during the course of enquiries before various authorities he took a consistent stand that advances were given for land aggregation and admitted _to have received the funds f rom the as ses see 78 MIs Shapoorji Pallonji Co. Ltd. company. Shr i Ni lesh Thakur alsoadmitted before the Hon'ble High Court regarding true nature of transaction and took a diametrically opposite s tands on the nature of purp os e of advanc e s . The admitted stand of Nilesh Thakur in appellate proceeding for AY 2009-10 is duly supported by the record, which is fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y concern M/s PRS Developers. The assessee has shown amount received from SDCL under liabilities. During the course of assessment proceedings, the AO called upon the assessee to explain the nature and source of credit found in the name of SDCL. The AO also issued notices u/s 133(6) to SDCL. In response, the assessee has filed various details and submitted that he had received amount from SDCL towards consultancy charges for their project for which the company has deducted tax at source @10%. The assessee further contended that he is involved in providing consultancy services to the company for their project for which a formal appointment letter has been issued by the company on 07-12-2007. The assessee further submitted that both the parties have entered into consultancy agreement dated 29-08-2008 specifying the terms and conditions of consultancy services and also fees payable to such consultancy. Since he had received part payment during the financial year relevant to AY 2008-09, he did not recognise the revenue from the consultancy charges and whatever expenses incurred in relation to execution of consultancy work has been treated as WIP. In this regard, he furnished copies of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received from SDCL as assessee s income from other sources. The AO further denied the benefit of carry forward of WIP shown by the assessee in his financial statement towards expenditure incurred for providing consultancy services on the ground that the assessee has failed to prove any business activity undertaken in the relevant financial year. Aggrieved by the order of AO, assessee preferred appeal before CIT(A). 32. Before CIT(A), the assessee reiterated his submissions before the AO. The assessee further submitted that the AO was incorrect in making addition towards amounts received from SDCL under the head Income from other sources purely on the basis of surmises and conjectures ignoring all evidences filed by the assessee to prove that the impugned amount has been received for the purpose of providing consultancy services to SDCL. The assessee further submitted that he had entered into an agreement with SDCL for providing consultancy and the nature of consultancy services to be provided has been narrated in the agreement dated 29-08-2008 entered into between the company and himself wherein the terms of agreement has been clearly specified. The assessee further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DCL has filed all the details called for by the AO during the course of assessment proceedings. All these factors go to prove the undisputed fact that the assessee has received consultancy charges from SDCL and the company has paid the amount towards consultancy charges. The Ld.Senior Counsel further submitted that th assessee has not offered any income from consultancy charges for the assessment year under consideration because he is following project completion method of accounting for recognition of revenue and hence, the revenue recognition from the services has been postponed as the project has not been completed. But, that by itself cannot be a ground for the AO to hold that the amount is not received for consultancy services but for other unknown purposes. The facts gathered during the course of assessment proceedings by the AO himself proves that the money is received for the purpose of consultancy services which is evident from the fact of confirmation by SDCL. The Ld.Senior Counsel further submitted that if at all the income from consultancy services has to be recognised in the relevant financial year, only a reasonable net profit from gross receipts may be estimated. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has not been able to prove providing any kind of services to SDCL. The assessee also was not able to prove incurring of any expenditure in relation to providing of consultancy services. Therefore, he opined that amount received from SDCL is not for the purposes of providing consultancy services, but for some unknown reasons. It is the contention of the assessee that he had entered into a formal agreement with SDCL for providing consultancy services as per which he agreed to provide consultancy services for their project. The assessee further contended that the terms and conditions of the consultancy services has been clearly set out in the agreement dated 29-08-2008. As per clauses 4(a) to 4(m), the nature of services to be provided has been illustrated. The clause 5 of the agreement clearly says the fees to be payable. All these facts goes to prove an undoubted fact that he had received amount from SDCL for providing consultancy services. The assessee further contended that the AO has conducted independent enquiry during the course of assessment proceedings by calling for various details from SDCL for which the company has filed all necessary details and also confirmed to have p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further consultancy agreement entered into between the parties on 29-08-2008 clearly goes to prove the undoubted fact that there existed a service agreement between the parties and that SDCL has paid consultancy fee. The agreement filed by the assessee has narrated the nature of service to be provided. In fact, SDCL has accepted before AO during the assessment proceedings that the assessee has provided consultancy services. We further notice that SDCL also deducted tax at source @10% on total payments. All these facts lead to an undoubted conclusion that the AO has made addition merely on the basis of conjectures and surmises without there being any material to show that amount received from SDCL is income of the assessee. Therefore, we are of the view that the AO was incorrect in treating the amount received from SDCL as income of the assessee under the head Income from other sources . 38. Having said so, let us examine whether the assessee is able to prove expenditure incurred in relation to his business activity of providing consultancy services to SDC L. The assessee claims to have incurred various expenditure in relation to work executed for SDCL which has been filed befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is to be recognised during the relevant financial year, a reasonable profit may be estimated from the gross receipts. We find merits in the arguments of the assessee for the reason that total receipts cannot be taxed as income of the assessee. The assessee has incurred various expenditures which have been debited to his P L Account. Though, the assessee claims to have incurred various expenditures, failed to file complete details of expenditures incurred, to the satisfaction of the AO. Under these circumstances, what needs to be done is reasonable estimates of net profit from the business, taking into account the facts circumstances. In this case, the assessee is in the business of providing consultancy services. In the case of professional and consultancy services, section 44AD provides for taxation of income from profits and gains of profession on presumptive basis. Though, provisions of section 44AD strictly not applicable to the present case, the analogy provided under the said provisions can be taken as basis for determining the profit. In the cases of profession, profit ranging from 10% to 25% is reasonable. Therefore, taking into account overall facts and circumstances o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are of the view that AO was right in treating interest on fixed deposit under the head Income from other sources . The CIT(A), after considering the relevant submissions has rightly upheld additions made by the AO. We do not find any error in the order of CIT(A). Hence, we are inclined to uphold the order of the CIT|(A) and reject ground raised by the assessee. 42. The next issue that came up for our consideration is denial of carry forward of closing work in progress of ₹ 15,39,11,744. The AO denied workin- progress shown by the assessee on the ground that the assessee has failed to prove any business activity. It is the contention of the aswsessee that he had followed project completion method for recognition of revenue from his business. Accordingly expenditure incurred during the relevant financial year has been shown under WIP and carry forwarded to next year. We find that the issue of carry forward emanates from the impugned issue of treatment of amount received from SDCL under the head Income from other sources . Since we have already given our finding in the preceding paragraph regardeing amount received from SDCL and directed the AO to estimate income from the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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