TMI Blog2010 (8) TMI 1105X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 2000-2001 to 2004- 2005. Learned Counsel further submitted that in response to the notice issued under section 153A of the Act, the assessee requested the Assessing Officer to treat the return filed earlier as return in compliance to the notice. For the assessment year 2006-2007, the assessee filed regular return declaring a total income of ₹ 21,52,793/-. The Assessing Officer on the basis of the materials said to be seized during the course of search operation, rejected the books of account under section 145 of the I.T. Act and estimated the profit at 12.5 before depreciation. According to the learned Counsel, what was said to be recovered by the Revenue is only a dumb document. The learned counsel further submitted that unauthenticated rough working of site-in-chare cannot be a basis for rejecting the books of account. Therefore, the same cannot be a basis for rejecting the books of account. Learned Representative further submitted that the Revenue has no material to show that the assessee has earned so much of income in the project executed at Cuttack. According to the learned Counsel, the dumb document cannot be relied upon by the department for rejecting the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nkateswarlu Co. also the Assessing Officer estimated the profit at 12.5% . After taking into consideration profit rates of similar trader, this Tribunal estimated the profit at 8% of the gross receipt. Therefore, in view of this decision of the Coordinate Bench according to the learned Counsel for the assessee the estimation of profit at 12.5% is not justified at all. 6. Learned Counsel further submitted that once the income was estimated, the Assessing Officer cannot make any further addition. In this case according to the learned Counsel, the Assessing Officer made separate additions in respect of other income like interest on fixed deposits, interest on mobilization of advance to sub-contractors, commission on sub-contract, profit on Madhukan Joint Venture, sales tax refund, sinerages charges refund etc., According to the learned representative all these profits are generated out of business activity of the assessee. Therefore, once profit was estimated there is no question of making any further addition. According to the learned Counsel, the Assessing Officer is not justified in separately adding these amounts to the profit estimated. 7. On the contrary, Smt.Vasundhara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... according to the learned Counsel, this income has no nexus with the main activity of the assessee. Therefore, once the profit was estimated in respect of contract business according to the learned representative, the other income has to be separately added to the total income for the purpose of computing the taxable income. Therefore, according to the learned Representative, the assessee s contention that the other income shall not be added separately, is not justified. 8. We have considered the rival submissions on either side and carefully perused the materials available on record. The first issue arise for consideration is, rejection of books of account. Admittedly, there was a search operation in the premises of the assessee on 20-10-2005 together with Madhukan Group of Companies. During the course of search operation, certain documents contains the working of the profit for the period from March, 1997 to March, 2003 from Government contract works at Cuttack was found and seized. From the order of the Assessing Officer it appears that total contract receipt was ₹ 9.95 crores and the profit worked out in the paper found is ₹ 2.19 crores. The assessee s contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h contract will have to be determined on the basis of the value of the contract represented by the cash payment received by the assessee from the Government Department . The Apex Court approved the judgment of the Full Bench of the A.P. High Court in Triramjapuniya (1977) 106 ITR 597. In view of this Judgment of the Apex Court the cost of materials supplied to the assessee by the Government or its department for the purpose of execution of work shall be excluded from the total contract receipt and what is to be considered is only the cash receipt and not the material receipt. Therefore, we find some justification in the contention of the assessee that the receivables viz., materials supplied by the assessee shall be excluded from the total contract receipts. Accordingly, we direct the Assessing Officer to exclude the cost of materials supplied by the Government/Other agencies for the purpose of executing the contract work. The Assessing Officer shall take into consideration only the cash payment received by the assessee for the purpose of estimating the profit. 11. The next issue arise for consideration is, rate of profit. As we have already discussed in the earlier paragrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which the work was carried on, availability of employees and other factual situation which are relevant for consideration, in our opinion, estimation of profit at 12.5% is highly excessive. Though the Assessing Officer referred to the search material which shows profit of ₹ 2.19 crores on the total contract receipt ₹ 9.95 crores which almost works out to 20% of the total contract receipt. The Assessing Officer estimated the profit at 12.5%. This shows that the Assessing Officer has his own doubt on the material found during the course of search operation. More over, no one could except a profit of ₹ 2.19 crores on the total gross receipt of ₹ 9.95 crores. Therefore, the material found during the course of search operation may not reflect the true affairs of the assessee. Therefore, the seized material as well as books of account maintained by the assessee cannot be a reliable material to ascertain the profit. It is also a fact that identical and similar circumstances, this Tribunal estimating the profits between 7% and 12.5% depending upon the circumstances of the case in respect of main contractor. However, in respect of sub contractor, this Tribunal is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all verify this factual aspect whether the assessment proceedings for any of the assessment years under consideration has been terminated on the date of search either by an order u/s 143(3) or by operation of law on expiry of time for issue of notice u/s 143(2), and if terminated, the income already assessed on the contract receipt shall be excluded while computing the taxable income in consequence to the order of this Tribunal. In case, the assessment proceeding is not terminated and pending, for any of the assessment years under consideration, that shall be abated and the tax already paid shall be given credit while passing order in consequence to this order of the Tribunal. 14. Now coming to addition of other income earned by the assessee we find that the assessee received interest on fixed deposits. Interest on fixed deposit has to be assessed separately even though profit was estimated in view of decision of Special Bench of this Tribunal in the case of DCIT Vs. Allied Construction (2007) 105 ITD 1 (SB). Therefore, we do not find any infirmity with regard to addition of interest as income separately on the fixed deposit. As far as the interest on mobilization account, the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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