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2011 (8) TMI 1320

Rao, This appeal by the assessee is directed against the order of ld. C.I.T.(A)-VI, Jalpaiguri dated 29/3/2011 for assessment year 2005-06. The grounds raised in this appeal by the assessee reads as under :- 1. That from the facts and circumstances of the case, the Ld. C.I.T. (Appeal) Jalpaiguri, has erred not by granting a reasonable opportunity of being heard to your appellant since the date 12.08.2010 a suo-motu adjournment was made by his demised predecessor C.LT. (Appeal) Jalpaiguri, due to his ill health. The rest of the notices mentioned in the order were not all served to your appellant. 2. That from the facts and circumstances of the case, the Ld. C.I.T. (Appeal) Jalpaiguri, has erred by upholding the invoking of Section 145 by the Ld. Addl.C.I.T. Jalpaiguri for non maintenance of stock book when by his own admission your appellant received all materials from the contractee and your appellant not defied none of the provisions of Section 144 of the I.T. Act, 1961. 3. That from the facts and circumstances of the case, the Ld. C.I.T. (Appeal) Jalpaiguri. has erred by not verifying the written submission for low profit from scrutiny case record that the appellant firm executin .....

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jecting the books of account by applying sec. 145 of the Act and also in estimating the net profit at 4% on the turnover declared by the assessee. Hence this appeal by the assessee on the above issue. 4. At the time of hearing before us, the learned counsel for the assessee submitted that the books of account of the assessee are duly audited u/s. 44AB of the Act. He further submitted that the A.O. rejected the books of account maintained in the normal course of business mainly on the ground that there was no unified stock register of the material purchased and its utilization without considering the logic of the situation that the assessee executed the works at different sites and time of execution of work was also different and, therefore, the assessee maintained comprehensive site-wise registers showing inflow and outflow of inputs and no unified stock register was possible to be maintained. In this connection, the learned counsel referred to copies of work order procured by the assessee during the assessment year under consideration placed at pages 27 to 146 of the paper book. He has also filed details of purchases made during the year at page 154 of the paper book and related c .....

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submitted that in the present case the assessee is a sub-contractor and it does not maintain any trading account and, therefore, closing stock is not an item and, in fact, the method of accounting followed by the assessee was never found to be at fault. In support of his submission, the learned counsel relied on Ashoke Refractories P. Ltd. vs. CIT [279 ITR 457 (Cal)] and Nisar Biri Sikka No. 1 vs. CIT [174 Taxman 51 (All.)]. 5. The ld. Departmental Representative, on the other hand, relied on the orders of the authorities below. He further submitted that most of the vouchers in relation to various expenses under different heads were signed by the employees of the assessee and not by the actual recipients and, therefore, the veracity of incurring such expenses was doubtful and actual profit on the basis of such unverifiable nature of expenses cannot be arrived at. He, therefore, submitted that in such circumstances, the A.O. has rightly rejected the trading results shown by the assessee by invoking provisions of sec. 145 of the Act as the books of account were not properly maintained with supporting evidence and thereby estimating the fair and reasonable profit at 4% of the turnover .....

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ec. (3) of sec. 145 of the Act also spells out that where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, he may make an assessment in the manner provided in sec. 144 of the Act. Therefore, satisfaction of the Assessing Officer is the foremost condition for accepting the trading results of an assessee. In the instant case, as stated above, the A.O. has pointed out several reasons and shortfalls for not accepting the trading results and in turn rejecting the books of account. It is fact that names of the parties from whom purchases were made and payments thereof have been provided by the assessee. However, at the same time there was no evidence before the A.O. to verify the distribution/utilization of such materials inasmuch as the assessee has not given site-wise consumption of materials. Further, Labour payments of ₹ 85,38,760/- form part of a major head in the trading/P & L Account considering the gross bill received to the tune of ₹ 1,70,37,407/-. The details produced by the assessee in support of payments to the labourers are only the names of such labourers and most of these are backed by thumb impre .....

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tractee as performance guarantee against the work as an income other than income from business. The A.O. has estimated the income from contract receipts and then separately added the said interest income as income from other sources rejecting the assessee s claim of business income. The ld. C.I.T.(A) confirmed the addition, but he has stated that in the method adopted by the A.O. there is no impact if the interest income is considered as business income or otherwise. We observe that the assessee had kept some money deposited with the contractee as performance guarantee for execution of works and claimed the same exclusively to carry on such business. Therefore, the interest accrued on such guarantee money was claimed as business income. Whether the income accruing on such deposit would constitute business income stands answered by the decisions of Hon ble Supreme Court in the cases of CIT vs. Bokaro Steel Ltd. [236 ITR 315 (SC)] and CIT vs. Karnal Co-operative Sugar Mills Ltd. [243 ITR 2 (SC)], which were followed by Hon ble Delhi High Court in the cases of CIT vs. Koshika Telecom Ltd. [287 ITR 479 (Del)] and in a recent decision in the case of CIT vs. Jaypee DSC Ventures Ltd. [(20 .....

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