Shri Sanjay Somani,, Indore v. The ACIT,, Indore

ITA 135/IND/2010 | 2006-2007
Pronouncement Date: 24-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 13522714 RSA 2010
Assessee PAN AQQPS7473P
Bench Indore
Appeal Number ITA 135/IND/2010
Duration Of Justice 2 month(s) 8 day(s)
Appellant Shri Sanjay Somani,, Indore
Respondent The ACIT,, Indore
Appeal Type Income Tax Appeal
Pronouncement Date 24-05-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 24-05-2010
Date Of Final Hearing 05-05-2010
Next Hearing Date 05-05-2010
Assessment Year 2006-2007
Appeal Filed On 16-03-2010
Judgment Text
PAGE 1 OF 13 - I.T.A.NOS.134 & 135/IND/2010 SANJAY SOMANI INDORE. IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI V.K. GUPTA ACCOUNTANT MEMBER PAN NO. : AQQPS7473P I.T.A.NOS.134 & 135/IND/2010 A.YS. : 2005-06 & 2006-07 SHRI SANJAY SOMANI ACIT PROP. M/S. DEWAS UDYOG VS 1(2) 101 CLASSIC CENTER INDORE. M. G. ROAD INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI S.S.DESHPANDE C. A. RESPONDENT BY : SHRI K.K.SINGH CIT DR DATE OF HEARING : 05.05.2010 O R D E R PER V.K. GUPTA A.M. THESE APPEALS BELONG TO THE SAME ASSESSEE AND INVOL VE COMMON ISSUES HENCE THESE WERE HEARD TOGETHER AND THESE ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER FOR THE SAKE OF CON VENIENCE. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. FIRST WE SHALL TAKE UP THE ASSESSEES APPEAL IN I. T.A.NO. 135/IND/2010 WHEREIN THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE PAGE 2 OF 13 - I.T.A.NOS.134 & 135/IND/2010 SANJAY SOMANI INDORE. LD. CIT(A) IN CONFIRMING THE ADDITION OF A.O. IN LE VYING THE PENALTY OF RS. 94 43 940/- U/S 271(1)(C) OF THE INCOME-TAX ACT 1961. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS AN IN DIVIDUAL. IT IS DEALING IN THE BUSINESS OF SUPPLY OF MS PIPES GE S HEETS HARDWARE MATERIAL TO VARIOUS GOVERNMENT ORGANIZATIONS JILA PANCHAYATS. BESIDES THE SUPPLY OF MATERIAL THE ASSESSEE IS ALSO DOING THE BUSINESS OF CONTRACTOR FOR LIFT IRRIGATION PROJECT ON TURNKEY B ASIS FOR DEORI SOMAIYA PANCHAYAT. THE BOOKS OF ACCOUNT WERE AUDITED AND TH E TAR WAS FILED. THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 2 03 440/-. THE A.O. HOWEVER IN THE COURSE OF POS T SURVEY INQUIRY FOUND THAT SOME OF THE CREDITORS WERE NOT VERIFIABLE AND IT WAS ALSO REVEALED BY SOME OF THE CREDITORS THAT THEY ISSUED BOGUS BILLS. WHEN THE ASSESSEE ON BEING MADE AWARE OF THESE FACTS DISCLOSED A SUM OF RS. 7 CRORES AS HIS INCOME BIFURCATING THE SAME OVER THE TWO ASSESSMENT YEARS I.E. RS. 2.80 CRORES IN ASSESSMENT YEAR 2006-07 AND RS. 4.2 CRORE S IN ASSESSMENT YEAR 2007-08. THE ASSESSEE FILED THE REVISED RETURN FOR THE IMPUGNED ASSESSMENT YEAR AFTER TAKING INTO CONSIDERATION THE DISCLOSURE MADE BY HIM. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ACCEPTING SUCH REVISED RETURN. THE A.O. THEREAFTER INITIATED PEN ALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. THE ASSESSEE SUBMITTED THAT S UCH DECLARATION WAS MADE TO BUY PEACE AND AVOID LITIGATION. IT WAS ALSO SUBMITTED THAT SUCH PAGE 3 OF 13 - I.T.A.NOS.134 & 135/IND/2010 SANJAY SOMANI INDORE. DECLARATION WAS ALSO SUBJECT TO AN UNDERSTANDING TH AT NO PENAL ACTION COULD BE TAKEN AGAINST THE ASSESSEE NOR ASSESSMENT OF EARLIER YEARS WOULD BE REOPENED. THE ASSESSEE ALSO SUBMITTED THAT REVIS ED RETURN WAS FILED VOLUNTARY BEFORE ANY QUERY WAS MADE OR CONCEALMENT WAS DETECTED BY THE DEPARTMENT HENCE QUESTION OF CONCEALMENT DID NOT ARISE. IT WAS ALSO SUBMITTED THAT THREE WAS NO MALA FIDE INTENTION ON THE PART OF THE ASSESSEE. THE ASSESSEE ALSO PLACED RELIANCE ON VARI OUS JUDICIAL DECISIONS IN SUPPORT OF ITS CLAIM OF NON LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THE A.O. HOWEVER REFERRING TO THE FACTS FOUND IN THE COURSE OF POST SURVEY ENQUIRIES HELD THAT IT IS THESE FACTS WHICH COMPELL ED THE ASSESSEE TO SURRENDER THE INCOME AND FILED REVISED RETURN. HENC E IT WAS NOT A CASE OF VOLUNTARY OFFER OR DISCLOSURE OF INCOME IN GOOD FAI TH AND THEREFORE IT WAS A FIT CASE FOR LEVY OF PENALTY ACCORDINGLY WHO LEVIED A SUM OF RS. 94 43 940/-. AGGRIEVED BY THIS THE ASSESSEE CARRIE D THE MATTER INTO APPEAL BEFORE THE LD. CIT(A) WHO ALSO CONFIRMED THE ACTIO N OF THE A.O. CONCURRING WITH THE REASONS OF THE A.O. STILL AGGRI EVED THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE NARRATED BASIC FACTS AND CONTENDED THAT THE A.OS OBSERVATIONS THAT THE ASSE SSEE SURRENDERED THE INCOME AS A RESULT OF POST SURVEY ENQUIRIES MADE BY THE ASSESSING OFFICER WAS FACTUALLY INCORRECT AS THE ASSESSEE SURRENDERED THE IMPUGNED SUM ON PAGE 4 OF 13 - I.T.A.NOS.134 & 135/IND/2010 SANJAY SOMANI INDORE. 13.12.2006 AND JUST AFTER THE DATE OF SURVEY AND BI FURCATION OF THE SAME WAS GIVEN ON 2.01.2007 AND THE REVISED RETURN WAS F ILED ON 28.12.2006. THE LEARNED COUNSEL FURTHER SUBMITTED THAT IT WAS A LSO NOT CLEARLY SPELT OUT BY THE ASSESSING OFFICER THAT HOW MANY CREDITOR S HAD DENIED THE TRANSACTION WITH THE ASSESSEE. THE LEARNED COUNSEL FURTHER SUBMITTED THAT IN CASE OF SUPPLY OF GOODS TO THE GOVERNMENT INSTIT UTIONS THE SAME HAD BEEN ACCEPTED HENCE IF THE PURCHASES WERE NOT GEN UINE AS STATED BY THE ASSESSING OFFICER ON THE BASIS OF HIS ENQUIRIES TH EN THE SALES SHOULD HAVE ALSO BEEN REDUCED AND IN THAT CASE THERE WOULD BE NO PROFIT TO THE ASSESSEE. IT WAS ALSO SUBMITTED THAT THERE WAS NO N EED OF MAINTAINING THE STOCK REGISTER OF TRADING GOODS AFTER THE RECEIPT O F THE ORDER FOR THE SUPPLY OF THE SAME THE ASSESSEE USED TO PURCHASE THE GOODS . IT WAS ALSO CONTENDED THAT IN RESPECT OF WORKS CONTRACT THE WO RK IN PROGRESS WAS SHOWN IN THE PROFIT AND LOSS ACCOUNT REPRESENTING C OST OF PURCHASES PLUS OTHER OVERHEADS. HENCE THIS ASPECT OF THE BUSINESS ALSO DID NOT RESULT INTO ANY EFFECT ON THE PROFIT BY THE ASSESSEE. 6. THE LEARNED COUNSEL FURTHER CONTENDED THAT EVEN NO OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO CROSS-EXAMINE THE CRED ITORS ABOUT THE BILLS ISSUED BY THEM. HENCE FOR THIS REASON ALSO IT COU LD NOT BE SAID THAT IT WAS A COMPULSIVE FACTOR ASSESSEE TO SURRENDER THE INCOM E. THE LEARNED COUNSEL FINALLY EMPHASIZED ON THE FACT THAT THE ASS ESSEE HAD SURRENDERED PAGE 5 OF 13 - I.T.A.NOS.134 & 135/IND/2010 SANJAY SOMANI INDORE. THE INCOME TO BUY PEACE AVOID LITIGATION AND WITH A REQUEST TO NOT TO START THE PENALTY PROCEEDINGS. HENCE IN THESE CIRCUMSTAN CES THE LEVY OF PENALTY WAS NOT JUSTIFIED. THE LEARNED COUNSEL IN THIS REGARD PLACED HEAVY RELIANCE ON THE DECISION OF THE NAGPUR BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. MALU ELECTRODES (P) LIMITED 14 IT J 398 WHEREIN THE TRIBUNAL ON IDENTICAL FACTS HAD HELD THAT IN CASE O F AGREED ADDITION TO BUY PEACE AND AVOID LITIGATION AND UNDER BONA FIDE BELI EF THAT THE PENALTY WOULD NOT BE LEVIED THEREAFTER. THE LEVY OF PENALTY U/S 271(1)(C) IN SUCH CASE WAS NOT JUSTIFIED. THE LEARNED COUNSEL ALSO RE LIED ON THE RECENT DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F CIT VS. RELIANCE PETRO PRODUCTS LIMITED AS REPORTED IN 322 ITR 158 FOR THE PROPOSITION THAT IN THE REVISED RETURN THERE WAS NO CONCEALMEN T OF INCOME NOR ANY INACCURATE PARTICULARS WERE FURNISHED AS THE REVIS ED RETURN HAD BEEN ACCEPTED AS SUCH. HENCE NO PENALTY COULD BE LEVIED . THE LEARNED COUNSEL ALSO PLACED RELIANCE ON THE DECISION OF THE TRIBUNA L IN THE CASE OF CANBAY SOFTWARE INDIA LIMITED VS.DY. CIT AS REPORTED IN 1 22 ITR TTJ 721. ON A QUERY FORM THE BENCH THE LEARNED COUNSEL SUBMITTED THAT IN ASSESSMENT YEAR 2007-08 NO PENALTY WAS LEVIED. 7. THE LD. CIT DR ON THE OTHER HAND PLACED STRONG RE LIANCE ON THE ORDER OF THE LD. CIT(A) AND ALSO CONTENDED THAT IN THE YEAR OF SURVEY WHERE SUCH SURVEY TOOK PLACE BEFORE THE DUE DATE ON FILING OF RETURN PAGE 6 OF 13 - I.T.A.NOS.134 & 135/IND/2010 SANJAY SOMANI INDORE. NORMALLY PENALTY WAS NOT LEVIED FOR THE REASON THAT THE ASSESSEE COLD TAKE A PLEA THAT IT WOULD HAVE DECLARED INCOME FOUND IN THE COURSE OF SURVEY IN THE RETURN EVEN THOUGH THE SURVEY WOULD NOT HAVE T AKEN PLACE. HENCE NO COGNIZANCE COULD BE TAKEN OF THE FACT THAT IN THE N EXT YEAR NO PENALTY WAS LEVIED. 8. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 9. IT IS NOTED THAT THE ASSESSEE IS ENGAGED IN SUPPLIE S TO GOVERNMENT DEPARTMENTS AND ALSO CARRYING OUT LIFT I RRIGATION PROJECT AWARDED BY THE STATE GOVERNMENT. IN RESPECT OF TRA DING GOODS THE MODUS OPERANDI OF THE ASSESSEE IS TO SUPPLY THE GOO DS DIRECTLY ON RECEIPT OF THE ORDER FROM THE GOVERNMENT. HENCE NO TRADING STOCK IS MAINTAINED. IN RESPECT OF WORK IN PROGRESS THE ASSESSEE HAS OF FERED THE INCOME FROM SUCH PROJECT IN ASSESSMENT YEAR 2007-08 BY WAY OF D ISCLOSURE OF RS. 4.20 CRORES OUT OF TOTAL RS. 7 CRORES AND WHICH HAS BEEN ACCEPTED. IT IS NOTED THAT AS A CONSEQUENCE OF SURVEY CONDUCTED BY THE D EPARTMENT THE ASSESSEE HAS SURRENDERED A SUM OF RS. 7 CRORES IN T WO ASSESSMENT YEARS ON ACCOUNT OF SOME SUNDRY CREDITORS AND VALUATION OF S TOCK. IT IS FURTHER NOTED THAT THE ASSESSEE HAS FILED REVISED RETURN FO R THE IMPUGNED ASSESSMENT YEAR WHEREIN SUCH ADDITIONAL INCOME HAS DULY BEEN DISCLOSED AND SUCH REVISED RETURN HAS BEEN ACCEPTED BY THE DE PARTMENT AS SUCH. IT IS PAGE 7 OF 13 - I.T.A.NOS.134 & 135/IND/2010 SANJAY SOMANI INDORE. ALSO PERTINENT TO MENTION THAT SUCH DECLARATION HAS BEEN MADE BY THE ASSESSEE TO BUY PEACE AND TO AVOID LITIGATION AND A LSO WITH A BONA FIDE BELIEF THAT NO PENALTY PROCEEDINGS WOULD BE INITIAT ED. THE IDENTICAL ISSUE AROSE BEFORE THE TRIBUNAL IN THE CASE OF MALU ELECT RODES (P) LIMITED TO WHICH ONE OF US I.E. ACCOUNTANT MEMBER IS THE AUTHO R WHEREIN THE TRIBUNAL AFTER CONSIDERING THE VARIOUS FACETS OF TH E PROVISIONS OF SECTION 271(1)(C) HELD THAT PENALTY U/S 271(1)(C) SHOULD NO T BE LEVIED WHERE AN ASSESSEE ACTS IN A MANNER WHICH RESULTS INTO AN ADD ITIONAL REVENUE IN A SMOOTH MANNER AND COMES OUT CLEAN WITHOUT FEAR OF P ENALTY OR PROSECUTION THUS NON LEVY OF PENALTY IN SUCH SITU ATION WOULD SERVE THE REAL PURPOSE OF PROVISIONS OF SECTION 271(1)(C) BEC AUSE THE PURPOSE OF LEVY OF PENALTY U/S 271(1)(C) IS TO DETER THE ASSES SEE FORM CONCEALMENT AND NOT TO COLLECT THE REVENUE. WE ARE FURTHER OF T HE VIEW THAT WHETHER IT IS A CASE OF THE YEAR OF SURVEY OR AN EARLIER YEAR WHEN THE ASSESSEE COMES OUT CLEAN THEN NORMALLY THE PENALTY SHOULD NOT B E LEVIED PARTICULARLY WHEN THE DUE TAXES WITH INTEREST HAVE BEEN PAID AND THE ASSESSEE ESPECIALLY WHEN IF THE ASSESSEE WOULD HAVE PURSUED THE MATTER HE COULD HAVE AVOIDED THE ADDITIONS ITSELF. IN THE PRESENT C ASE ONCE THE SALES HAVE BEEN ACCEPTED THEN THERE COULD NOT BE A CASE OF B OGUS PURCHASES TO THIS EXTENT AND ONLY A NORMAL PROFIT COULD HAVE BEEN ASS ESSED. IN THIS VIEW OF PAGE 8 OF 13 - I.T.A.NOS.134 & 135/IND/2010 SANJAY SOMANI INDORE. THE MATTER WE HOLD THAT IT IS NOT A FIT CASE FOR L EVY OF PENALTY U/S 271(1)(C) OF THE ACT AND THEREFORE WE CANCEL THE SAME. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE STANDS AL LOWED 11. NOW WE SHALL TAKE UP THE ASSESSEES APPEAL IN I.T. A.NO. 134/IND/2010. 12. IN THIS APPEAL THE ASSESSEE IS AGGRIEVED BY THE DE CISION OF THE LD. CIT(A) IN CONFIRMING THE ACTION OF A.O. IN REGA RD TO REJECTION OF BOOKS U/S 145 AND APPLICATION OF NET PROFIT RATE AT 5%. 13. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED RE TURN OF INCOME ON 31.10.2005 DECLARING TOTAL INCOME AT RS. 3 80 89 0/- ALONGWITH AUDIT REPORT. THE A.O. TAKING A CUE FROM THE RESULT OF SU RVEY PROCEEDINGS U/S 133A CONDUCTED ON THE ASSESSEE ON 4.12.2006 REQUIRE D THE ASSESSEE TO EXPLAIN THE METHODOLOGY OF VALUATION OF CLOSING STO CK AND WORK IN PROGRESS. THE ASSESSEE SUBMITTED THAT NO STOCK OF T RADING GOOD WAS MAINTAINED BY IT AND WORK IN PROGRESS OF LIFT IRRIG ATION PROJECT WAS ONLY SHOWN IN THE BOOKS OF ACCOUNT. THE VALUATION OF SUC H WORK IN PROGRESS HAD BEEN DONE ON THE BASIS OF MATERIALS CONSUMED AN D OTHER OVERHEADS INCURRED IN RESPECT OF SUCH PROJECT. THE A.O. FOUND THAT IN THE COURSE OF SURVEY PROCEEDINGS THE FACT HAD EMERGED THAT THE AS SESSEE WAS PROCURING INFLATED BILLS. THEREAFTER THE A.O. HELD THAT THE ASSESSEE HAD NOT KEPT ANY STOCK REGISTER NOR THE PURCHASE AND VALUATION OF CL OSING STOCK WAS PROPER PAGE 9 OF 13 - I.T.A.NOS.134 & 135/IND/2010 SANJAY SOMANI INDORE. AND SUPPORTED BY THE BILLS HENCE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE DID NOT GIVE A TRUE AND FAIR PICTURE OF PR OFIT. HENCE THE PROVISIONS OF SECTION 145 WERE TO BE APPLIED BY RET URNING THE BOOKS OF ACCOUNT. THE A.O. RELIED ON THE SEVERAL JUDICIAL DE CISIONS IN THIS REGARD AND REJECTED THE BOOK RESULT. THE A.O. THEREAFTER ADOPTED A NET PROFIT RATE OF 5 % WHICH WAS A COMMON NORM OF THE REVENUE DEPARTMENT IN GOVERNMENT CONSTRUCTION BUSINESS AND COMPUTED TOTAL INCOME AT RS. 1 32 19 960/-. AGGRIEVED BY THIS THE ASSESSEE CARR IED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A) WHEREIN THE ASSESSEE AGAIN NARRATED THE MODUS OPERANDI OF ITS BUSINESS ACTIVITIES AND CONTE NDED THAT THE ACCOUNTS WERE AUDITED U/S 44AB AND NO DEFECTS EXCEPT APPREHE NSION AND VALUATION WERE POINTED OUT BY THE ASSESSING OFFICER AND THER EFORE HIS ACTION OF APPLYING PROVISIONS OF SECTION 145 WAS NOT CORRECT. THE ASSESSEE ALSO CONTENDED THAT THE ASSESSEE HAD ALREADY OFFERED AN INCOME OF RS. 7 CRORES IN SUBSEQUENT ASSESSMENT YEARS I.E. ASSESSMENT YEAR 2006-07 AND 2007- 08. HENCE TAXING AN INCOME IN RESPECT OF SAME PROJ ECT DURING THE YEAR ALSO AMOUNTED TO DOUBLE TAXATION. THE LD. CIT(A) H OWEVER CONFIRMED THE ACTION OF THE A.O. FOR REJECTION OF THE BOOKS O F ACCOUNT AND ALSO ADOPTED THE SAME RATE OF NET PROFIT THOUGH HE EXCL UDED CLOSING STOCK IN COMPUTING THE NET PROFIT AND WORKED OUT THE SAME AT RS. 67 27 338/- AND ALSO ADDED THE OTHER INCOME OF RS. 50 19 087/- AND WORKED OUT THE PAGE 10 OF 13 - I.T.A.NOS.134 & 135/IND/2010 SANJAY SOMANI INDORE. QUANTUM OF ADDITION AT RS. 1 17 46 425/- AS AGAINST RS. 1 32 19 960/- WORKED OUT BY THE ASSESSING OFFICER. THE LD. CIT(A) ALSO REJECTED THE PLEA OF THE ASSESSEE THAT THE IMPUGNED ADDITION WOU LD AMOUNT TO DOUBLE ADDITION IN VIEW OF THE SUBSEQUENT DECLARATION MADE BY THE ASSESSEE FOR THE REASON THAT THE ADDITIONAL INCOME HAD BEEN OFFE RED IN SUBSEQUENT ASSESSMENT YEARS AND THE NET PROFIT WORKED OUT BY T HE CIT(A) WAS REASONABLE. STILL AGGRIEVED THE ASSESSEE IS IN APP EAL BEFORE US. 14. THE LEARNED COUNSEL CONTENDED THAT THE ADDITION IN THE YEAR UNDER CONSIDERATION HAD BEEN MADE ONLY ON THE BASIS OF SUBSEQUENT SURVEY PROCEEDINGS. HENCE THE PROVISIONS OF SECTIO N 145 COULD NOT BE APPLIED ON THAT BASIS. THE LEARNED COUNSEL FURTHER SUBMITTED THAT REJECTION OF THE BOOKS WAS NOT WARRANTED FOR THE RE ASON THAT ALL THE PURCHASES AND SALES WERE FULLY VOUCHED AND WHATEVER OBSERVATIONS WERE MADE BY THE AUDITORS IN THE TAX AUDIT REPORT WERE OF GENERAL NATURE AND HENCE WRONGLY INFERRED BY THE REVENUE AUTHORITIES . THE LEARNED COUNSEL ALSO CONTENDED THAT WORK IN PROGRESS WAS CORRECTLY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AND PROFIT THEREOF WAS OFFERED ON PERCENTAGE COMPLETION METHOD BASIS. HENCE THE SUBSEQUENT DECLARATION OF INCOME BY THE ASSESSEE COULD NOT BE IGNORED AS WAS DONE BY THE C IT(A). THE LEARNED COUNSEL AGAIN EMPHASIZED ON THE FACT THAT WHATEVER PROFIT WAS EARNED IN THE LIFT IRRIGATION PROJECT THAT HAD BEEN OFFERED I N SUBSEQUENT YEARS. PAGE 11 OF 13 - I.T.A.NOS.134 & 135/IND/2010 SANJAY SOMANI INDORE. HENCE ESTIMATION OF THE PROFIT IN THE YEAR UNDER C ONSIDERATION WAS A CLEAR CUT CASE OF DOUBLE ADDITION OF THE SAME INCOM E. THE LEARNED COUNSEL FURTHER CONTENDED THAT THE OTHER INCOME SHO WN BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT IN FACT WAS IN THE NA TURE OF GROSS RECEIPTS HENCE THE ADDITION THEREOF WAS NOT CORRECT AND BEC AUSE CORRESPONDING EXPENSES HAD TO BE SET OFF AND FOR THIS REASON ALSO THE ACTION OF THE LD. CIT(A) WAS NOT CORRECT. 15. THE LD. CIT DR ON THE OTHER HAND PLACED STRONG RE LIANCE ON THE ORDER OF THE LD. CIT(A). 16. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 17. IT IS NOTED THAT THE ASSESSEE IN ASSESSMENT YEAR 20 06-07 HAS OFFERED A SUM OF RS. 1.25 CRORES FOR UNDER VALUATIO N OF WORK IN PROGRESS IN IRRIGATION PROJECT AND SUCH IRRIGATION PROJECT I S A CONTINUING ONE FROM EARLIER YEARS AND THEREFORE THE BOOK RESULT SHOWN BY THE ASSESSEE CANNOT BE SAID TO BE CORRECT AND THEREFORE WE UPHOLD THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ACTION OF A.O. IN REGARD T O APPLICATION OF PROVISIONS OF SECTION 145 OF THE ACT. WE FURTHER FI ND THAT THE OTHER INCOME SHOWN BY THE ASSESSEE COMPRISES OF THE FOLLO WING :- SCHEDULE FORMING PART OF ACCOUNTS SCHEDULE -11 : AMOUNT ( RS.) OTHER INCOME 5 00 836.00 PAGE 12 OF 13 - I.T.A.NOS.134 & 135/IND/2010 SANJAY SOMANI INDORE. INCOME FROM MACHINE HIRE CHARGES 43 52 797.00 INTEREST ON FDRS 14 627.00 INTEREST (OTHERS) 1 50 759.20 COMMISSION RECEIVED 68.00 50 19 087.20 18. FROM THE PERUSAL OF THE ABOVE IT IS APPARENT THAT THESE ARE GROSS RECEIPTS UNDER A PARTICULAR HEAD AND THERE MUST BE SOME CORRESPONDING SPECIFIC EXPENSES EXCEPT IN CASE OF INTEREST/COMMIS SION E.G. INCOME FROM MACHINERY HIRE CHARGES IS SUBSTANTIAL AND DEPR ECIATION THEREON SHOULD BE ALLOWED PARTICULARLY WHEN SUCH INCOME IS NOT CONNECTED WITH THE REGULAR BUSINESS ACTIVITIES OF TRADING IN GOODS AND LIFT IRRIGATION PROJECT INSPITE OF REJECTION OF BOOKS OF ACCOUNT A S IT IS A SETTLED PRINCIPLE THAT THE ESTIMATION OF INCOME SHOULD BE DONE IN A P ROPER MANNER AND ON SOME COGENT BASIS. THUS THIS APPROACH OF THE LD. C IT(A) IN COMPUTING THE INCOME IS NOT JUSTIFIED. WE FURTHER FIND THAT T HE LD. CIT(A) HAS ALSO NOTED THAT WORK IN PROGRESS IN IRRIGATION PROJECT W AS UNDER VALUED AND FOR THAT PURPOSE THE ASSESSEE HAD MADE DECLARATION IN SUBSEQUENT YEARS AND IT IS NOT THE CASE OF THE REVENUE THAT SUCH UNDER VALU ATION PERTAINED ONLY TO THOSE ASSESSMENT YEARS AND IF THAT BE THE CASE THE N THERE WAS NO NEED TO REJECT THE BOOKS OF ACCOUNT AND APPLY THE NET PROFI T RATE IN THE YEAR UNDER CONSIDERATION AND THUS IF THESE FACTS ARE CONSID ERED AS A WHOLE THEN IT APPEARS TO BE A CASE OF DOUBLE TAXATION OF THE SAME INCOME AND FOR THIS PAGE 13 OF 13 - I.T.A.NOS.134 & 135/IND/2010 SANJAY SOMANI INDORE. REASON WE DO NOT FIND ANY MERIT IN THE ADDITION MA DE BY THE REVENUE AUTHORITIES. ACCORDINGLY WE DELETE THE SAME. 19. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED. 20. TO SUM UP ASSESSEES APPEAL IN I.T.A.NO. 135/IND/2 010 IS ALLOWED AND APPEAL IN I.T.A.NO. 134/IND/2010 IS PAR TLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 24 TH MAY 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 24 TH MAY 2010. CPU* 6D7115