Shri Banna Lal Jat Contractor, JODHPUR v. JCIT, BHILWARA

ITA 567/JODH/2013 | 2009-2010
Pronouncement Date: 30-04-2014 | Result: Partly Allowed

Appeal Details

RSA Number 56723314 RSA 2013
Assessee PAN AFNPJ1819E
Bench Jodhpur
Appeal Number ITA 567/JODH/2013
Duration Of Justice 4 month(s) 18 day(s)
Appellant Shri Banna Lal Jat Contractor, JODHPUR
Respondent JCIT, BHILWARA
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 21-04-2014
Date Of Final Hearing 21-04-2014
Next Hearing Date 21-04-2014
Assessment Year 2009-2010
Appeal Filed On 12-12-2013
Judgment Text
IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA JUDICIAL MEMBER AND SHRI N.K. SAINI ACCOUNTANT MEMBER. ITA NO.567/JODH/2013 (A.Y. 2009-10) SHRI BANNA LAL JAT CONTRACTOR VS. J CIT BHILWARA RANGE C/O SHRI U.C. JAIN ADVOCATE BHILWARA. SHATRUNJAY HARI SINGH NAGAR PALI ROAD JODHPUR. PAN NO. AFNPJ 1819 E (APPELLANT) (RESPONDENT) ITA NO.39 /JODH/2014 (A.Y. 2009-10) DCIT CIRCLE VS. SHRI BANNA LAL JAT BHILWARA BUS STAND JAHAZPUR BHILWARA. PAN NO. AFNPJ 1819 E (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI U.C. JAIN & SHRI RAJENDRA JAIN. DEPARTMENT BY : SHRI N.A. JOSHI - D.R. DATE OF HEARING : 21/04/2014. DATE OF PRONOUNCEMENT : 30/04/2014. O R D E R 2 PER N.K. SAINI A.M THESE CROSS APPEALS BY THE ASSESSEE AND THE DEPART MENT ARE DIRECTED AGAINST THE ORDER DATED 08/11/2013 OF LD. CIT(A) AJMER. IN ASSESSEES APPEAL THE FOLLOWING GROUNDS HAVE BEEN RAISED:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) ERRED IN UPHOLDING THE APPLICATION OF PROVISO TO SE CTION 145(2). 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) ERRED IN SUSTAINING AN ADDITION OF RS. 1 41 849/- I N THE CONTRACT ACCOUNT. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) ERRED IN TREATING THE AMOUNT OF INTEREST RECEIVED A MOUNTING TO RS. 39 88 780/- ON FDRS PLEDGED WITH THE GOVERNMENT DEP ARTMENT AS INCOME FROM OTHER SOURCES PARTICULARLY WHEN THE SAM E IS INCOME FROM BUSINESS AND CANNOT BE ADDED SEPARATELY AS INCOME F ROM OTHER SOURCES. 4. THAT THE PETITIONER MAY KINDLY BE PERMITTED TO R AISE ANY ADDITIONAL OR ALTERNATIVE GROUND AT OR BEFORE THE TIME OF HEARING . 5. THE PETITIONER PRAYS FOR JUSTICE & RELIEF. THE GROUNDS RAISED IN THE DEPARTMENTAL APPEAL READ AS UNDER:- THE LD. CIT(A) AJMER IN THE PRESENT FACTS AND CIR CUMSTANCES OF THE CASE HAS ERRED IN:- 1. RESTRICTING THE N.P. ADDITION TO RS. 1 41 849/- AS AGAINST THE ADDITION OF RS. 21 18 154/- MADE BY THE AO AFTER REJECTING T HE BOOKS OF ACCOUNTS U/S 145(3) OF THE I.T. ACT 1961 WITHOUT A PPRECIATING THE FULL FACTS OF THE CASE. 2. DELETING THE ADDITION OF RS.7 41 335/- MADE BY THE AO U/S 40A(3) WITHOUT APPRECIATING THE FACTS OF THE CASE. 3. DELETING THE ADDITION OF RS. 2 74 918/- MADE BY TH E AO ON ACCOUNT OF TELEPHONE & VEHICLE EXPENSES WITHOUT APPRECIATING THE FACTS OF THE CASE. 3 4. DELETING THE ADDITION OF RS. 10 050/- MADE BY THE A O ON ACCOUNT OF DEPRECIATION WITHOUT APPRECIATING THE FACTS OF THE CASE. 5. DELETING THE ADDITION OF RS. 3 95 210/- MADE BY THE AO ON ACCOUNT OF INTEREST EXPENSES WITHOUT APPRECIATING THE FACTS O F THE CASE. 6. THE APPELLANT CRAVES TO ADD AMEND ALTER DELETE O R MODIFY THE ABOVE GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2 GROUND NO. 1 RAISED BY THE ASSESSEE WAS NOT PRESSE D AS SUCH IT IS DISMISSED. GROUND NOS. 4 & 5 OF THE ASSESSEES APP EAL ARE GENERAL IN NATURE SO DO NOT REQUIRE ANY COMMENTS ON OUR PART. GROUND NO. 2 OF THE ASSESSEES APPEAL AND GROUND NO. 1 OF THE DEPARTMEN TAL APPEAL ARE COMMON SO THESE ARE ADJUDICATED TOGETHER. 3. FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSEE IS A CIVIL CONTRACTOR AND HAD SHOWN NET PROFIT OF RS. 1 50 96 741/- @ 6.03% FOR THE CONTRACT RECEIPT OF RS. 25 02 16 492/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER EXAMINED THE VAR IOUS EXPENSES AND REJECTED THE BOOKS OF ACCOUNTS BY OBSERVING THAT TH E ASSESSEE HAD NOT MAINTAINED SALARY WAGES STOCK WORKS WORK IN PRO GRESS MACHINE OPERATING MUSTER ROLL AND ATTENDANCE REGISTERS ETC . HE ALSO POINTED OUT THAT CERTAIN PAYMENTS WERE MADE ON SELF MADE VOUCHE RS AND NO EVIDENCE HAD BEEN SUBMITTED IN SUPPORT OF EARTH WORK AND GRA VEL EXPENSES OF RS. 25 90 559/-. ACCORDINGLY THE BOOKS OF ACCOUNT S WERE REJECTED. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH THE DETAILS OF THE LAST 4 THREE YEARS REFLECTING THE TURNOVER GROSS PROFIT R ATE AND NET PROFIT RATE WHICH WAS AS UNDER:- F.Y. TURNOVER (RS. IN CRORE) NET PROFIT (RS. IN CRORE) NET PROFIT RATE 2006 - 07 27.93 1.92 6.88% 2007 - 08 30.85 2.11 6.84% 2008 - 09 25.02 1.51 6.03% THE ASSESSING OFFICER APPLIED THE NET PROFIT RATE O F 6.88% AND MADE THE ADDITION OF RS. 21 18 154/- BUT HE DID NOT ALL OW DEPRECIATION INTEREST ETC. 4. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER:- '1) THE ABOVE NAMED APPELLANT IS ASSESSED TO TAX SI NCE LAST 20 YEARS OR MORE AND IS A CONTRACTOR EXECUTING ROAD WORKS. D URING THE YEAR UNDER APPEAL THE APPELLANT DECLARED A NET PROFIT OF RS. 1 50 96 741/-. THE GROSS CONTRACT RECEIPT DURING THE YEAR UNDER APPEAL IS RS . 25 02 16 492/-.THAT THIS IS REGULAR SYSTEM OF ACCOUNTING FOLLOWED BY AP PELLANT IN EARLIER YEAR ALSO THAT HE HAS DISCLOSED THE INTEREST INCOME ON D EPOSITS IT ST REFUNDS AS BUSINESS INCOME THUS THE NET PROFIT HAS BEEN DEC LARED AFTER CONSIDERING THESE RECEIPT ALSO. THAT THE LEARNED JOINT COMMISSIONER OF INCOME TAX B HILWARA RANGE HAS NOT POINTED OUT A SPECIFIC DEFECT BUT NARRATED IN THE A SSESSMENT ORDER THAT THE APPELLANT CLAIMED EXPENSES IN THE P/L ACCOUNT FOR W HICH NO CONTRACT WISE 5 BREAKUP OF EXPENSES FILED NO COMPLETE ADDRESS OF L ABOURERS GIVEN NO STOCK REGISTER MAINTAINED MACHINE OPERATING REGISTER WI P REGISTER ETC. WERE PROPERLY MAINTAINED .THE BILLS DOES NOT BEAR CST RS T OR TIN NO. TRANSPORT BILLS FOR GRIT DID NOT MATCH WITH GRIT BILLS NO EX PENSES LIKE ROAD SURVEY WAS CLAIMED IN EARLIER YEARS NO DOCUMENTARY EVIDENCE R EGARDING JCB WORK CHARGES WATER SUPPLY EXPENSES WERE PRODUCED LIKEW ISE THE ASSESSEE FILED THE DETAILS OF TOTAL CREDITORS BUT FILED DETAILS OF CREDITORS ABOVE RS. 5/- LACS ONLY AND ON THESE GROUNDS REJECTED THE BOOKS OF AC COUNTS AND APPLIED THE PROVISO OF SECTION 145(3) OF THE IT ACT. 1961 AND A PPLIED THE NET PROFIT RATE OF 6.88% AS DECLARED BY THE ASSESSEE IN A. Y. 2007- 08. AND THEREBY MADE THE ADDITION OF RS. 2L 18 L54/- WITHOUT CONSIDERING THE FOLLOWING SUBMISSION OF ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S. 2) THAT IN PAST AIL THE WORKS WERE DIRECTLY ALLOTTE D TO THE ASSESSEE WHERE AS IN THE YEAR UNDER ASSESSMENT A WORK WORTH RS. 9.88 CRORE DONE WAS SUB- LATED TO THE ASSESSEE BY M/S. RAVI CONSTRUCTION CO. UDAIPUR FOR CONSTRUCTING OF ROAD OF PRAGATI PATH BHILWARA ON W HICH THE ASSESSEE HAS TO PAY 2% OF COMMISSION TO M/S. RAVI CONSTRUCTION CO. UDAIPUR. IF WE CONSIDER THIS FACT THAN THERE IS NO FALL IN THE PROFIT WHICH IS CLEAR FROM THE FOLLOWING INFORMATION:-. RS. IN LACS NET PROFIT ON RS. 15.14 CRORE @ 6.84% (DIRECT ALLOT TED WORK) 103.56 NET PROFIT ON SUB LATED WORK RS. 9.88 @ 4.84 (6.84- 2%) 47.82 ----------- TOTAL 151.38 NET PROFIT DECLARED BY THE ASSESSEE 150.96 ------------ LESS PROFIT SHOWN AS COMPARED TO PREVIOUS YEAR 0.42 ------------ WHICH IS LESS BY RS.42000/- ONLY WHICH IS VERY NOMI NAL AND IGNORABLE. IN VIEW OF ABOVE SUBMISSION THE ADDITION OF RS. 21 18 154/- MADE BE DELETED & OBLIGE. 6 3) IT IS SUBMITTED THAT THE APPELLANT FILED THE CHA RT OF NET PROFIT FOR A.Y. 2007-08 TO 2009-10 RESPECTIVELY BEFORE THE LEARNED A. O. AS UNDER: A. Y . TURNOVER RS. IN CRORE NET PROFIT RS.IN CRORE NET PROFIT RATE 2007 - 08 27.93 1.92 6.88 2008 - 09 30.85 2.11 6.84 2009 - 10 25.02 1.51 6.03 IT IS SUBMITTED SIR THAT THERE ARE CERTAIN DEFICIEN CIES AS REGARDS TO MAINTAIN THE DETAILS OF EXPENSES IN A PARTICULAR SYSTEM .I.E . THE BILLS FOR WATER SUPPLY JOB BILLS ISSUED BY JCB OWNERS ARE IN SOME CASES NO T PRINTED ONE BUT BILLS ARE THERE THE PAYMENTS ARE MADE THROUGH ACCOUNT PA YEE CHEQUES IN GENERAL BUT IN SOME CASES THE SMALL TRADERS/OWNERS DOES NOT ACCEPT CHEQUES AND AS SUCH PAYMENTS ARE IN CASH BUT WITHIN THE PERMISSIBLE LIMITS. ANY HOW THE APPLICATION OF NET PROFIT IS JUSTIFIED BUT SIR THE LEARNED A. O. WHILE APPLYING THE NET PROFIT WHICH IS INCLUSIVE O F RECEIPTS ON ACCOUNT OF INTEREST ON DEPOSITS FROM BANKS IT & ST REFUNDS ET C FOR EARLIER YEAR AT THIS POINT SIR THE LEARNED A. O. HAS TREATED THIS INCO ME AS OTHER INCOME WHEREAS IT IS THE PART OF BUSINESS INCOME AS HAS BEEN HELD IN THE CASE OF CIT VS CHINNA NANCHI MUTHU CONSTRUCTIONS. (2008) 29 7ITR 70 (KAR) : (2008) 170 TAXMAN 272 SINCE THE NET PROFIT RATE HAS ALREA DY BEEN APPLIED. THIS IS A DOUBLE ADDITION TO THE INCOME OF APPELLANT. THEREFO RE PRAYED THAT THE ADDITION OF RS. 43 86 882/- MADE BE DELETED AND OBL IGE. FURTHER ASSESSEE SUBMITTED AS UNDER: 1. NET PROFIT RATE: THE APPELLANT MAINTAIN REGULAR BOOKS OF ACCOUNTS WH ICH ARE AUDITED U/S 44AE OF THE INCOME TAX ACT 1961. THAT THE APPELLANT MAINTAINS A CONSOLIDATED TRADING & & PROFIT AND LOSS ACCOUNT SI NCE LAST MANY YEARS IN WHICH THE MISCELLANEOUS RECEIPTS ON ACCOUNT OF INTE REST ON FDR'S NSC INTEREST INCOME TAX AND SALES TAX REFUNDS AND. INTE REST ON SB ACCOUNT ETC. 7 ARE SHOWN AND THE NET PROFIT RATE HAS BEEN ARRIVED AFTER CONSIDERING ALL RECEIPTS. THE COPY OF THE AUDITED TRADING & PROFIT AND LOSS ACCOUNTS FOR LAST THREE YEARS ARE ENCLOSED. A) THAT THE POSITION OF BUSINESS REMAINS SAME AS IN A. Y. 2007-08 AND 2008- 09 BUT DURING THE YEAR UNDER CONSIDERATION THE APP ELLANT RECEIVED WORK WORTH RS. 9.88 CRORE ON SUB LET BASIS FROM M/S RAVI CONSTRUCTION CO. UDAIPUR ON WHICH HE HAS TO PAY 2% SUBLETTING COMMISSION WH ICH HAS NOT BEEN TAKEN INTO CONSIDERATION BY THE LEARNED A.O. WHILE APPLYI NG THE NET PROFIT RATE. IF THIS FACT IS CONSIDERED THE VARIATION IN NET PROFIT RATE COMES TO 0.13% LESS AS COMPARED TO A.Y. 2007-08 AND 0.09% LESS AS COMPARED TO A.Y. 2008-09 WHICH IS NEGLIGIBLE. AND WE ENCLOSE HEREWITH THE FO LLOWING: A. COPY OF WORK ORDER LETTER DT. 28/7/2008 REC EIVED FROM UIT BHILWARA IN FAVOUR OF RAVI CONSTRUCTION CO. UDAIPUR. B. COPY OF AGREEMENT FOR SUB-LETING. C. TDS CERTIFICATE OF RAVI CONSTRUCTION CO. ISSUED BY UIT BHILWARA. D. DETAILED STATEMENT OF PAYMENT RECEIVED BY RAVI CONSTRUCTION CO. FROM UIT AND PAYMENT TO ASSESSEE BY DEDUCTEE 2% +TAX. AL ONG WITH FORM NO. 16A AND PAYMENT LIST. E. COPY OF ACCOUNT OF BANNA LAL JAT AS APPEARIN G IN THE BOOKS OF RAVI CONSTRUCTION CO.. F. COPY OF ACCOUNT OF RAVI CONSTRUCTION CO. IN T HE BOOKS OF BANNA LAL JAT'S BOOKS. B) THAT THE CHART OF NET PROFIT FOR LAST 3 YEARS SU PPORTED BY COPY OF AUDITED PROFIT AND LOSS ACCOUNT WHICH SHOWING TURNOVER NET PROFIT INCLUDES INCOME FROM OTHER SOURCE OF INTEREST SALES TAX REFUND IN TEREST ON IT REFUND AND AGRICULTURE INCOME ALSO. NET PROFIT INCLUDES AGRICULTURE INCOME IN TWO YEARS IF WE EXCLUDE THE AGRICULTURE INCOME FROM THE NET PROFIT THEN % OF NE T PROFIT WILL BE AS UNDER: 8 A.Y. TURNOVER RS. IN CRORE NET PROFIT RS. IN CRORE NET PROFIT RATE % AGRICULTURE INCOME NET PROFIT EXCLUDING AGRICULTURE INCOME NET PROFIT RATE% 2007-08 27.93 1.92 6.88 .058 1.86 6.67% 2008-09 30.85 2.11 6.84 .016 2.10 6.79% 2009-10 25.02 1.51 6.03 .000 1.51 6.03% WE THEREFORE REQUEST TO YOUR GOOD SELF TO KINDLY AP PLY NET PROFIT RATE EXCLUDING AGRICULTURE INCOME AND ALSO DELETE THE AD DITION MADE ON ACCOUNT OF NET PROFIT RATE. THEREFORE WE REQUEST YOUR HONOUR TO KINDLY DELETE T HE ADDITION OF RS. 21 18 154/- ON ACCOUNT OF LOW NET PROFIT AND FURTHE R REQUEST TO DELETE THE ADDITION OF RS. 43 86 882/- MADE RESPECTIVELY FOR O THER INCOME WHEREAS THIS HAS BEEN CONSIDERED IN DETERMINING THE NET PROFIT R ATE AS HAS BEEN HELD IN THE CASE CIT VS CHINNA NANCHMUTHU CONSTRUCTIONS (20 08) 297ITR 70(KAR). ' THE ASSESSEE FURTHER REITERATED THE CONTENTIONS REG ARDING DEPOSITS WITH THE BANK BEING REQUIRED FOR PROCURING CONTRACTS THE SU B CONTRACT RECEIPT OF RS. 9.88 CRORES AND SUBMITTED VARIOUS NP RATE CHARTS IN VARIOUS OPTIONS/ SITUATIONS. 5. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE SUSTAINED THE ADDITION OF RS. 1 41 849/-. NOW BOTH THE PARTIES ARE IN APPEAL. THE ASSESSEE IS IN APPEAL AGAINST T HE SUSTENANCE OF ADDITION OF RS. 1 41 849/- AND THE DEPARTMENT IS IN APPEAL AGAINST THE RELIEF OF RS. 19 76 305/-. 9 6 . LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HE ASSESSING OFFICER WRONGLY APPLIED THE NET PROFIT RATE OF 6.88 % BASED ON EARLIER YEARS RESULTS FOR THE A.Y. 2007-08 AND HAD NOT CON SIDERED THIS FACT THAT THE ASSESSEE EXECUTED MAJOR WORK AMOUNTING TO RS. 9 .88 CRORES ON SUB- CONTRACT BASIS. IT WAS FURTHER STATED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS. 1 41 849/- AFTER ALLOWING RELIEF ON ACCOUNT OF SUBLETTING COMMISSION @ 2% ONLY. IT WAS CONTENDED THAT THE ADDITION HAD BEEN SUSTAINED IN CONTRACT ACCOUNT AND THE LD. CIT(A) OUGHT TO HAVE APPLIED THE RATE OF 6.84% WHICH WAS NET PRO FIT RATE OF THE IMMEDIATELY PRECEDING YEAR INSTEAD OF 6.88% WHICH W AS THE RATE FOR THE YEAR PRIOR TO THE PRECEDING YEAR. IT WAS FURTHER S TATED THAT THE RELIEF ON ACCOUNT OF SUBCONTRACT ALLOWED BY THE LD. CIT(A) W AS WELL JUSTIFIED AND WAS SUPPORTED BY THE JUDGMENT OF THE HON'BLE RAJAST HAN HIGH COURT IN THE CASE OF CIT VS. BHAWAN VA PATH NIRMAN REPORTED IN 258 ITR 431. 7 . IN HIS RIVAL SUBMISSIONS LEARNED D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND FURTHER SUBMITTED THAT SINCE THERE WAS DECLINE IN THE NET PROFIT RATE IN COMPARISON TO THE EARLIER YE AR THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING THE ADDITION BY CONSIDERING THE PAST HISTORY OF THE ASSESSEES CASE AND THE LD. CIT(A) WRONGLY ALLOWED THE RELIEF TO THE ASSESSEE. 10 8 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE IT IS NOTICED THAT THE ASSESSING OFFICER APPL IED THE NET PROFIT RATE FOR THE A.Y. 2007-08 WHICH WAS AT 6.88% WHILE IN TH E IMMEDIATELY PRECEDING YEAR IT WAS AT 6.84%. THEREFORE BY KEEP ING IN VIEW THE PAST HISTORY OF THE ASSESSEES CASE AFTER REJECTING THE BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE ACT THE NET PROFIT RATE OF I MMEDIATELY PRECEDING YEAR OUGHT TO HAVE BEEN APPLIED. IN THAT VIEW OF T HE MATTER WE MODIFY THE ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSIN G OFFICER TO APPLY THE NET PROFIT RATE OF 6.84% AND ALLOW THE COMMISSION @ 2% ON ACCOUNT OF SUBCONTRACT AS HAS BEEN ALLOWED BY THE LD. CIT(A). ACCORDINGLY THE GROUND RAISED BY THE ASSESSEE IS PARTLY ALLOWED AND THAT OF THE DEPARTMENT IS DISMISSED. 9 . VIDE GROUND NO. 3 THE GRIEVANCE OF THE ASSESSEE RELATES TO THE SUSTENANCE OF ADDITION BY TREATING THE INTEREST REC EIVED AMOUNTING TO RS. 39 88 780/- ON THE FDRS PLEDGED WITH THE GOVT. DEPARTMENT CONSIDERING THE SAME AS INCOME FROM OTHER SOURCES . 10 . AS REGARDS TO THIS ISSUE LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THIS ISSUE IS COVERED BY THE DEC ISION OF THIS BENCH OF 11 THE TRIBUNAL IN THE CASE OF ACIT CIRCLE-BMR BARME R VS. SHRI LAL CHAND CHOUDHARY IN I.T.A.NO. 527/JODH/2013 COPY OF THE S AID ORDER WAS FURNISHED WHICH IS PLACED ON RECORD. 11 . IN HIS RIVAL SUBMISSIONS LEARNED D.R. ALTHOUGH S UPPORTED THE ORDERS OF THE AUTHORITIES BELOW BUT COULD NOT CONTROVERT THE AFORESAID CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. 12. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTI ES AND THE MATERIAL ON RECORD IT IS NOTICED THAT THE ASSESSIN G OFFICER TREATED THE INTEREST ON FDRS WHICH WERE PLEDGED TO GET THE GOVE RNMENT CONTRACT AS INCOME FROM OTHER SOURCES AND THE SAID ACTION OF THE ASSESSING OFFICER WAS UPHELD BY THE LD. CIT(A). IT IS NOTICED THAT A N IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE VIDE ORDER DATED 27/03/2014 IN I.T.A.NO. 527/JODH/2013 F OR THE A.Y. 2009-10 IN THE CASE OF ACIT BARMER VS. SHRI LAL CHAND CHOU DHARY (SUPRA) WHEREIN THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PA RA 10 WHICH READ AS UNDER:- 10 . AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PAR TIES IT IS NOTICED THAT A SIMILAR ISSUE HAS ALREADY BEEN DECIDED IN FA VOUR OF THE ASSESSEE VIDE PARAS 12 & 13 OF THE AFORESAID REFERRED TO ORDER DA TED 07/03/2013. THE FINDINGS GIVEN THEREIN ARE REPRODUCED AS UNDER:- 12 12. AFTER HEARING BOTH SIDES WE ARE OF THE CONSIDE RED OPINION THAT THE RULE OF CONSISTENCY DEMANDS US TO FOLLOW THE DECISI ON OF THIS VERY BENCH. THE JODHPUR BENCH HAS HELD SO IN THE CASE OF JAIN CONSTRUCTION CO. WE EXTRACT PARAS 13 AND 14 OF THE JAIN CONSTRUC TION COMPANY IN ITA NO. 532/JU/2010 A.Y. 2007-08 (COPY ENCLOSED AT PAGE 29 ONWARDS) IN WHICH IT HAS BEEN HELD THUS :- WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. THE ASSESSEE HAS DECLARED INTEREST PAID TO THIRD PARTIES AMOUNTI NG TO RS.35 83.211/-. INTEREST RECEIVED TO THE EXTENT OF RS.3 00 681/- WAS REDUCED FROM THE INTEREST FOR CLAIMING DEDUCTIO N IN RESPECT OF THE INTEREST PAID TO THIRD PARTIES. IN CASE INTE REST IS TO BE TREATED AS INCOME FROM OTHER SOURCES THEN DEDUCTION OUT OF NET PROFIT RATE ON ACCOUNT OF INTEREST TO THIRD PARTIES WILL HAVE TO BE ALLOWED TO THE EXTENT OF RS.35 38 211/-. THUS IT IS ONLY A REVENUE NEUTRAL ISSUE. THE IT AT JODHPUR BENCH IN THE CASE OF RADHA KRISHAN BENIWAL VS. ACJT (ITA NO. 115/JU/09 D ATED 09.07.2009) HELD THAT INTEREST IS TO BE TREATED AS BUSINESS INCOME BECAUSE FDRS AND NSCS WERE PURCHASED IN SUPP ORT OF LENDERS TO BE CONSIDERED FOR ACCEPTANCE. THE A.O. I N HIS ORDER HAS NOWHERE MENTIONED THAT SUCH FDRS AND NSCS WERE NOT PURCHASED FOR SUBMITTING THE TENDERS. HENCE WE HOL D THAT INTEREST SHOULD BE TREATED AS INCOME FROM BUSINESS IN VIEW OF THE ORDER OF THE JODHPUR TRIBUNAL. 13. SINCE ON IDENTICAL SET OF FACTS THE I.T.A.T. H AS HELD THAT INTEREST RECEIVED FROM F.D.RS. AND N.S.CS. PLACED WITH GOVER NMENT WHILE OBTAINING CONTRACT FROM GOVERNMENT IS REQUIRED TO B E ASSESSED AS INCOME FROM BUSINESS. SINCE THIS INTEREST INCOME IS BUSINESS INCOME WHICH HAS BEEN CONSIDERED IN ESTIMATION OF INCOME B Y APPLYING N.P. RATE WE THEREFORE ARE OF THE CONSIDERED VIE W THAT NO SEPARATE ADDITION IS WARRANTED. ACCORDINGLY BY FOL LOWING THE ABOVE JODHPUR BENCH DECISION WE HAVE TO ALLOW THES E GROUNDS OF APPEAL BECAUSE THE LD. D.R. HAS NOT PRODUCED ANY CO NTRARY DECISION OF ANY HIGH COURT OR OF HONBLE SUPREME COURT. 13 13. SO BY RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 27/03/2014 IN THE CASE OF ACIT BARMER VS. SHRI LAL CHAND CHOUDHARY (SUPRA) THE ADDITION SUSTAINED BY THE LD. CIT(A) O N ACCOUNT OF INTEREST FROM FDR CONSIDERING THE SAME AS INCOME FROM OTHER SOURCES IS DELETED. 14. VIDE GROUND NO. 2 TO 5 THE GRIEVANCE OF THE DEPAR TMENT RELATES TO THE DELETION OF ADDITION OF RS. 7 41 335/- UNDER SE CTION 40A(3) RS. 2 74 918/- OUT OF TELEPHONE & VEHICLE EXPENSES RS. 10 050/- ON ACCOUNT OF DEPRECIATION AND RS. 3 95 210/- ON ACCOU NT OF INTEREST EXPENSES RESPECTIVELY. 15. THE FACTS RELATING TO THESE ISSUES IN BRIEF ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE MADE THE CASH PAYMENTS EXCEEDING RS. 20 00 0/- AMOUNTING TO RS. 7 41 335/- ON VARIOUS DATES DETAILS HAS BEEN G IVEN AT PAGE 11 OF THE ASSESSMENT ORDER DATED 07/12/2011 FOR THE COST OF REPETITION THE SAME IS NOT REPRODUCED HEREIN. THE ASSESSING OFFICER D ISALLOWED THE IMPUGNED AMOUNT BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT BUT THE ASSESSING OFFICER DID NOT MAKE SEPARATE ADDITIONS B Y OBSERVING THAT IT WAS 14 COVERED BY THE PROFIT ADDITION BEING MADE TO THE IN COME OF THE ASSESSEE. THE OTHER ADDITIONS MADE ARE DISCUSSED BY THE ASSES SING OFFICER IN PARA 3 TO 5 OF THE ASSESSMENT ORDER DATED 07/12/2011. 16. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER T O THE LD. CIT(A) AND SUBMITTED AS UNDER:- A) 'ADDITION ON ACCOUNT OF PAYMENT EXCEEDING RS. 2 0000/- (RS. 7 41 335/-) THE APPELLANT FILED THE REASONS FOR ABOVE AND COMPL ETE HISTORY OF THE PAYMENT FILED VIDE LETTER DT. 9/11/2011 WHICH IS Q UITE SATISFACTORY DETAIL AS UNDER: S. NO. DATE AMOUNT CASH BOOK PAGE NO. EXPLANATION. 1 26.4.2008 210000/- 11 PART PAYMENT OF TRACTOR BILL NO. 58 OF AUTO MOBILE INDIA BHILWARA RS.432198/- (FIXED ASSETS) 9.5.2008 50000/- 16 -------- DO- ........ 26.6.2008 63000/- 36 --------- DO ---------- 2. 20.6.2008 40296/- (40276+200) 26 THE COST OF DIESEL'& PETROL PAID IN CASH SINCE THEY DO NOT SALE ON CREDIT. (PHOTO COPY OF BILLS ENCLOSED.) 3. 1.7.2008 30000/- 39 AMOUNT PAID TO M/S JAIPUR HARDWARE & MACHINERY STORE DEPOSITED BY BANK SLIP IN THEIR BANK ACCOUNT. (PHOTO COPY ENCLOSED.) 4. 18.7.2008 37950/- 46 AMOUNT PAID TO NISHAR AHMED DEOLI FOR SHUTTERING WORK. FOR BANK BUILDING CONSTRUCTION. (FIXED 15 ASSETS) 6. 1 0.2008 44895/- 79 AMOUNT PAID TO LABOUR & KARIGAR FOR BANK BUILDING WORK. (FIXED ASSETS) 15.11.2008 66250/- 100 AMOUNT PAID TO LABOUR & KARIGAR FOR BANK BUILDING WORK AMOUNT PAID TO LABOUR & KARIGAR. (FIXED ASSETS) 18.1.2009 370.87/- 129 AMOUNT PAID TO LABOUR & KARIGAR FOR BANK BUILDING WORK AMOUNT PAID TO LABOUR & KARIGAR. (FIXED ASSETS) 5. 6.1.2009 100000/- 123 PAYMENT MADE TO SIZ ARI AGAINST HIS LABOUR COST OF SEEDS & FERTILIZERS. THE ASSESSEE FURTHER SUBMITTED THAT AS THE ADDITION HAS BEEN MADE AFTER REJECTING THE BOOKS OF ACCOUNTS U/S 145(3) AND IS N O FURTHER SCOPE FOR SEPARATE ADDITION ON ABOVE ACCOUNT U/S 40A(3) OF TH E I.T. ACT AND RELIED UPON THE DECISION OF HON'BLE ITAT JAIPUR BENCH 'A' IN IT A NO. 829/JP/2012 DATED 23.01.2013 IN THE CASE OFLTO VS. NARDEV KUMAR GUPTA. THIRD GROUND: FURTHER THE LEARNED A. O. ALSO PROPOSED A DISALLOWA NCE OF RS. 74918/- OUT OF TOTAL EXPENSES RS. 13 74 592/- (RS. 1121341/- V EHICLE EXPENSES +148794/- TELEPHONE EXPENSES) THE APPELLANT FILED THE COMPLETE DETAILS OF EXPENSE S SIR THE ASSESSEE IS QUITE ILLITERATE AND A FARMER NO PERSONAL CALLS ARE MADE AND SO FAR VEHICLE REPAIRS EXPENSES THE VEHICLES ARE USED FOR BUSINESS PURPO SES ONLY. FOURTH GROUND: 16 THE ASSESSEE SUBMITTED THAT AS THE ADDITION HAS BEE N MADE AFTER REJECTING THE BOOKS OF ACCOUNTS U/S 145(3) AND IS NO FURTHER SCOPE FOR SEPARATE ADDITION ON ABOVE ACCOUNT U/S 40A(3) OF THE I.T. AC T AND RELIED UPON THE DECISION OF HON'BLE ITAT JAIPUR BENCH 'A ' IN IT A NO. 829/JP/2012 DATED 23.01.2013 IN THE CASE OF LTO VS. NARDEV KUMAR GUPT A. FIFTH GROUND: INTEREST ON BORROWED LOANS OF RS. 24 32 059/- FROM BANK FOR PURCHASE OF PLOTS TO THE TUNE OF RS. 395210/- BE NOT DISALLOWED . IT IS SUBMITTED THAT THE ASSESSEE HAS HIS OWN CAPIT AL TO THE TUNE OF RS. 6 27 63 556/- AND OUT OF THIS ONLY 24 32 039/- HAS BEEN USED FOR NON BUSINESS PURPOSES IT IS A SMALL PORTION ONLY. THE ABOVE ADDITION HAVE NOT BEEN MADE SEPARATELY SI NCE THE NET PROFIT RATE HAS BEEN APPLIED. ' FURTHER ASSESSEE HAS SUBMITTED AS UNDER: 'INTEREST ON LOAN FOR PURCHASE OF PLOTS: SIR IT IS SUBMITTED THAT THE PLOT WAS PURCHASED IN SEPTEMBER 2007 FOR RS. 40.35 LACS AND THE LOAN TAKEN FROM HDFC WAS DEBITED TO HIS CAPITAL ACCOUNTS AND THE TRANSACTION DOES NOT RELATE TO TH IS YEAR. FURTHER IN NEXT YEARS THE INTEREST PAID ON THIS LOAN HAS BEEN CAPIT ALIZED IN PLOT ACCOUNT AND HAS NOT BEEN CHARGED TO PROFIT AND LOSS ACCOUNT AS REVENUE EXPENDITURE ANY HOW WE ENCLOSE HEREWITH THE FOLLOWING DOCUMENTS TO EXPLAIN THE TRANSACTION FOR PURCHASE OF PLOT AND LOAN RAISED A ND PAYMENT MADE TO UIT BHILWARA AND INTEREST IS NOT CHARGED TO PROFIT AND LOSS ACCOUNT: A. COPY OF CASH BOOK ABSTRACT WHICH SHOWING RS. 1 0.10 LACS DEPOSITED IN SEPT 2007. B. COPY OF BANK BOOK /BANK STATEMENT WHICH SHOWIN G RS. 30.25 LACS HAS BEEN PAID OUT OF RUNNING BUSINESS BANK ACCOUNT ON 22 ND OCT 2007 THEREAFTER ASSESSEE AVAILED THE LOAN FROM HDFC ON 23 RD OCT 2007 RS. 28.00 LACS AND RS. 2.00 LACS ON 3 RA NOV. 2007. 17 C. COPY OF CAPITAL ACCOUNT FOR THE YEAR ENDED ON 3 1/3/2007 WHICH SHOWS THAT THE ASSESSEE HAVE SUBSTANTIAL CAPITAL AS WELL AS CURRENT YEAR INCOME. THAT THE LOAN HAS BEEN AVAILED IN PREVIOUS YEAR I.E . A.Y. 2008-09 AND DURING THE YEAR UNDER APPEAL INSTALLMENT HAS BEEN PAID WIT H INTEREST RS. 243989/- WHICH HAS BEEN CAPITALIZED AS PART OF THE COST OF P LOT AND NO INTEREST IS CHARGED TO PROFIT AND LOSS ACCOUNT ON PLOT LOAN ACC OUNT BUT THE LEARNED A. O. APPLIED HYPOTHECATED RATE @16.25% ON RS. 24 32 0 59/-.THERE IS NO QUESTION OF DISALLOWANCES REMAIN AS ASSESSEE HAS AL READY CAPITALIZED. ' THE ASSESSEE FURTHER SUBMITTED AS UNDER: 1. 'THAT THE APPELLANT PURCHASE IN AUCTION SHOPS FROM NAGAR PALIKA JAHAZPUR IN WHICH HE DEPOSITED AUCTION MONEY FOR 4 SHOPS @ 8000/- EACH BUT ONLY 2 SHOPS WERE AUCTIONED TO THE APPELL ANT. THE PAYMENTS FOR THIS WERE MADE THROUGH BANK OF BARODA PRIVILEGE ACCOUNT (CURRENT A/C NO.07990200006956) RS.4 34 015/- VIDE CH.NO.888 136 AND RS.13 50 044/-VIDE CH.NO.548276 OF SBBJ JAHAZPUR A CURRENT ACCOUNT NO. 61010712536 (COPY OF NAGAR PALIKA JAHAZPUR ACC OUNT AND COPY OF BANK STATEMENTS FOR BOTH THE CURRENT ACCOUNT ARE EN CLOSED) WHICH SHOWS THE PAYMENT OUT OF RUNNING FUNDS ON WHICH NO INTERE ST HAS BEEN PAID. 2. THAT THE FIGURE OF RS. 24 32 059/- MENTIONED IN THE ASSESSMENT ORDER BY THE LEARNED A. O. FOR INVESTMENT IN PLOTS IS EXPLAI NED AS UNDER : 1. PAYMENT MADE FOR 2 SHOPS (4 34 015 + 13 50 044) 1 7 84 059/- (AS EXPLAINED IN (1) ABOVE) 2. INSTALLMENTS PAID FOR ANSAL SUSHANT CITY PLOT 6 4 8 000/- THAT THE INSTALLMENT OF RS. 6 48 000/- WERE ALSO PA ID FROM SBBJ BUILWARA ACCOUNT NO. 61032957275 (COPY ENCLOSED) WHICH IS AL SO A CURRENT ACCOUNT ON WHICH NO INTEREST HAS BEEN PAID. THE ASSESSEE FURTHER SUBMITTED:- 18 '1. THAT REGARDING PAYMENT COVERED U/S 40A(3) IN WHICH PAYMENT TOWARDS PURCHASE OF TRACTOR MADE IN CASH WHICH IS IN CAPITA L NATURE ON WHICH DEPRECIATION HAS BEEN CLAIMED BY RS. 65757/-. IN RESPECT OF PAYMENT TOWARDS CONSTRUCTION OF BUILD ING WHICH HAS BEEN LET- OUT TO BANK WHICH IS ALSO A CAPITAL NATURE EXPENDIT URE AND INCOME DERIVED FROM PROPERTY SHOWN AS INCOME FROM HOUSE PROPERTY H EAD. PAYMENT MADE TO SIZARI AGAINST THE LABOUR COST OF SEEDS AND FERTILIZERS WHICH IS FOR AGRICULTURE INCOME IS EXEMPT UNDER INC OME TAX. 2. SHOP PURCHASE FROM NAGAR PALIKA JAHAZPUR IN AUCT ION AND SHOP IS USE FOR AS OFFICE FOR BUSINESS. AND PAYMENT MADE THROUGH CU RRENT ACCOUNT NO. SBBJ JAHAZPUR 61010712536 RS. 1350044/- AND FROM BANK OF BARODA PREVILLAGE ACCOUNT NO. 07990200006956 RS. 434015/- WHICH IS AL SO CURRENT ACCOUNT ON WHICH NO INTEREST IS PAID BY ASSESSEE AND NO LOAN H AS BEEN AVAIL FOR THE SAME. INSTALLMENT PAYMENT FOR ANSHUL SUSHANT CITY PLOT EI GHT (8) INSTALMENT OF RS. 51000/- EACH FROM SBBJ BHILWARA CURRENT ACCOUNT 610 32957275 ON WHICH NO INTEREST HAS BEEN PAID. ' 17. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE IMPUGNED ADDITIONS BY OBSERVING IN PARA 4.3 OF THE IMPUGNED ORDER AS UNDER:- I HAVE CONSIDERED THE CONTENTIONS OF THE APPELLANT AS WELL AS ASSESSMENT ORDER. IT IS SEEN THAT AFTER REJECTING THE BOOKS OF THE ACCOUNTS U/S 145(3) OF THE I.T. ACT THE AO HAS PROCEEDED TO MAKE SEPARATE DISALLOWANCE U/S 40A(3) OF RS. 7 41 335 TELEPHONE EXPENSES AND VEHICLE EXP ENSES OF RS. 2 74 918 DEPRECIATION OF RS. 10 050 AND INTEREST EXPENSES OF RS. 3 95 210 AS DISCUSSED ABOVE. IN THIS CONTEXT IT IS RELEVANT TO NOTE THAT NP RATE HAS BEEN DETERMINED AFTER CONSIDERING THE VARIOUS EXPENSES D EBITED IN THE BOOKS OF ACCOUNTS. THE AO HAS REJECTED THE BOOKS OF ACCOUNTS U/S 145(3) OF THE I.T. 19 ACT AND PROCEEDED TO ESTIMATE THE HIGHER NET PROFIT RATE OF THE ASSESSEE. IN SUCH A CASE IT HAS BEEN HELD IN THE CASE OF INDWEL L CONSTRUCTIONS VS CIT 232 ITR 776 (AP) AS UNDER: 'THE PATTERN OF ASSESSMENT UNDER THE IT ACT IS GIVE N BY S. 29 WHICH STATES THAT THE INCOME FROM PROFITS AND GAINS OF BUSINESS SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SS. 30 TO 43D. SEC. 40 PROVIDES FOR CERTAIN DISALLOWANCES IN CERTAIN CASES NOTWITHS TANDING THAT THOSE AMOUNTS ARE ALLOWED GENERALLY UNDER OTHER SECTIONS. THE COMPUTATION UNDER S. 29 IS TO BE MADE UNDER S. 145 ON THE BASIS OF THE BOOKS REGULARLY MAINTAINED BY THE ASSESSEE. IF THOSE BOOKS ARE NOT CORRECT OR COMPLETE THE ITO MAY REJECT THOSE BOOKS AND ESTIMATE THE INCOME TO THE BEST OF HIS JUDGMENT. WHEN SUCH AN ESTIMATE IS MADE IT IS IN SU BSTITUTION OF THE INCOME THAT IS TO BE COMPUTED UNDER S. 29. IN OTHER WORDS ALL THE DEDUCTIONS WHICH ARE REFERRED TO UNDER S. 29 ARE DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING SUCH AN ESTIMATE. THIS WILL ALSO MEAN THAT THE EMBARGO PLACED IN S. 40 IS ALSO TAKEN INTO ACCOUNT. NO DOUBT THERE IS BIG DIFFERENCE BETWEEN PROFIT EARNED WITH OWN CAPITAL AND PROFIT EARNED WI TH BORROWED CAPITAL AND SUCH A DIFFERENCE COULD HAVE BEEN TAKEN INTO ACCOUN T BY THE ITO WHILE MAKING AN ESTIMATE. IF THE CIT HAD SET ASIDE THE ES TIMATE ON THE GROUND THAT THE VITAL FACT THAT THE BUSINESS WAS CARRIED ON WIT H OWN CAPITAL AND NOT WITH BORROWED CAPITAL HAS BEEN IGNORED BY THE ITO THERE MAY NOT HAVE BEEN ANY DIFFICULTY IN UPHOLDING THAT ORDER. BUT WHEN HE PR OPOSES TO ADD BACK AN EXACT ITEM IN THE P&L A/C HE WAS RELYING ON THE RE JECTED BOOKS WHICH HE COULD NOT DO. THERE IS ALSO A FURTHER DIFFICULTY IF S. 40 IS TO BE TAKEN INTO ACCOUNT EVEN AFTER MAKING AN ESTIMATE. WHEN THERE A RE CERTAIN OTHER DEDUCTIONS WHICH ARE TO BE DISALLOWED SUCH AS WEALT H-TAX PAYMENT IN S. 40 CAN IT BE SAID THAT AFTER MAKING AN ESTIMATE THE W EALTH-TAX CHARGED IN THE P&L A/C SHOULD AGAIN BE ADDED BACK TO THE PROFIT. T HIS EXAMPLE ILLUSTRATES HOW THE CONTENTION OF THE REVENUE THAT S. 40(B) MA KES A DIFFERENCE IN THE SITUATION IS UNTENABLE. THEREFORE IT IS NOT CORRE CT IN LAW TO MAKE A SEPARATE ADDITION REPRESENTING THE INTEREST AND REMUNERATION PAID TO PARTNERS TO THE INCOME ALREADY ESTIMATED AND ASSESSED FROM CONTRACT S. ' FURTHER IT HAS BEEN HELD IN THE CASE OF ACIT VS PA DAM CHAND BHANSAII 85 TTJ (JD) 215 AS UNDER: (HEADNOTE) 'BUSINESS EXPENDITUREDISALLOWANCE UNDER S. 40A(3) INCOME COMPUTED BY APPLYING NET PROFIT RATEINCOME HAVING BEEN COMP UTED BY REJECTING THE 20 BOOK RESULTS AND BY APPLYING THE NET PROFIT RATE N O ADDITION UNDER S. 40A(3) COULD BE MADE ' IN THIS CONTEXT IT HAS BEEN HELD IN THE CASE OF CI T VS G.K. CONTRACTOR 19 DTK (RAJ) 305 AS UNDER: (HEADNOTE) 'INCOMECASH CREDITESTIMATION OF PROFIT AFTER REJE CTION OF BOOKS OF ACCOUNTAO HAVING ESTIMATED THE PROFIT BY APPLYING A HIGHER NET PROFIT RATE TO TOTAL CONTRACT RECEIPTS AFTER REJECTING ASS ESSEE 'S BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF S. 145(3) NO SEPARATE A DDITION CAN BE MADE ON ACCOUNT OF CASH CREDIT UNDER S. 68 EVEN THOUGH THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS OF PROOF IN EXPLAINING THE AMOUN T SHOWN IN THE BOOKS OF ACCOUNT AS 'MARKET OUTSTANDING'NO SUBSTANTIAL QUES TION OF LAW ARISES FOR CONSIDERATION. ' IN VIEW OF ABOVE DISCUSSION IT IS APPARENT THAT TH E ABOVE ADDITIONS MADE U/S 40A(3) OF RS. 7 41 335 VEHICLE AND TELEPHONE E XPENSES OF RS. 2 74 918 DEPRECIATION OF RS. 10 050 AND INTEREST OF RS. 3 95 210 AFTER REJECTING THE BOOKS OF ACCOUNTS U/S 145(3) OF THE I.T. ACT AND AP PLYING THE NP RATE ARE NOT SUSTAINABLE IN LAW. WHILE ESTIMATING THE NP RATE TH E RELEVANT EXPENSES ARE DEEMED TO HAVE .BEEN TAKEN INTO CONSIDERATION. FURTHER THE ASSESSEE HAS ALSO POINTED OUT THAT MOS T OF THE DISALLOWANCE MADE U/S 40A(3) IS RELATED TO BANK BUILDING FOR WHI CH RENTAL INCOME HAS BEEN OFFERED UNDER THE HEAD INCOME FROM HOUSE PROPE RTY AND PROVISIONS OF SEC. 40A(3) ARE APPLICABLE ONLY FOR THE BUSINESS IN COME. SIMILARLY DISALLOWANCE MADE ON ACCOUNT OF AGRICULTURAL EXPENS ES WHICH ARE ALSO NOT COVERED U/S 40A(3) OF THE I.T. ACT. THE APPELLANT ALSO POINTED OUT THAT FOR THE INVESTM ENT IN THE PLOTS OF RS. 24 32 059. THE PAYMENTS OF RS. 6 84 162 RS. 4 34 0 15 AND RS. 13 00 000 WAS MADE FROM THE RUNNING CURRENT ACCOUNTS FOR WHIC H NO INTEREST IS PAYABLE BY THE ASSESSEE AND ASSESSEE HAD ENOUGH CAP ITAL OF ITS OWN OF RS. 3 60 75 783 AS ON 31.03.2008. IN VIEW OF ABOVE DISCUSSION IT IS APPARENT THAT DI SALLOWANCE OF RS. 7 41 335 + RS. 2 74 91 8+ RS. 10 050+ RS. 3 95 210 MADE BY T HE AO IS NOT LIABLE TO BE SUSTAINED DUE TO REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF THE NP RATE. ACCORDINGLY ABOVE ADDITIONS ARE DELETED AND THESE FOUR GROUNDS OF APPEAL ARE ALLOWED. 21 NOW THE DEPARTMENT IS IN APPEAL. 18. LEARNED D.R. STRONGLY SUPPORTED THE ASSESSMENT ORDE R PASSED BY THE ASSESSING OFFICER AND REITERATED THE OBSERVATIONS M ADE IN THE SAID ORDER DATED 07/12/2001. 19. IN HIS RIVAL SUBMISSIONS LEARNED COUNSEL FOR THE A SSESSEE REITERATED THE OBSERVATIONS IN PARA 4.3 OF THE IMPUGNED ORDER AND STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 20. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE IT IS NOTICED THAT THE ASSESSING OFFICER WORK ED OUT THE DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT EVEN AFTER REJECTIN G THE BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE ACT. HOWEVER THE SAID DISALLOWANCES WERE DELETED BY THE LD. CIT(A) BY FOL LOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT AS WELL AS IT AT JODHPUR BENCH REFERRED BY THE LD. CIT(A) IN PARA 4.3 OF THE IMPUG NED ORDER WHEREIN IT HAS BEEN HELD THAT WHEN THE ASSESSING OFFICER HAVIN G ESTIMATED THE PROFIT BY APPLYING A HIGHER RATE TO THE TOTAL CONTRACT REC EIPTS AFTER REJECTING THE ASSESSEES BOOKS OF ACCOUNTS BY INVOKING THE PR OVISIONS OF SECTION 22 145(3) OF THE ACT NO SEPARATE ADDITION CAN BE MADE . WE THEREFORE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A ) ON THESE ISSUES. ACCORDINGLY WE DO NOT SEE ANY MERIT IN THE GROUND NOS. 2 TO 5 RAISED BY THE DEPARTMENT. 21. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALL OWED AND THAT OF DEPARTMENT IS DISMISSED. (ORDER PRONOUNCED IN THE COURT ON 30 TH APRIL 2014). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30 TH APRIL 2014. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR ITAT JODHPUR.