COMMISSIONER OF INCOME TAX Vs. MAHAVIR CONCAST LTD.

JUDGEMENT

(1.) THOUGH notice was served, there is no appearance on behalf of the assessee.

(2.) THE revenue is aggrieved by the order of the Income Tax Appellate Tribunal (ITAT) dated 17.04.2014 in ITA 3283/Del/2011. It urges two questions, i.e. (a) as to the correctness of the ITAT's opinion with respect to rejection of books of accounts under Section 145(3) of the Income Tax Act, 1961 (hereafter referred to as "the Act") by the Assessing Officer (AO), and; (ii) the decision for directing cancellation of Rs.12,10,000/ -, disallowed on account of interest.

(3.) THE assessee was carrying on the business of manufacturing of MS Alloys Steel Casting, including MS Ingots. It also used to trade in iron and steel. For AY 2007 -08, it paid tax under Section 115JB of the Act on book profit of Rs.18,31,207/ -. It had claimed certain losses. In scrutiny assessment, it was discerned that the assessee had disclosed gross sales of Rs.35,09,16,339/ - as against a substantially lower amount in the preceding year. It also earned commission income of Rs.36 lakhs which was higher than the preceding year's income. The overall Gross Profit Rate during the year was 0.8% as against ( -)17.23% and the NP Rate of 0.54% as against 2.07% in the preceding year. The assessee had claimed bank interest of Rs.19,25,169/ - in the Profit and Loss Account. The AO found that the assessee had given advance of Rs.55 lakhs to SVP Builders (India) Limited which was repaid in the same year. However, no interest was claimed. The AO added Rs.12,10,000/ - on the basis that the assessee's contention of commercial expediency or nexus for using borrowed funds for business purposes was in substantiated under Section 36(1)(iii) of the Act. The AO went on to examine the books and rejected the books of accounts under Section 145(3). On the basis of his estimate, after allowing appropriate deduction, the AO determined the income @ 6% Gross Profit Rate (hereafter "G.P. Rate") of Rs.12,08,45,880/ -.