The rejection of books of accounts and estimation of income at 8% was upheld due to unverifiable self-made vouchers, while the interest income issue was remanded for further investigation.

ORDER

This appeal in ITA No. 304/Agr/2016 for the assessment year 2010-11 has arisen from the appellate order dated 30.06.2016 in Appeal No.-129/CIT(A)-1/AGRA/DCIT-1/AGRA/2013-14 passed by learned Commissioner of Income-tax (Appeals)-1, Agra, whichappeal before ld. CIT(A) has in turn arisen from the assessment order dated 04.03.2013 passed by Assessing Officer u/s.143(3) of the Income-tax Act, 1961.

2. Grounds of appeal raised by assessee in Memo of Appeal filed with the Income-Tax AppellateTribunal, Agra Bench, Agra, reads as under :

“1. Because the Ld. CIT (A) has erred in confirming the rejection of books of accounts of the assessee without properly appreciating the facts & the circumstances of the case.

2. Because the Ld. CIT (A) has erred in confirming the estimation of income of the appellant @ 8% of gross contract receipts without properly appreciating the facts & circumstances of the case.

3. Because the Ld. CIT (A) has erred in confirming an addition on account of interest on FDR to the tune of Rs 87662/- without properly going through the merits of the case and without appreciating the fact that the same was already included in the total income of the appellant.

4. Because the Ld. CIT (A) has erred in confirming an addition on account of interest to the tune of Rs 73972/-received from JSPL without properly going through the merits of the case and without appreciating the fact that the same was already included in the total income of the appellant.

5. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the grounds are without prejudice to each other.”

3. Brief facts of the case are that the assessee filed return of income on 31.10.2010 declaring income of Rs.31,10,060/-. The return of income was processed by the Revenue u/s. 143(1) of the Act. Case of the assessee was selected by Revenue for framing scrutiny assessment u/s 143(2) read with Section 143(3). Statutory notices u/s. 143(2) and 142(1) were issued by the AO to the assessee during the course of assessment proceedings. The assessee is a proprietor of M/s. Shakti Construction ,and derives business income from contract work, income from house property and income from other sources. The assessee participated in the assessment proceedings. The books of accounts were produced by the assessee before the AO during the course of assessment proceedings, and were test checked by the AO. The assessee also furnished supporting bills/vouchers. Assessing Officer observed that these bills are self-made and paid in cash. The assessee was unable to verify the said vouchers. Assessing Officer issued show cause notice to the assessee asking the assessee to explain why the books of accounts maintained should not be rejected u/s. 145(3) of the Act , and net profit should not be estimated @ 8% of the gross receipts. The assessee submitted that the expenditure are fully supported by vouchers and bills, cash memos and recipients signatures are duly endorsed thereon. Books of accounts are audited by the independent Chartered Accountant and audit report u/s. 44AB dated 27.09.2010 has already been submitted by the assessee. There was no adverse comments given by the Chartered Accountant. Hence, there is no justification in estimating the profit @ 8% of the gross receipts. The assessee also submitted that the contract was not merely a labour contract. Out of the total receipts of Rs.4,00,48,401/- an amount of Rs.3,75,880/- (sic. Rs. 3,75,43,880/-) was against sale and supply of material to the contractee, while the balance of Rs.25,04,521/- was against execution of works contractwhich is 6.25% of the gross receipts. Thus, presumptive rate of 8% of the gross receipt cannot be applied, to estimate income of the assessee. The assessee submitted that the assessee has un