MALIYEKKAL CONSTRUCTION CO Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee, a civil construction firm, is the appellant before us against the common order of the Income-tax Appellate Tribunal for the assessment years 1993-94 and 1994-95. THE assessee admittedly did not maintain books of account. However, returns were filed estimating the net income at 7 per cent. of the contract receipts. THE Assessing Officer taking note of the net profit retained for the earlier years at 10 per cent. of the contract receipts, fixed the net income at 8 per cent. of the contract receipts. It was specifically mentioned by the Assessing Officer that the net income fixed at 8 per cent. is inclusive of all deductions towards payment of salary and interest to partners. In other words, the net income so fixed is after excluding all deductions which are available to the assessee. THE assessee, however, contested the assessment in the first appeal and pressed for deductions towards payment of salary and interest to partners as provided under Section 40(b) of the Income-tax Act. THE Commissioner of Income-tax (Appeals) dismissed the appeal. THE assessee filed a second appeal before the Tribunal. THE Tribunal noticed that the assessee is entitled to deduction under Section 40(b) of the Act towards payment of salary to partners, and interest on advances. However, the Tribunal, taking note of the fact that the assessee did not maintain books of account, and that the assessee returned a higher rate of profit for the earlier years at 10 per cent., fixed the net income at 10 per cent., and allowed the deductions claimed under Section 40(b) of the Act. It is against this order of the Tribunal that the assessee filed the above two appeals.

(2.) WE have heard Sri P. Balachandran, counsel appearing on behalf of the assessee, and senior counsel Sri P.K.R. Menon, on behalf of the Revenue. The assessee's counsel contended that the order of the Tribunal has resulted in enhancement of tax for one year, for which they have no powers. Admittedly, the first appellate authority dismissed the appeal, and, therefore, the only action open to the Revenue was to file a cross-appeal when the assessee filed appeal before the Tribunal. In the absence of cross-appeal by the Revenue, the Tribunal has no power to enhance the tax demanded, is the contention of the assessee's counsel.