NAV NIRMAN COMPANY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN compliance with the direction of this court by order dated December 10, 1980, under Section 256(2) of the I.T. Act, the INcome-tax Appellate Tribunal, Nagpur, has referred the following question for opinion :

(2.) FACTS as found and stated by the Tribunal are as follows : The assessee is a partnership firm carrying on the business of executing civil contracts. It was constituted by a deed of partnership, dated October 22, 1963. The first accounting year of the assessee ended on Diwali, i.e., 4th November, 1964, which was the previous year for the assessment year in question, i.e., 1965-66.

(3.) THE assessee maintained books of account according to the Diwali year, but these were not properly closed and adjusted so as to ascertain profit and loss by drawing up a profit and loss account. An entry was passed in the accounts estimating the profits at 10% in relation to receipts of Rs. 19,16,602 amounting to Rs. 1,91,660, This amount was credited to the partners' account in proportion to their shares by giving a corresponding debit to the expenses account.