BHARAT CONSTRUCTION COMPANY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, under Section 256(1) of the Income-tax Act, 1961, has referred the following question for the opinion of this court :

(2.) THE assessee-firm, carrying on construction business, had shown a net profit of 5.6 per cent. on total contract receipts of Rs. 64,30,344. As most of the expenses including the labour payments were unvouched, the assessing authority applied the provisions of Section 145 of the Income-tax Act, 1961, and determined the income of the assessee by applying a net profit rate of 8 per cent. on the total receipts. This resulted in a net addition of Rs. 1,36,444. THE Commissioner of Income-tax (Appeals) gave relief of Rs. 36,000 and retained the addition to the extent of Rs. 1,00,444. It was contended before the Tribunal that in a construction business, whenever a net profit rate is applied, it is always subject to a further deduction of depreciation. THE assessee relied upon some of the circulars of the Board clarifying to the same effect. It may be noticed that the assessing authority did not allow depreciation separately because in his view, if it was so done, the net profit would fall to as low as 5.63 per cent. He, therefore, applied the rate of 8 per cent. THE Commissioner of Income-tax (Appeals) brought down the net profit rate to 7.44 per cent. THE Tribunal without giving any reason has simply brought down the rate to 7 per cent. As to how the Tribunal had dealt with the aspect is evident from the part of the order, which is extracted as follows :