ADDITIONAL COMMISSIONER OF INCOME TAX Vs. HEMANDAS DHARAJMAL

JUDGEMENT

(1.) THE assessee-firm had undertaken a contract for construction of canals, etc., in connection with the Vallabh Nagar Project from the Irrigation Department of the Government of Rajasthan. In execution of the aforesaid work, the State Government supplied cement and other materials to the assessee for being directly utilised in the completion of the work. After the completion of the contract, the State Government made payment of the gross amount due to the assessee in respect of the completed contract, after deducting the value of the materials supplied to the assessee for the execution of the contract. THE ITO rejected the books of account maintained by the assessee on the ground that they suffered from certain defects and applied a net profit of 121/2%.

(2.) ON appeal by the assessee, the AAC while maintaining the estimate of net profits at the rate of 121/2% in respect of the contracts directly executed by the assessee, applied 71/2% profit rate in respect of the contracts which were supervised by other persons employed by the assessee. ON further appeal to the Income-tax Appellate Tribunal (hereinafter called "the Tribunal"), both by the assessee as well as by the Department, the Tribunal came to the conclusion that the estimate of net profits at 121/2% in respect of the contracts directly executed by the assessee was fair and reasonable. The Tribunal also found that the estimate of net profits in respect of contracts executed through the other persons employed by the assessee at 71/2% was also fair and reasonable. However, the Tribunal, in its order dated February 3, 1972, held that the amount of the bills relating to the Value of the materials supplied by the State Government should be excluded from the gross receipts of the assessee.