COMMISSIONER OF INCOME TAX Vs. SHRI MANGILAL CHOUDHARY

JUDGEMENT

(1.) The substantial question of law for adjudication before us in this appeal is "whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in holding that the provisuions of Sec. 145(3) of the Act of 1961 are not applicable in the present case -

(2.) The facts in the appeal are that the assessee derives income from execution of contract work awarded by different departments of the Government. During the assessment year 2006-07 the appellant declared profit of Rs.22,24,001/- on total contract receipts of Rs.3,51,51,351/- subject to depreciation and interest on third parties. A net profit in a tune of Rs.5,25,268.00 including interest received on Fixed Deposit Receipts yielding a net profit rate of 1.1% as against 1.15% in the immediately preceding year. The Assessing Officer considered the declared net profit quite low, thus, called upon the assessee to explain as to why a net profit rate @ 12.5% be not applied. The Assessing Officer while rejecting the accounts books of the assessee pointed out certain discrepancies in the books of accounts with specific assertion that no stock register was maintained, attendance register-muster roll suffers from serious defects, vouchers of purchase and expenses are self-prepared, no work in progress was shown and the identity of the creditors was not borne out in the accounts books. With this background he invoked the power as per provisions of Sec. 145(3) of the Income Tax Act, 1961.

(3.) The Assessing Officer estimated the net profit of assessee by applying a net profit rate of 12.5% on the contract receipts keeping in view certain judgments of different High Courts. Accordingly, an addition of Rs.24,67,880.00 was added in the income return furnished by the assessee.