A. Pasayat, J.
1. At the instance of the Revenue, the following question has been referred to this court under Section 256(1) of the Income-tax Act, 1961 (in short, ' the Act'), by the Income-tax Appellate Tribunal, Cuttack Bench, Cuttack (in short, 'the Tribunal') for adjudication in both the cases :
' Whether the Tribunal was justified in their opinion that the profit of the assessee's business can only be properly deduced yearwise from the method employed by the assessee by maintaining its accounts on complete work basis and by the method of dividing the net profit yearwise in proportion to yearly gross receipts ?'
2. Both the references are governed by this judgment.
3. The background facts as appear from the statement of case drawn up by the Tribunal are as follows :
M/s. Guttoffnungashutto Sterkrado (hereinafter referred to as the 'assessee') is a non-resident company incorporated in West Germany. It entered into a contract with Hindusthan Steel Limited for delivery, supervision, assembling and putting into operation its Blast Furnace No. IV at Rourkela Steel Plant. The work of erection was taken up and completed during the period from November 7, 1963, to March 31, 1968. Since the performance of the contract was spread over a number of years, the assessee made up its accounts relating to this work on what is commonly known as 'complete contract' basis as the real profit could be determined only at the end of the contract. The account books which were maintained in the regular and usual course of business were audited by qualified chartered accountants of West Germany. Copies of accounts as well as required particulars for the entire contract period were submitted before the Income-tax Officer, Ward-A, Rourkela, for the years 1965-66 and 1966-67. The assessee computed its total income on the basis of its books of account covering the entire period of contract and the net income so ascertained was apportioned among the four years in question, that is assessment years 1965-66 to 1968-69, on proportionate turnover basis. Initially, the assessments for the first two years were completed by the Income tax Officer by accepting the net profit arrived at on 'complete contract' basis. Subsequently, the Commissioner of Income-tax, Bhubaneswar, examined the records and was of the opinion that the assessments made by the Assessing Officer were erroneous and were prejudicial to the interests of the Revenue. He, accordingly set aside the assessments with a direction to the Income-tax Officer to make fresh assessments in conformity with the. past records after examining the accounts properly. Against the orders passed under Section 263 of the Act, the assessee carried the matter in appeal before the Tribunal. The Tribunal restored the orders of the Income-tax Officer and set aside the orders passed by the Commissioner. In the meantime, the assessments for the years 1967-68 and 1968-69, with which we are presently concerned had been taken up. The assessments made were assailed before the Appellate Assistant Commissioner of Income-tax. The said authority set aside the assessments with a direction to make them afresh. The Income tax Officer, while making the fresh assessments, observed that the method of accounting adopted by the assessee was not correct. He was of the view that a net profit rate of 10 per cent. was to be adopted on the receipts and, accordingly, the assessee's income was computed. Out of the profits,two-thirds were held to be taxable in India and, on that basis, the taxable income for the two years was computed. The Commissioner of Income-tax (Appeals), following the order of the Tribunal relating to the previous two years (1965-66 and 1966-67), set aside the assessments with a direction to the Income-tax Officer to make fresh assessments in the light of the findings recorded by the Tribunal for the said two assessment years. The conclusions of the Commissioner of Income-tax (Appeals) were approved by the Tribunal. Following the decision relating to the earlier two years, the Tribunal upheld the order of the Commissioner of Income-tax (Appeals) and dismissed the appeal filed by the Revenue. Two applications under Section 256(1) of the Act were filed by the Revenue before the Tribunal to refer three questions to this court. The Tribunal accepted the prayer partially and has referred the question as indicated above to this court.
4. We have heard learned counsel for the Department. From the records, we find that a similar dispute, i.e., whether the income has to be assessed on 'complete contract' basis, was before the Tribunal for the assessment years 1965-66 and 1966-67. The Tribunal recorded a categorical finding that no defect in the accounts maintained by the assessee was pointed out by the Assessing Officer and, on the contrary, the profits of the assessee can be correctly determined from the method of accounting adopted by it. With these conclusions, the orders of the Commissioner of Income-tax passed under Section 263 of the Act were set aside, and the orders of the Income-tax Officer were restored. It is not in dispute that the Revenue has not assailed the correctness of the conclusions of the Tribunal. The fact situation being identical, the Tribunal followed its earlier judgment and observed that the 'complete contract' basis was the correct mode for determination of the assessee's income and its income can be correctly determined from the method of accounting adopted by it. It, therefore, upheld the direction of the Commissioner of Income-tax (Appeals) given to the Assessing Officer for redoing the assessments on the 'complete contract' basis. The question that has been referred to this court is whether the profits can be properly deduced from the method employed by the assessee by maintaining its accounts on 'complete work' basis and by the method of dividing the net profit yearwise in proportion to the yearly gross receipts. The question whether the method employed by the assessee by maintaining its accounts on a particular basis will be sufficient for determination of profits is essentially one of fact. Whether the income, profits and gains could or could not be properly deduced from the method of accounting regularly adopted by the assessee is aquestion of fact. (See Chhabildas Tribhuvandas Shah v. CIT : [1966]59ITR733(SC) ). Therefore, in our opinion, no question of law arises out of the order of the Tribunal. We further find that the Tribunal's conclusion for the assessment years 1965-66 and 1966-67 has not been traversed. Though the principles of res judicata are not strictly applicable to assessment proceedings, it cannot be said that the assessee shall be subjected to assessment on two different methods though the contract is one and parts of the contractual receipts were received in different years. In that background also, we find that the Tribunal was justified in following its view expressed for the assessment years 1965-66 and 1966-67. Our conclusion being that no question of law arises out of the order of the Tribunal, we decline to answer the question that has been referred to us. The assessee having not appeared in spite of notice, we award no costs.
S.K. Mohanty, J.
5. I agree.