R.N. Pyne, J.
1. This reference arises out of the two orders of the Income-tax Appellate Tribunal both dated 9th March, 1971 and a consolidated statement of case has been submitted by the Tribunal pursuant to the order of the court. Relevant facts of this reference appearing from the said statement of case may briefly be stated :
The assessee is a registered firm. Its business is to execute contracts for construction of roads, buildings and bridges under various Government departments. The assessment year involved in this reference is 1966-67, the corresponding financial year being 1965-66. The assessee disclosed a net profit of 7.2 per cent. on the receipts of Rs. 6,35,271 in the contract work. The assessee did not maintain any stock register showing the materials purchased and consumed in the process of construction work and the stock left. The expenses for construction were not properly vouched. The cash book was not properly maintained. Because of these defects the ITO did not accept the book results of the assessee. He found that the gross receipts amounted to Rs. 10,53,806. The ITO also considered the net profit of 7.2 per cent. as low and he estimated the gross profit at 12 1/2 per cent., which amount came to Rs. 1,31,726.
2. The assessee came up in appeal before the AAC and it was contended that the ITO should have accepted the book results. It was further contended that in any case the cost of material supplied by the Government amounting to Rs. 2,97,088 should not have been included in the gross receipts before estimating the net profit. The AAC agreed with the ITO that the book results could not be accepted on account of defects pointed out by the ITO as also of some other defects which were noticed by the AAC. The AAC upheld the rate of net profit as estimated by the ITO. He, however, accepted the contention of the assessee that the cost of material supplied by the Government amounting to Rs. 2,97,088 should be excluded from the gross receipts before applying the net profit at the rate of 12 1/2 per cent. This contention of the assessee was accepted on the grounds that from the certificate given by the Executive Engineer, P. W. D., Jalpaiguri, it appeared that the assessee-firm was not allowed any profit on the cost of materials supplied by the Government and that the cost of cement and steel supplied by the Government was more than the market price of the same. The AAC reduced the profit by Rs. 37,135. The ITO also disallowed certain depreciation claimed by the assessee but in this reference we are not concerned with that claim.
3. Both the department and the assessee preferred appeals against the order of the AAC before the Tribunal. In I. T. A. No. 134 (Cal) of 1969-70, the department challenged the exclusion of the cost of materials supplied by the Government from the gross receipt before applying the rate of 12 1/2 per cent. in arriving at the net income of the assessee. In I. T. A. No. 154 (Cal) of 1968-69, the assessee challenged the rejection of the book results and the application of 12 per cent. of the net profit. The assessee also challenged the disallowance of depreciation of Rs. 37,314 for jeep and trucks, etc., and the confirming of the addition of Rs. 4,273 under Section 41(2) of the I. T. Act, 1961.
4. The assessee filed the said appeal being I.T.A. No. 154 (Cal) of 1968-69 before the Tribunal on 12th August, 1968. A certified copy of the order of the AAC was not filed along with the memorandum of appeal. The assessee wrote a letter through its counsel to the Tribunal along with the memorandum of appeal stating that an application for obtaining a certified copy of the order of the AAC had been given but the copy had not been received. The office of the Appellate Tribunal noted the defect and in its first notice to the assessee informed that a certified copy of the order appealed against had not been filed. The date for hearing of the appeal was fixed for 14th January, 1971, but the Bench did not function on that date and the appeal was refixed for hearing on 1st March, 1971. The assessee filed a certified copy of the order of the AAC on 1st March, 1971, at the time of hearing. The Tribunal found that the assessee had received communication of the order of the AAC on 19th June, 1968. As the assessee made an application for obtaining a copy on 16th July, 1968, and received the copy on 29th August, 1968, in the Tribunal's view, the appeal became competent only when the certified copy was filed on the 1st March, 1971. The Tribunal held that the assessee had not made any application for condonation of delay, nor had stated the reasons why, the certified copy could not be filed within a reasonable time of its receipt by the assessee and the appeal became barred by time. The Tribunal, accordingly, dismissed the appeal by its order dated 9th March, 1971.
5. In the appeal in I. T. A. No. 134 (Cal) of 1969-70, it was submitted on behalf of the department before the Tribunal that the two reasons which were given by the AAC in deducting the cost of materials supplied by the Government from the gross receipts were not valid. The department also relied upon a decision of the Calcutta Bench of the Tribunal in I. T. A. No. 12976 of 1964-65 (Sri B. N. Chowdhury v. ITO) dated February 22, 1968, in support of its contention. On behalf of the department it was contended that, before deciding the question, the nature of the contract executed by the assessee should be kept in view. It was stated that the contracts were 11 in number. The Tribunal found that out of 11 contracts three were forsupply of materials while 8 were for construction work. The Tribunal was of the view that the nature of the contract did not help the assessee. It was submitted on behalf of the assessee that there was no element of profit in the supply of goods by the authorities concerned and the bills were prepared by the authorities and not by the assessee. It was also submitted that the assessee-firm kept accounts on cash basis showing the amounts actually received during the year together with the refund of security deposits deducted for earlier year and that the cost of the materials supplied by the Government department did not come to the assessee-firm and hence could not be included in the accounts. It was next contended that the addition made was beyond any proportion having regard to the figures of the earlier years. The Tribunal observed that these matters were not relevant for the decision of the point under consideration and though it was correct that the assessee kept its accounts on cash basis, that also did not make any difference. The Tribunal held that the net profit was to be applied on the gross value of the bills and not after deduction for value of materials supplied by the Government as held by the Tribunal in Sri B. N. Chowdhury's case. The Tribunal, accordingly, allowed the appeal of the department.
6. Thereafter, on the application of the assessee, this hon'ble court directed the Tribunal to send to this court a consolidated statement of the case under Section 256(2) of the I. T. Act, 1961, on the questions stated hereinafter arising out of the Tribunal's said two orders both dated 9th March, 1971. It has been pointed out by the parties that the question No. 2 stated in the Tribunal's statement of case at page 2 of the paper book is not the correct question but the correct question No. 2 should be question No. 1 mentioned in the order of court dated 5th June, 1972, as stated at page 65 of the paper book. Therefore, according to the parties, proper questions to be answered in this reference are as follows :
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right to dismiss the appeal as barred by time regard being had that the appeal was filed by the assessee-firm within sixty days (12th August, 1968) from the date of communication of the order of the Appellate Assistant Commissioner but which did not contain the certified copy of the order appealed against and such certified copy was filed on the date of hearing ?
(2) Whether, on the facts and in the circumstances of the case, it is perverse to hold that in estimating the net profit of the assessee in the business of contract with the Government department the percentage is to be calculated on the gross receipt inclusive of the value of the materials supplied by the department itself ?
(3) Whether, on the facts and in the circumstances of the case, while the assessee-firm keeps its account on cash basis the Tribunal was right in upholding the estimate made by the Income-tax Officer by application of twelve and half per cent, of the net profit on the receipt including the sum of Rs. 2,97,088 being the value of the materials supplied by the Government department which sum was never received by the assessee-firm ?'
7. Question No. 3 has not been pressed by the assessee and, therefore, we decline to answer it.
8. Regarding question No. 1, counsel for the assessee drew our attention to Section 253(1), (3), (5) and (6) of the I. T. Act, Rule 47 and Form No. 36 of the I.T. Rules, 1962, as also to Rules 8, 9, 12 and 23 of the Appellate Tribunal Rules, 1963. He has submitted that the requirements regarding filing of a certified copy of the order of the AAC along with the filing of the memorandum of appeal before the Tribunal is not mandatory but only directory in nature in a case where the memorandum of appeal is presented in time to the department but without being accompanied by a certified copy of the AAC's order. Such defect only amounts to an irregularity and as soon as the certified copy of such order is filed before the hearing of the appeal the condition regarding the filing of the certified copy is fulfilled and the defect is removed. It is further submitted that if the requirement of the Rules regarding filing of the certified copy of the AAC's order along with the memorandum of appeal is not mandatory, its substantial compliance before the hearing of the appeal would be enough. It is the submission of the counsel that if the said requirement is not mandatory then non-compliance thereof would not entail dismissal of the appeal on the ground that the appeal is incompetent or on the ground of limitation if the memorandum of appeal is filed within the prescribed period of limitation. Counsel has also submitted that Sub-rule (2) of Rule 9 of the Income-tax (Appellate Tribunal) Rules gives a discretion to the Tribunal to dispense with the fulfilment of the requirement of Sub-rule (1) which, inter alia, includes the filing of the certified copy of the AAC's order along with the memorandum of appeal and this shows that the requirement regarding filing of the certified copy of the order along with the memorandum of appeal is not mandatory but only directory. Counsel has also submitted that as the rule requiring the filing of the certified copy of the AAC's order along with the memorandum of appeal is not mandatory. The Tribunal should have given an opportunity to the appellant before it to file the certified copy before the hearing of the appeal. According to counsel, in the instant case, there was no question of any limitation because the memorandum of appeal was filed within the time prescribed in the Act but it was not accompanied by a certified copy of the AAC's order appealedagainst. Hence, the filing of the memorandum of appeal was defective and such defect was removed as soon as the certified copy was filed by the assessee. Therefore, according to the counsel, in the instant case, there cannot be any question of any limitation and the Tribunal's decision is wrong. In support of his submission counsel has relied upon several cases, to wit, Sheonath Singh v. CIT : [1958]33ITR591(Cal) , Gouri Kumari Devi v. CIT : [1959]37ITR220(Patna) , Chhotey Lal Krishan Lal v. CIT : [1962]45ITR490(All) , Punjab Co-operative Bank Ltd. v. CIT [1940] 8 ITR 635 . Pratap Singh v. Shri Krishna Gupta, : [1955]2SCR1029 , Anil Kumar Dutta v. Additional Member, Board of Revenue as also a passage at pages 314-315 of Maxwell on the Interpretation of Statutes (12th edn.).
9. On the question No. 2 it was submitted on behalf of the assessee that no income accrued to the assessee out of the goods supplied by the Government and there was no profit to the assessee on the sum of Rs. 2,97,088 and, therefore, in making the estimate as the Tribunal included the said amount, its order is perverse. Counsel has referred to the case of Addl. CIT v. Trikamji Punia & Sons : [1977]106ITR597(AP) [FB] and CIT v. K. S. Guruswami : [1973]92ITR90(Mad) . Referring to a portion of the order of the AAC, at page 19 of the paper book, counsel submitted that the finding of facts by the AAC, viz, the rates at which 'cement' and 'steel materials' were supplied by the P.W.D. or the Railway department were higher than the market rates and that no profit was allowed on cost of material supplied by the Government was not controverted in this case and this was not taken note of by the Tribunal. It was alo submitted that in view of the fact that on the value of the goods supplied by the Government, the contractor had no profit and the value of the goods charged by the Government was higher than the market price no reasonable man while making an estimate of income would take the value of such goods into account and that being done in the instant case the order of the Tribunal was perverse. Counsel has further submitted that the unreported decision in I.T. Reference No. 184 of 1969 (Gopendra Krishna Saha v. CIT--since reported in : [1978]113ITR421(Cal) ) on which reliance was placed by the revenue was distinguishable because in that case the Tribunal found that there was a profit element in the value of the goods supplied by the Government but in the instant case it was found that regarding goods supplied by the Government there was no profit element and, further, the price of such goods was higher than the market rate. It has not been shown by the revenue that the factual inference of the AAC was wrong is also the submission of the counsel. It was also the submission of the counsel that neither the Tribunal found that there was any profit element in the goods supplied by the Government nor the value of the goods was lower than themarket value. Therefore, according to the counsel, the decision of the Tribunal is perverse.
10. On behalf of the revenue, it was submitted that the expression used in Section 253(3) is 'shall be filed '. Counsel for the revenue has also referred to Sub-section (5) and submitted that the said two sub-sections show that the requirement of filing of the certified copy along with the memorandum is mandatory. He has also referred to Section 268 which provides for exclusion of time for obtaining the certified copy of the order for the purpose of counting of the period of limitation. It is the submission of the counsel that if the requirement regarding filing of the certified copy of the order is not mandatory but only directory, then Section 268 would be meaningless. According to counsel under Rule 9(2) of the Income-tax (Appellate Tribunal) Rules, the Tribunal has been given a right to accept the paper book without a certified copy in certain cases, that is, where it is satisfied about the reasons for non-filing of the certified copy of the order along with the memorandum of appeal. Counsel urged that, reading Section 253(3) and (5) of the I.T. Act and Rule 9(1) and (2) of the Income-tax (Appellate Tribunal) Rules, there cannot be any doubt that the requirement of these provisions for filing of the certified copy along with the memorandum of appeal is mandatory in nature. Counsel submitted that in the instant case the memorandum of appeal originally presented to the Tribuhal was not admitted by it. The assessee neither obtained any order for acceptance of its appeal under Rule 9(2) of the Income-tax (Appellate Tribunal) Rules nor applied for extension of time for filing of the appeal under Section 253(5) of the I.T, Act, 1961. Therefore, according to counsel, the Tribunal was right in its decision that as the appeal became competent on the day when the certified copy of the order was filed, i.e., 1st March, 1971, the assessee's appeal was time barred. Counsel has referred to the cases of Behari Lal Laxminarain v. ITO : [1960]39ITR649(All) and Jagat Dhish Bhargava v. Jawahar Lal Bhargava, : [1961]2SCR918 .
11. Counsel for the revenue drew our attention to the order of the ITO appearing at page 9 of the paper book where reasons of the ITO for rejecting the assessee's books of account and other records are elaborately stated. Counsel submitted that because of such rejection the ITO was justified in disbelieving the book results and making the assessment on the basis of estimate under Section 145 of the I.T. Act. Therefore, according to the counsel, as the assessee's books of account and other records were rejected no question of deduction as claimed by the assessee could arise. Counsel has submitted that in a case where the books of account are rejected and the book results are disbelieved and the ITO is to assess the assessee on the basis of estimate it is not possible in that case for the ITO to deduct any amount or to find out the net profit of the assessee because of the absence of the assessee's books of account. It is the submission of the counsel that in theinstant case as the ITO had to assess on the basis of estimate he was right in disallowing the deductions as claimed by the assessee. Counsel has referred to the unreported decisions in I.T. Reference No. 184 of 1969 (Gopendra Krishna Saha v. CIT--since reported in : [1978]113ITR421(Cal) and I.T. Reference No. 198 of 1971 (Rakhal Chandra Banerjee v. CIT--since reported in : [1978]113ITR419(Cal) and it is his submission that the question No. 2 of this reference is fully covered by the aforesaid decisions.
12. A brief reference may now be made to the cases cited by the parties on question No. 1.
13. On behalf of the assessee strong reliance was placed on a decision of this court in the case of Sheonath Singh v. CIT : [1958]33ITR591(Cal) . In that case the last day for filing an appeal before the Appellate Tribunal from a decision of the AAC was October 13, 1954. On September 30, a memorandum of appeal, signed and verified only by the authorised representative and not by the assessee, was filed. Subsequently, on October 13, a second memorandum was filed in which the assessee had signed below the verification but only the authorised representative had signed below the grounds of appeal. On December 14, both the memoranda of appeal were signed at all places by the assessee. The Appellate Tribunal held that as the memoranda filed before the due date were materially defective owing to the absence of the assessee's signature and were not brought to order within the period of limitation they could not be treated as proper memoranda at all, and, as the assessee had not applied for condonation of delay, dismissed the appeal. It was held, inter alia, that the absence of or defect in the signature of the appellant in the memorandum of appeal was not an illegality or fatal but only an irregularity which could be rectified by amendment, the amendment taking effect from the date when the document had originally been filed. The memoranda as originally filed were not nullities and the Tribunal had power to accept them in the condition in which they found them at the time they were hearing the appeal provided they were satisfied that the assessee had in fact intended the appeal to be placed before them and had done so through the authorised representative although he had not himself signed the memorandum. It appears that in coming to the above decision Chakravorti C.J. mainly relied on the principles governing the question of signing of the pleadings and memorandum of appeal under the relevant provisions of the Civil Procedure Code and in particular on a decision of the Privy Council in the case of Mohini Mohun Das v. Bungsi Buddan Saha Das ilr [1890] Cal 580 as also other cases dealing with the question of signing of the pleadings and memorandum of appeal under the Civil Procedure Code, as will appear from the following observations appearing at page 602 of the report :
'It will be clear from the uniform view of the courts, as reflected in the decisions which I have cited, that the rule as to the signature of a plaint or a memorandum of appeal by the plaintiff or the appellant, although expressed in the relevant statute in the language of a mandatory provision has never been regarded as mandatory, but the rule being a procedural rule has been treated as only directory, non-compliance or defective compliance therewith being held to be irregularities, curable by the court at its own instance and not illegalities affecting the jurisdiction of the court. Rule 13 of the Appellate Tribunal Rules, to which the Tribunal did not refer, appears to be based on that view.'
14. Relying on the case of Sheonath Singh v. CIT : [1958]33ITR591(Cal) , the Patna High Court in the case of Gauri Kumari Devi v. CIT : [1959]37ITR220(Patna) , observed that failure of an assessee personally to sign the memorandum of appeal presented to the Appellate Tribunal is not an illegality but only a mere irregularity which can be rectified by an amendment, the amendment taking effect from the date the memorandum of appeal was originally filed. It is incumbent on the Appellate Tribunal to allow the assessee to amend the memorandum of appeal by affixing his signature thereto.
15. In the case of Chhotey Lal Kishan Lal v. CIT : [1962]45ITR490(All) the facts were that in an appeal to the Tribunal, though the AAC was mentioned as the respondent, the appellant prayed for notice being served on the ITO, notice was served on him and he appeared and raised an objection that the appeal was incompetent as he was not made a respondent. The rules framed by the Tribunal required that in an appeal to the Tribunal the ITO concerned should be made a respondent. The appellant applied for impleading the ITO as a party but this application and the appeal were dismissed. On a reference, the court held that the memorandum of appeal, even as it was presented was not illegal or invalid, and, having regard to the facts of the case relating to the procedure that was followed, it was a good appeal and should have been decided on merits ; at any rate the Tribunal ought to have permitted the appellant to rectify the mistake and implead the ITO.
16. In the case of Anil Kumar Dutta v. Additional Member, Board of Revenue , regarding defective filling up of declaration forms under the Bengal Finance (Sales Tax) Act, 1941, it was held that the omission to date the form when the transactions were all dated was not a matter of great importance. Similarly, the omission to put the date below the signature was not fatal. It was also held that unless a signature was forged, difference in styles or signatures would not invalidate declaration forms, because they were not required to be signed according to specimen signature.
17. The cases cited above are in respect of omission or defective signature or defective description of the parties in the memorandum of appeal filed before the Tribunal and they were decided on the basis of the relevant rules of the Civil Procedure Code governing the questions of signing of the pleadings and memorandum of appeal or joinder of parties and the court decisions in that behalf. Therefore, it appears that the above cases stand on a different footing from the case where the memorandum of appeal is filed without being accompanied by the certified copy of the order appealed against.
18. For the purpose of showing the difference between the mandatory and directory provisions in a statute counsel for the assessee referred to Maxwell on the Interpretation of Statutes, 12th edn., pp. 314-315, and the cases of Punjab Co-operative Bank Ltd. v. CIT [1940] 8 ITR 635 and Pratap Singh v. Shri Krishna Gupta, : [1955]2SCR1029 . As there is no dispute on that point it is not necessary to deal with the said cases in any detail or the said text book.
19. In the case of Jagat Dhish Bhargava v. Jawahar Lal Bhargava, : [1961]2SCR918 , on which strong reliance was placed by the revenue, the Supreme Court considered the effect of the failure to file the certified copy of the decree with the memorandum of appeal. It was observed thus :
'Therefore, there is no doubt that the requirement that the decree should be filed along with the memorandum of appeal is mandatory, and in the absence of the decree the filing of the appeal would be incomplete, defective and incompetent (para. 5).'
20. In para. 14 of the report, the following observations were made by the Supreme Court:
'If at the time when the appeal is preferred a decree has already been drawn up by the trial court and the appellant has not applied for it in time it would be a clear case where the appeal would be incompetent and a penalty of dismissal would be justified...On the other hand, if a decree has been drawn up and an application for its certified copy has been made by the appellant after the decree was drawn up, the office of the appellate court should return the appeal to the appellant as defective, and when the decree is filed by him the question of limitation may be examined on the merits.'
21. It, therefore, appears that the requirement of Order 41, Rule 1 of the Code of Civil Procedure regarding filing of the certified copy of the decree with the memorandum of appeal is mandatory.
22. In the case of Behari Lal Laxminarain v. ITO : [1960]39ITR649(All) , the assessee, whose appeal to the AAC from an assessment was dismissed on May 7, 1949, and on whom a copy of the appellate order was served on May 11, presented on July 6, a memorandum of appeal to the AppellateTribunal. The memorandum of appeal was found to be defective inasmuch as it was not in the prescribed form and was not filed in triplicate. It was neither rejected nor returned, but the defects were pointed out to the assessee who rectified the defects and filed a proper memorandum in triplicate on July 22, with an application for admission of the appeal. The Appellate Tribunal passed an order on the application 'admit'. When the appeal came up for hearing an objection was raised by the department that the appeal was barred by time. It was held by the court that by passing the order 'admit' the Appellate Tribunal accepted the prayer of the assessee to substitute the memorandum of appeal in proper form for the original one which was presented on July 6, in time. The order of admission had the effect of allowing the original memorandum of appeal to be amended so as to conform to the requirements of Rule 10 of the Appellate Tribunal Rules. Such an amendment permitted by the Tribunal dated back to the date of presentation of the original memorandum of appeal, so that for purposes of computing limitation as well as for all other purposes, it would be deemed that the memorandum of appeal in proper form and in triplicate had been filed on July 6, and the appeal was not barred by limitation.
23. From the cases cited above, it appears that when the signature in the memorandum of appeal filed before the Tribunal is defective following the principles laid down in cases deciding the question of defective signature in the pleading or memorandum of appeal filed under the Civil Procedure Code it was held that such defect was a mere irregularity and as soon as it was removed the appeal became competent from the date on which the memorandum was filed. But the decision of the Supreme Court referred to above, however, shows that the principle applicable to the question of filing of the certified copy of the decree along with the memorandum of appeal is different and when the certified copy of the decree is not filed along with the memorandum of appeal the filing of the appeal would be incomplete, defective and incompetent, but the court in certain circumstances as stated in the said decision would not reject the appeal but would allow the party concerned to remedy the defect. In this reference, we are really concerned with the effect of non-filing of the certified copy of the order with the memorandum of appeal and, therefore, the decision of the Supreme Court referred to above appears to be applicable and the decision of the various courts on the question of defective signing of the pleadings and the memorandum are distinguishable.
24. Relevant sections of the I.T. Act and the rules having a bearing on the point now under consideration may be referred to.
25. Section 253 of the I.T. Act, 1961, provides for filing of the appeal. Sub-section (3) provides that every appeal under Sub-section (1) or Sub-section (2) shallbe filed within 60 days of the date on which the order sought to be appealed against is communicated to the assessee or to the Commissioner, as the case may be. Sub-section (5) provides, inter alia, that the Appellate Tribunal may admit an appeal after the expiry of the relevant period referred to in Sub-section (3) if it is satisfied that there was sufficient cause for the non-presenting of it within that period. Sub-section (6) provides that an appeal to the Appellate Tribunal shall be in the prescribed form and shall be verified in the prescribed manner and, shall, except in the case of an appeal referred to in sub-s, (2) or a memorandum of cross-objection referred to in Sub-section (4), be accompanied by a fee of Rs. 100. Section 268 provides that in computing the period of limitation prescribed for an appeal or an application under the Act, the day on which the order complained of was served and, if the assessee was not furnished with a copy of the order when notice of the order was served upon him, the time requisite for obtaining a copy of such order, shall be excluded. Rule 47(1) of the I.T. Rules, 1962, provides, inter alia, that an appeal under Sub-section (!) or Sub-section (2) of Section 253 to the Appellate Tribunal shall be in Form No. 36. Form No. 36 prescribed by the Board in exercise of the power conferred by the Act contains 'Notes' and item No. 1 thereof provides that the memorandum of appeal must be in triplicate and should be accompanied by two copies (at least one of which should be a certified copy) of the order appealed against and two copies of the relevant order of the ITO.
26. Rule 9(1) of the Income-tax (Appellate Tribunal) Rules, 1963, provides that every memorandum of appeal shall be in triplicate and shall be accompanied by two copies (at least one of which shall be a certified copy) of the order appealed against and two copies of the order of the ITO. Sub-rule (2) provides that the Tribunal may in its discretion accept the memorandum of appeal which is not accompanied by all or any of the documents referred to in Sub-rule (1). Rule 12 provides that the Tribunal may reject the memorandum of appeal, if it is not in the prescribed form or return it for being amended within such time as it may allow. On re-presentation after such amendment, the memorandum of appeal shall be signed and dated by the officer competent to make the endorsement under Rule 7.
27. As stated hereinbefore it was mainly contended by the assessee's counsel relying on Rule 9(2) of the Income-tax (Appellate Tribunal) Rules (hereinafter referred to as 'Appellate Tribunal Rules') that as the Tribunal has discretion to accept a memorandum of appeal which is not accompanied by all or any of the documents referred to in Rule 9(1), non-filing of a certified copy of the order appealed from along with the memorandum of appeal is a mere irregularity and the requirement of Sub-rule (1) is not mandatory. We are, however, unable to accept this contention. From the relevant sections and the rules referred to above it appears that filing of thecertified copy of the order appealed against is linked up with the period of limitation prescribed for the filing of the appeal. If a certified copy of the order appealed against can be filed at any time before the hearing of the appeal and the appeal is competent where the memorandum of appeal is unaccompanied by the certified copy of the order appealed from and the defect is merely an irregularity then Section 268 of the Act providing for exclusion of the time requisite for obtaining a certified copy of the order for the purpose of computation of the period of limitation for filing of the appeal becomes meaningless. The provision in the Act allowing exemption of time for taking a certified copy of the order appealed against in computing the period of limitation shows that the requirement, viz., the memorandum of appeal should be accompanied by a certified copy of the order appealed against, is mandatory. Rule 9(1) of the Appellate Tribunal Rules should not be construed with reference to Sub-rule (2) only but also with reference to or in the context of the other relevant provisions of the Act. Prescribed forms issued by the Board are also binding. As stated earlier on the similar language used in Order 41, Rule 1 of the Code of Civil Procedure, the Supreme Court held that the requirement that the decree should be filed with the memorandum of appeal is mandatory. Therefore, the requirement of Rule 9(1) of the Appellate Tribunal Rules that the memorandum of the appeal shall be accompanied by a certified copy of the order appealed against appears to us to be mandatory.
28. From the facts recited earlier it appears that as the appeal when filed on 12th August, 1968, was defective because the memorandum of appeal was not accompanied by a certified copy of the order appealed from the office of the Tribunal by its letter informed the assessee of such defect and asked him to rectify the same. It, therefore, appears that the appeal was not admitted by the Tribunal. It further appears that a certified copy of the order was also not filed by the assessee immediately after it was received by it. Therefore, the position was that until 1st March, 1971, when the assessee filed a certified copy of the AAC's order the appeal remained incomplete, defective and incompetent and was not admitted by the Tribunal. Such defect was removed and the appeal became complete and competent on 1st March, 1971, when the certified copy of the order was filed. But on that date the time for filing of the appeal had already expired. Therefore, without an order of the Tribunal under Section 253(5) of the Act condoning the delay the appeal remained time barred. It should be noted that the assessee, although it was open to it to do so, did not apply to the Tribunal to exercise its discretion under Rule 9(2) of the Appellate Tribunal Rules dispensing with the requirements of filing of the certified copy of the order appealed against along with the memorandum of appeal and to admit the appeal without a certified copy of the order. Therefore, in our view, the Tribunal was right in coming to the finding that the appeal bearing I.T.A. No. 154 (Cal) of 1968-69, was barred by limitation.
29. It appears that question No. 2 is covered by decisions of this court.
30. In I.T. Reference No. 184 of 1969 (Gopendra Krishna Shah v. CIT--since reported in : [1978]113ITR421(Cal) one of the questions which the court had to consider was whether in estimating the income under Section 13, proviso, of the Indian I.T. Act, 1922, flat rate could be applied on the gross value or on the net value (that is, after giving deductions for value of the materials supplied by the contractee) of the contract job. In that case as the ITO did not accept the book result he acted under the proviso to Section 13 of the Indian I.T. Act, 1922, in computing the assessee's income. The ITO applied the flat rate of 12% on the net amount after allowing deductions on security deposit, cost of materials and water charges. The AAC, however, applied the said rate not on the net value of the work but on the gross value of the work done by the assessee and that was upheld by the Tribunal. It was contended for the assessee that in a case where the contractor had to quote at a particular rate and not beyond that rate and that rate was excluding the value of the materials supplied by the Government or contractee, in such case, there was no question of the contractor providing higher rate of profit or return on the remaining part of the job because he was precluded by the terms of the contract from doing so. It was also submitted that in any event no profit could be expected from the materials supplied by the Government. Dealing with the aforesaid contentions Sabyasachi Mukharji J. observed as follows (p. 425):
'In the instant case, the contractor had not been able to satisfy the authorities below as to what were the terms of the contract with the contractee and in what terms and consideration the materials were supplied by the contractee to the contractor. Furthermore, in this case as we have to keep in mind, the total amount of profit had to be computed by applying the proviso of Section 13 of the Indian Income-tax Act, 1922. The rate of profit had also to be determined by applying the proviso to Section 13 of the Indian Income-tax Act, 1922. As the Tribunal had pointed out that if the normal experience and expectation of a contractor as to how the profit would vary, were taken into consideration and in the circumstances where the contractor had not been actually able to satisfy the terms of the contract and where the estimates were to be based by applying the provisions to Section 13 of the Indian Income-tax Act, 1922, it cannot be said, in our opinion, that the Tribunal was not justified in upholding the decision of the Appellate Assistant Commissioner in the manner as it did. In cases where there was clear and unambiguous evidence that there was contractwhich provided sufficient limit, beyond which the tender could not be quoted and there was a stipulation that the contract was to be quoted at a particular rate, excluding the cost of materials, to be supplied by the contractee, other considerations might apply.'
31. With reference to the decision of the Madras High Court in the case of CIT v. K. S. Guruswami Gounder : [1973]92ITR90(Mad) , it was observed in the above decision by Sabyasachi Mukharji J. that in that case, however, there was no question of estimating a particular rate of profit earned by applying the proviso to Section 13 of the Indian I.T. Act, 1922.
32. The above decision in I.T. Reference No. 184/69 [since reported in : [1978]113ITR421(Cal) was followed in I.T. Reference No. 198 of 1971 [Rakhal Chandra Banerji v. CIT--since reported in : [1978]113ITR419(Cal) . In that case as the assessee did not maintain any books of account, the ITO applied a net profit of 12'6% on the gross bill amount received by the assessee for two years. In appeal before the AAC, the assessee contended that the cost of materials supplied by the Government should have been deducted before applying the net profit rate and according to the assessee, there was no element of profit in the cost of materials supplied. The AAC found that the Government had supplied cement, iron rods, etc., costing Rs. 1,44,408 and Rs. 1,99,383 in the respective two years under consideration. According to the AAC cost of materials should have been deducted from the gross amount for the purpose of determining the net profit earned by the assessee. The AAC was of the view that the assessee did earn profits on the cost of materials supplied because certain materials were supplied by the Government from the market at the prevailing rate. The assessee being aggrieved filed an appeal before the Tribunal and urged that the departmental authorities were not justified in not excluding the value of materials supplied. The Tribunal, however, was of the opinion that the assessee had tendered for the contract as a whole including the cost of materials which were supplied by the Government and as such there was element of profit in respect of cost of materials also.
33. In that case, it was observed that (p. 420): 'Counsel for the assessee contended before us that there could not be any proposition of law that in a case of materials supplied in a tender where the materials were supplied by the Government, an element of profit had entered in the calculation. He further submitted that in so far as the Tribunal had held that there was an element of profit even in the cost of materials supplied as calculated by the Tribunal, the Tribunal was acting on surmise and guess without any evidence. Firstly, we have to observe that in this case the assessee has not maintained any books of account and the revenue applied a rate of profit of 12.6% on the gross amounts of bills received by the assessee. The assessee had tendered for the contract as a whole including the cost ofmaterials which were subsequently supplied by the Government. There is no evidence on record to show that the assessee did not know about the supply of materials by the Government to be made or at what price. Furthermore, the gross profit has been computed on the total gross bill of the assessee. In the aforesaid background the Tribunal had come to the conclusion that the assessee, though tendered the contract as a whole, it must have included the cost of materials which were supplied by the Government as an element of profit in respect of cost of materials also. We are of the opinion that in the aforesaid background it cannot be said that the Tribunal was indulging in any surmise or acting without any proper evidence. Furthermore, we may point out that the question as referred to this court does not really challenge the findings of the Tribunal on this basis. Counsel for the assessee drew our attention to the decision in the case of Commissioner of Income-tax v. K. S. Guruswami Gounder : [1973]92ITR90(Mad) and the decision in the case of M. P. Alexander & Co. v. Commissioner of Income-tax : [1973]92ITR92(Ker) . Facts of those cases were entirely different. In this connection, reliance may be placed in support of our conclusion on the decision of the Andhra Pradesh High Court in the case of V. D. Rajarathanam v. Commissioner of Income-tax : [1968]68ITR19(AP) and also on the decision of this court in the case of Gopendra Krishna Saha v. Commissioner of Income-tax in I.T. Ref. No. 184 of 1969, judgment delivered on 27th September, 1974 [since reported in : [1978]113ITR421(Cal) ]'.
34. In the case of V. D. Rajarathanam v. C1T : [1968]68ITR19(AP) , the question was whether estimation of profit on the gross amount instead of estimating on the net amount received by the assessee after deduction of cost of material supplied by the Government was justified in law. Jagan-mohan Reddy C.J, observed that it was not known whether the contract was for the whole work including the materials and the Government gave a rebate of the cost of materials. There was, however, an indication in the finding of the AAC that latter was the case. In that case, the assessee was to raise the gross amount and had to furnish materials himself, but since the Government furnished the materials an inference should arise that they must have deducted this amount from payment in which the case based by the Government authority could not be challenged and it was held that the cost of materials supplied by the Government should be included in the figure on the basis of which the percentage of profit could be worked out.
35. The cases of CIT v. K. S. Guruswami Gounder : [1973]92ITR90(Mad) , M. P. Alexander & Co. v. CIT : [1973]92ITR92(Ker) and Addl. CIT v. Trikamji Punia & Sons : [1977]106ITR597(AP) [FB] are distinguishable on facts. In those cases, there were certificates by the Executive Engineerand the railway stating that for estimating purposes the percentage of profits was calculated on the labour charges alone and that was not calculated on the cost of the departmental materials supplied for the work.
36. In Addl. CIT v. Trikamji Punia & Sons : [1977]106ITR597(AP) [FB] it has been held that the issue whether raw materials supplied by the railway authorities to the contractor should be taken into consideration for the purpose of computing the income of the contractor depends upon the iacts and circumstances of each case. When the agreement provides that the materials will be supplied by the railway authorities to the contractor and the quotation was given by the contractor on that footing, the cost of materials supplied by the other party to the contractor cannot be included in the total receipts for the purpose of arriving at the profit earned by the assessee. In that case, it was further held that the very fact that some materials, viz., cement, iron and steel were to be supplied by the railway authorities and it was not open to the assessee to purchase the same from outside, would go to show that these items could never have entered into the making of the profits by the assessee. Hence, the cost of materials supplied by the railway authorities should not be taken into consideration in estimating the net income of the assessee.
37. In that case distinguishing the case of V. D. Rajarathanam v. CIT : [1968]68ITR19(AP) it was observed as follows (p. 604) :
'Thus, it is clear from what has been pointed out by Jaganmohan Reddy C.J. that, in that particular case, the contract was that the contractor should furnish the materials himself and for that purpose he had to receive a particular gross amount; but since the Government had furnished some of the materials, the amount representing the cost of those materials was deducted before actual payments were made. Thus, the deduction in V. D. Rajarathanam v. Commissioner of Income-tax : [1968]68ITR19(AP) is based on facts totally different from the facts of the case before us.'
38. In our opinion, no hard and fast rule can be laid down to determine the question as to whether in estimating the net profit of a contractor the percentage is to be calculated on the gross receipt inclusive of the value of the materials supplied to the contractor. It will depend on the particular facts and the circumstances of each case. It appears that before the Tribunal the assessee did not argue the point that the finding of fact of the AAC about the rates at which 'cement' and 'steel materials' were supplied to the assessee by PWD or railway department and non-allowance of profit on such rates were not controverted by the revenue and, therefore, that point was not considered or decided by the Tribunal.
39. The assessee kept no stock register in the instant case before us. Its books of accounts were rejected. Best judgment assessment was made. The assessee produced one certificate to show that no profit was allowed on thematerials supplied by the P.W.D., but there were eight contracts for construction work and three contracts for supply of materials by the assessee. The Tribunal also held that 'the nature of the contracts does not help the assessee'. This finding has not been challenged before us.
40. As already stated, no stock book was kept by the assessee. Further, the burden was on the assessee to prove before the authorities below that the materials supplied to the assessee were wholly used or utilised by it in the construction works or that it had returned the unused or unutilised materials to the defendants concerned or that the contracts for construction works were not on the basis of lump sum amounts or that in calculating its profits on all those contracts it had excluded the value of those materials. It does not appear from the record that any attempt was even made by the assessee to prove any one of the aforesaid facts.
41. Therefore, for all the foregoing reasons it cannot be said that on the facts and the circumstances of the case the conclusion reached by the Tribunal on question No. 2 was perverse in its accepted sense.
42. It may also be noted here that the cases cited on behalf of the assessee were decided on different facts as already shown, whereas the facts of the aforesaid case decided by Sabyasachi Mukharji J. and the facts of the instant case before us are substantially the same.
43. In the premises, we answer question No. 1 in the affirmative and question No. 2 in the negative and both against the assessee without making any order as to costs.
Deb, J.
44. I agree.