Cit Vs. Bhawan and Path Nirman (Bohra and Co.) - Court Judgment

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counsels: sundeep bhandawat, for the revenue anjay kothari, for the assessee head note: income tax appeal (high court)--substantial quesiton of lawdetermination of net profit rate by invoking section 145 catch note: assessee-contractor declared net profit rate of 8.10 per cent--in view of defects noticed in books of account, assessing officer rejected books results and applied net profit rate 12.5 per cent by invoking section 145--tribunal examined issue in depth and reduced net profit rate of 12.5 per cent to 10 per cent--revenue contended that tribunal committed error in reducing rate of net profit without any sufficient reasons, so there was involved substantial question of law to file appeal under section 260a--not justified--detailed reasons were given by tribunal that in view of keen competition and unexpected rise in general trend of price level, assessee's percentage of profit was cut down as compared to last year's, so no substantial question of law was involved for appeal. ratio: question as to whether tribunal was justified in reduction of net profit rate applied for estimating income of assessee by giving detailed reasons, did not amount to substantial question of law. held: one cannot be impressed with the contention of revenue to the effect that no reasons have been assigned by the tribunal for confirming the finding of the tribunal (sic-commissioner (appeals)) for reducing the net profit rate from 12.5 per cent to 10 per cent. detailed reasons have been given which are extracted as follows :'(a) most of the new contracts taken this year had been taken under keen competition from leading other contractors, and the policy of business was also changed to have less margin of profit, greater net returns, so that the available machinery which in absence of work, remained idle, is put to use regularly and continuously. (b) there had been unexpected and steep rise in the general trend of price level in the country. this was beyond expectations right from rations to petrol, diesel, parts, everything did show an upward trend and so also the labour and this factor did cut down the profits of the assessee-firm to a greater extent. [para 5]thus, no substantial question of law involved in this appeal. the appeal is dismissed summarily. case law analysis: cit v. devi prasad vishwanath prasad (1969) 72 itr 194 (sc), distinguished. dy. cit v. marudhar hotels (p) ltd. (2000) 245 itr 138 (raj) applied. application: also to current assessment year. decision: in favour of assessee. income tax act 1961 s.260a income tax act 1961 s.145 in the rajasthan high court n.n. mathur & jagat singh, jj. - - bhandawat, learned counsel for the department, that the tribunal having held that the books of accounts were rightly rejected by the assessing officer which was confirmed by the commissioner (appeals) committed error in reducing the rate of net profit from 12.5 per cent to 10 per cent without assigning any good reasons. , insofar as the trading of the firm is concerned it has shown better performance as will be revealed from the following capital invested yield ratio chart .6. as far as of the judgment of the apex court in [1969]72itr194(sc) (supra) is concerned the same does not relate to estimation of net profit and as such it has no application to the facts of the case.by the courtthis is an appeal under section 260a of the income tax act, 1961 directed against the judgment of the tribunal, jodhpur dated 24-11-2000.2. we have heard mr. sundeep bhandawat learned counsel for the revenue, and mr. anjay kothari, for the respondent-assessee, for the purpose of admission of the appeal.3. the respondent-assessee firm is a civil contractor. it filed return of receipt of rs. 1,63,86,523 giving a net profit rate of 8.10 per cent. in view of various defects noticed in the books of accounts the assessing officer rejected the books results declared by the assessee and invoked the provisions of section 145 by applying the net profit rate of 12.5 per cent and made trading addition of rs. 7,36,107. the commissioner (appeals), on appeal by the assessee reduced the net profit rate from 12.5 per cent to 10 per cent as in his opinion the estimated net profit rate of 12.5 per cent was excessive. on appeal by the department the tribunal examined the issue with respect to estimate net profit in depth and detail, and confirmed the order of the commissioner (appeals).4. it is contended by the mr. bhandawat, learned counsel for the department, that the tribunal having held that the books of accounts were rightly rejected by the assessing officer which was confirmed by the commissioner (appeals) committed error in reducing the rate of net profit from 12.5 per cent to 10 per cent without assigning any good reasons. the learned counsel has placed reliance on a decision of the apex court in cit v. devi prasad vishwanath prasad : [1969]72itr194(sc) , and a judgment of the kerala high court in cit v. nirmala liquors : [1988]173itr525(ker) . on the other hand, mr. kothari, learned counsel appearing for the respondent, submits that the instant appeal is not maintainable as no substantial question of law is involved as required by section 260a of the income tax act. it is also submitted that case does not fall in any of the parameters laid down by this court in dy. cit v. marudhar hotels (p) ltd. .5. we have carefully gone through the judgment of the tribunal. we are not impressed with the contention of mr. bhandawat, to the effect that no reasons have been assigned by the tribunal for confirming the finding of the tribunal (sic-commissioner (appeals)) for reducing the net profit rate from 12 per cent to 10 per cent. detailed reasons have been given in para 5 of the judgment, of the tribunal, which are extracted as follows :'(a) most of the new contracts taken this year had been taken under keen competition from leading other contractors, and the policy of business was also changed to have less margin of profit, greater net returns, so that the available machinery which in absence of work, remained idle, is put to use regularly and continuously. the rise of net receipts, as compared to the preceding year is rs. (in net) 72,06,237 which as compared to last year's total net of rs. 85,22,465 is almost say double, with little marginal difference. the profit in work account last year was rs. 9,30,350. this year this profit in work account is rs. 12,24,627.there had thus been an overall addition of more than rs. 3,00,000 to this profit, with the same staff and facilities. the net profit last year was nil. it was a loss of rs. 24,427 as against which this is plus (profit) of rs. 18,642.(b) when tenders are given the current market rate of all the material taken into account. it is a generally known factor that during the previous year relevant to assessment year 1990-91, there had been unexpected and steep rise in the general trend of price level in the country. this was beyond expectations right from rations to petrol, diesel, parts, everything did show an upward trend and so also the labour and this factor did cut down the profits of the assessee-firm to a greater extent.(c) it will be necessary to say that in general, i.e., insofar as the trading of the firm is concerned it has shown better performance as will be revealed from the following capital invested yield ratio chart .... '6. as far as of the judgment of the apex court in : [1969]72itr194(sc) (supra) is concerned the same does not relate to estimation of net profit and as such it has no application to the facts of the case. the kerala case only speaks that the question of estimation of net profit involves a question of law. in marudhar hotel's case (supra), it is held by the division bench of this court that simply because a question of law involves, section 260a is not attracted, as an appeal lies only on a substantial question of law.thus, in our opinion no substantial question of law involved in this appeal. the appeal is dismissed summarily.