The Division Bench dismissed the Revenue's appeal against the ITAT. The court held no substantial question of law arose regarding the Tribunal's application of a 12% net profit rate on contract receipts, finding the assessment was not arbitrary or perverse.
Appeal against the ITAT order dated 25.05.2007 is dismissed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
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I. T. A. No. 293 of 2008
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH.
Case No. : I. T. A. No. 293 of 2008
Date of Decision : November 14, 2008.
Commissioner of Income-tax, Hisar .... Appellant Vs. M/s Parbhat Kumar Contractor, Sirsa .... Respondent
CORAM : HON'BLE MR. JUSTICE ADARSH KUMAR GOEL
HON'BLE MR. JUSTICE L. N. MITTAL
Present : Mr. Sanjeev Kaushik, Standing Counsel for C. I. T. - appellant.
ADARSH KUMAR GOEL, J. (Oral) :
Revenue has preferred this appeal under Section 260-A of Income Tax Act, 1961 against the order of the Ld. Income Tax Appellate Tribunal, Chandigarh Bench “A” Chandigarh passed in ITA No.323/Chandi/2005 dated 25.05.2007 for the Assessment Year 2001-02, proposing to raise following substantial question of law :-
“i) Whether on the facts and in the circumstances of the case, the Ld. Tribunal was right in law in directing to determine the net profit by applying a net profit rate of 12% on contract receipts of Rs.91,65,025/-, excluding the cost of material supplied by the department subject to allowability of salary and interest paid to the
I. T. A. No. 293 of 2008
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partners, without appreciating that the assessee is maintaining account books and the Assessing Officer/CIT(A) have made separate addition of Rs.16,48,675/- by proving that the claim of labour payable was not genuine and further that there was clear admission on behalf of the assessee during appellate proceedings before Ld. I.T.A.T. that the account of wages is unverifiable ?”
The assessee is a contractor engaged in the work of civil construction and filed its return for the assessment year in question. The Assessing Officer made addition to the returned income mainly on account of claim for wages being found to be not verifiable. On appeal of the assessee, CIT (A) made further additions. Finally, the issue was considered by the Tribunal. While considering the issue of addition on account of unverifiable wages, the Tribunal considered it appropriate to apply reasonable rate of profit, which was assessed at the rate of 12% on contract receipts, excluding the material supplied by the department. The Tribunal also relied upon its judgment in the case of M/s Ess Ess Builders (P) Ltd. (in I.T.A. No.707/Chandi/1997 for the assessment year 93-94, order dated 16.09.2003) .
We have heard learned counsel for the parties and perused the record.
The Tribunal has proceeded on the basis that there may be unverifiable wages which may call for addition to income, but not to the extent assessed by CIT (A). Applying net profit rate on the basis of best judgment, assessment in a given situation will be a question of fact unless, such an assessment is shown to be arbitrary or perverse. In the present case, it cannot be held that any substantial question of law arises. Assessment of 12% of net profit rate of contract receipt is not shown to be arbitrary or perverse.
I. T. A. No. 293 of 2008
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No substantial question of law arises for consideration. The appeal is dismissed.
(ADARSH KUMAR GOEL) JUDGE
November 14, 2008 ( L. N. MITTAL ) monika JUDGE
2 issues framed by the court
Whether the Tribunal was right in directing to determine net profit by applying a net profit rate of 12% on contract receipts excluding department-supplied material cost while disallowing unverifiable
Whether the assessment of net profit at 12% of contract receipts amounts to an arbitrary or perverse exercise justifying a substantial question of law?
Colour shows how this judgement treated each authority
M/s Ess Ess Builders (P) Ltd.Referred¶18
M/s Ess Ess Builders (P) Ltd. (in I.T.A. No.707/Chandi/1997 for the assessment year 93-94, order dated 16.09.2003)
1 provisions across 1 enactments
Commissioner of Income-tax, Hisar
M/s Parbhat Kumar Contractor, Sirsa
Adarsh Kumar Goel
L. N. Mittal
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
