Commissioner Of Income Tax-I,Ludhiana v. M/S. Kumar Builders, Ludhiana

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 879 of 2010Date of decision: 17.3.2011 Commissioner of Income Tax-I,Ludhiana --- Appellant Versus M/s. Kumar Builders, Ludhiana --- Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present:Mr. Rajesh Katoch, Standing Counsel for the appellant-Revenue. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-Tax Act, 1961 (for short “the Act”) has been filed by the Revenue against the order dated30.6.2010, passed by the Income Tax Appellate Tribunal ChandigarhBench ‘A’, Chandigarh (in short “the Tribunal”) in ITA No. 416/CHD/2010,relating to the assessment year 2006-2007. 2.The following substantial question of law has been claimed fordetermination of this Court: “Whether on the facts and circumstances of the case, theHon’ble Income Tax Appellate Tribunal was right in law indirecting to determine the net profit by applying the net profitrate of 10% on contract receipts of Rs. 9,59,16,586/- without appreciating the facts that the books of accounts of theassessee were rejected by the Assessing Officer and the NetProfit rate of 12% had been adopted based on the decision ofHon’ble Punjab and Haryana High Court in the case of CIT,Hisar vs. Prabhat Kumar Contractor, Sirsa (supra)?” 3.The facts, in brief, necessary for adjudication as narrated inthe appeal, are that the respondent-assessee, a firm of civil contractor,filed its return on 31.10.2006 declaring taxable income of Rs. 57,49,202/-.The case was, however, referred for special audit under Section 142(2A)of the Act and on certain discrepancies being pointed out by the specialauditor, the assessing officer rejected the books of accounts of theassessee and completed assessment under Section 185/143(3) at Rs.1,15,37,190/- vide order dated 28.5.2009 by treating the firm asAssociation of Persons. The income of the assessee was assessed atnet profit rate of 12% on total contract receipts of Rs. 9,59,16,586/- whichworked out to Rs. 1,15,09,990/-. The assessing officer further madeaddition of Rs. 15,650/- on account of interest on fixed deposit receiptsand Rs. 1,760/- on account of interest on income tax refund. 4.The assessee preferred appeal before the Commissioner ofIncome-tax (Appeals)-I {in short “the CIT(A)”}, which was partly allowedvide order dated 24.2.2010. The CIT(A) after relying upon a decision ofthis Court in Income Tax Appeal No. 293 of 2008 (Commissioner ofIncome tax, Hisar vs. M/s. Prabhat Kumar Contract, Sirsa), decidedon 14.11.2008 sustained the addition made by the assessing officer byadopting the net profit rate of 12% of contract receipts. The CIT(A),however, held that in the light of a judgment of the Tribunal of Delhi Benchthe assessee-firm was liable to be assessed as firm. 5.Still not satisfied, the assessee carried appeal before theTribunal. The Tribunal, vide order dated 30.6.2010 partly accepted theappeal and directed the assessing officer to compute the income byapplying net profit rate of 10% in view of the decision of this Court inIncome Tax Appeal No. 689 of 2009 (Raja Ram Contractors vs. C.I.T.Ludhiana), decided on 7.4.2010. 6. We have heard learned counsel for the Revenue and haveperused the order passed by the Tribunal. 7.Learned counsel for the appellant-revenue by placing relianceon a decision of this Court in Income Tax Appeal No. 293 of 2008(Commissioner of Income tax, Hisar vs. M/s. Prabhat KumarContract, Sirsa), decided on 14.11.2008 submitted that this Court in thecase of a similar civil contractor had accepted 12% net profit rate on thecontract receipts to be reasonable. The net profit rate of 10% on thecontract receipts adopted by the Tribunal was, thus, not justified. 6. We have heard learned counsel for the Revenue and haveperused the order passed by the Tribunal. 7.Learned counsel for the appellant-revenue by placing relianceon a decision of this Court in Income Tax Appeal No. 293 of 2008(Commissioner of Income tax, Hisar vs. M/s. Prabhat KumarContract, Sirsa), decided on 14.11.2008 submitted that this Court in thecase of a similar civil contractor had accepted 12% net profit rate on thecontract receipts to be reasonable. The net profit rate of 10% on thecontract receipts adopted by the Tribunal was, thus, not justified. 8. The issue that arises for consideration in this case is, whetherthe net profit rate of 10% accepted by the Tribunal on the contractreceipts was justified or it should have been 12% as adopted by theassessing officer. 9.The Tribunal while examining the question of application of netprofit rate relied upon a decision of this Court in Income Tax Appeal No.689 of 2009 (Raja Ram Contractors vs. C.I.T. Ludhiana), decided on7.4.2010 wherein this Court in the facts and circumstances of that casehad accepted 10% net profit rate to be reasonable while computing theincome of the assessee. The Tribunal on appreciation of the factualsituation that in assessment year 2004-2005, the net profit rate of 8% wasapplied which had been accepted by the Department and for the assessment year 2005-2006, the net profit rate of 1.45% was appliedafter allowance of salary and interest paid to the partners, had held thatthe net profit rate of 10% for this assessment year was reasonable andjustified. No doubt, this Court in M/s. Prabhat Kumar Contract, Sirsa’scase (supra) in an individual factual situation therein had held 12% netprofit rate to be reasonable but it had not been held that a universal flatrate has to be applied as a general rule in all cases. Therefore, thedecision relied upon by the counsel for the appellant does not advancethe case of the appellant. 10.No substantial question of law arises and, thus, finding nomerit in the appeal, the same is dismissed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) JUDGE