Commissioner of Gift Tax vs A. Vajjiram and Bros.

K. Raviraja Pandian, J.—The Revenue is on appeal against the order of the Tribunal dated July 31, 2007, made in I. T. A. No

1818/Mds/05. The relevant assessment year is 2002-03.

The facts of the case are as follows : The assessee is a partnership firm, a civil contractor, carrying on Government projects. The assessee-firm

filed its return of income for the assessment year 2002-03 on October 28, 2002, disclosing a total income of Rs. 1,60,000 and claiming refund of

excess tax deducted at source in a sum of Rs. 2,35,453. It is the case of the Revenue that the assessee has not accounted the correct receipts and

on that basis the Assessing Officer computed the total income of the assessee at Rs. 52,10,010. Against that order, the assessee preferred an

appeal before the Commissioner of Income Tax (Appeals) and the Commissioner of Income Tax (Appeals) has estimated the profits of the

assessee at 8 per cent, of the contract receipts, having found that the total addition made by the Assessing Officer is highly exorbitant which would

amount to net profit at 27.28 per cent., which is commercially impossible in respect of Government contract works. Against that order, the

Revenue filed an appeal before the Income Tax Appellate Tribunal. The Tribunal after perusing the materials on record, held that the

Commissioner of Income Tax (Appeals) has taken a very reasonable view and which requires no interference. The correctness of the same is now

canvassed by the Revenue by framing the following substantial question of law:

Whether on the facts and in the circumstances of the ease, the Income Tax Appellate Tribunal was right in law in deleting the additions made by

the Assessing Officer to the tune of Rs. 48,43,782 even though the assessee has not accounted the correct receipts of his business ?

Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in sustaining the order of the

Commissioner of Income tax (Appeals) estimated the profits of the assessee at 8 per cent, of the contract receipts even though the books of

account are not maintained by the assessee-firm ?

We have heard the argument of the learned Counsel for the Revenue.

As against the estimate made by the Assessing Officer, on appeal, the Commissioner of Income Tax (Appeals) has sustained the addition in a

sum of Rs. 12,67,933. He had estimated the profit of the assessee at 8 per cent, of the contract receipts. He interfered with the assessment order

on the ground that if the total addition made by the Assessing Officer is allowed to remain or accepted, then the net profit of the assessee is nearly

28 per cent., which is not at all possible in the nature of the work undertaken by the assessee. The estimation have been made on the sole ground

that the accounts maintained by the assessee has not been proper. The Tribunal has also taken into consideration that u/s 44AD also when the

books of account are not maintained, income has to be estimated only at 8 per cent, and hence the order of the Commissioner of Income Tax

(Appeals) estimating the income at 8 per cent, cannot be regarded as one which is illegal. We are of the view that the conclusion arrived at by the

Tribunal is correct. The estimation has been made judiciously which requires no interference.

In view of the aforesaid reason, the appeal is dismissed.