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2008 (11) TMI 723 - HC - Income Tax

Issues Involved:
The judgment involves the issue of determining the net profit rate for a contractor engaged in civil construction work, specifically regarding the addition of wages claimed by the assessee and the application of a reasonable profit rate on contract receipts.

Issue 1: Addition of Unverifiable Wages
The assessee, a contractor in civil construction, filed its return for the assessment year, with the Assessing Officer making additions to the income due to unverifiable wages claimed. The CIT (A) further added to the income. The Tribunal, in its judgment, applied a net profit rate of 12% on contract receipts, excluding material supplied by the department, based on the consideration that there may be unverifiable wages warranting an addition to income, but not to the extent assessed by the CIT (A). The Tribunal's decision was based on the principle that the assessment of net profit rate by best judgment is a question of fact unless proven to be arbitrary or perverse. In this case, the 12% net profit rate applied by the Tribunal was deemed not arbitrary or perverse, leading to the dismissal of the appeal as no substantial question of law was found to arise.

Conclusion:
The High Court, comprising Hon'ble Mr. Justice Adarsh Kumar Goel and Hon'ble Mr. Justice L. N. Mittal, dismissed the appeal by the Revenue under Section 260-A of the Income Tax Act, 1961 against the order of the Ld. Income Tax Appellate Tribunal, Chandigarh Bench. The Tribunal's decision to determine the net profit by applying a 12% rate on contract receipts, excluding material costs, was upheld as not arbitrary or perverse. The judgment emphasized that the assessment of net profit rate based on best judgment is a factual matter unless proven otherwise, leading to the conclusion that no substantial question of law arose for consideration in this case.

 

 

 

 

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