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Issues involved: Interpretation of Sec.144 and Section 44AD, reduction of estimated profit/income, declaration of closing balance, correctness of Tribunal's order.
Interpretation of Sec.144 and Section 44AD: The High Court examined the issue of interpreting Sec.144 and Section 44AD in a case where the assessing officer had estimated the profit/income of the assessee at 30% of gross receipts. The Tribunal, however, reduced this estimate to 6% of the gross receipts. The Court noted that the proviso to section 44-AD, which assesses estimated profit as 8% of gross receipts for Civil Contractors earning less than Rs. 40 lakhs, was not applicable in this case due to the higher turnover. The ITAT justified its decision by considering a fixed rate of 2% of gross receipts as the tax deductible at source for all contractors, big or small. Based on this reasoning, the Court upheld the Tribunal's decision to estimate the income at 6% of gross receipts, considering the tax liability at 1.8% for individuals and 2.1% for firms or companies. Consequently, the Court found the Tribunal's order logical and non-arbitrary, leading to the dismissal of the appeal. Declaration of Closing Balance: Another issue raised was whether the Tribunal erred in ignoring the fact that the assessee had not declared a closing balance of Rs. 39,87,021 in the books of account. The assessing officer had estimated income at 30% of gross receipts to account for this balance. The Court, however, did not find this omission to be a sufficient ground to challenge the Tribunal's decision. It emphasized that the ITAT's reasoning for estimating income at 6% of gross receipts was based on logical and non-arbitrary grounds, and thus, the appeal was summarily dismissed. Correctness of Tribunal's Order: Lastly, the Court considered whether the Tribunal's order was based on the facts on record. Upon reviewing the case, the Court found that the ITAT had provided cogent and logical reasons for estimating the profit of the assessee at 6% of the gross receipts. It noted that the Tribunal's decision was not illogical, unreasoned, or arbitrary. Therefore, the Court declined to interfere in the matter, concluding that the questions of law did not arise, and the appeal was dismissed.
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