2011 (4) TMI 1411 - AT - Income Tax

Summary

Issues involved:
The issues involved in this case are:
1. Confirmation of net profit rate of 7% on gross receipts of contract.
2. Confirmation of addition on account of unexplained investment in contract business.
3. Levy of interest u/s 234B of the Act.

Confirmation of net profit rate of 7% on gross receipts of contract:
The appellant, a contractor, challenged the net profit rate of 7% applied by the Assessing Officer on the gross receipts. The Assessing Officer relied on previous decisions, but failed to consider that the appellant was an individual proprietor, unlike the comparable cases of firms. The turnover difference between the cases further made them incomparable. The appellant's history of net profit rates was also considered, leading to a fair adjustment to 5% net profit rate on the turnover.

Confirmation of addition on account of unexplained investment in contract business:
The Assessing Officer estimated unexplained investment based on undisclosed receipts, leading to an addition in the appellant's income. The appellant contended that only the profit element should have been added. The CIT(A) found the Assessing Officer's approach unreasonable and reduced the addition, but it was still deemed excessive. The investment part was adjusted to 10% of the undisclosed receipts for a fair estimation.

Levy of interest u/s 234B of the Act:
The appellant disputed the levy of interest u/s 234B, while the Department argued it was consequential. The Tribunal restored this issue to the Assessing Officer for a fresh decision in accordance with the law.