2011 (4) TMI 653 - HC - Income Tax

Scaling down of net profit rate to 5% against 8% - Civil Contractor - the claim of the assessee is that the accounts of the assessee are audited one and the assessment has been framed without rejecting the books of account and by taking the profit @ 8% against the returned income of Rs.1,98,380 - a copy of the order of the Tribunal dated 11.2.2011 has been produced wherein the department had filed MA Nos. 117 & 118/Chd/2009 in ITA Nos. 433 and 434/Chd/2008 bringing the fact to the notice of the Tribunal that the departmental representative had never agreed for the concession as recorded by the Tribunal in its order dated 27.11.2008 - The matter is remitted to the Tribunal to decide the same afresh on merits, in accordance with law

Summary

Issues:
1. Whether the net profit rate of 5% applied by the Tribunal was justified.

Analysis:
1. The appeal was filed by the revenue under Section 260A of the Income Tax Act, 1961 against the order passed by the Income Tax Appellate Tribunal, Chandigarh Bench, relating to the assessment year 2001-02. The substantial question of law raised was whether the Tribunal was right in law in scaling down the net profit rate to 5% against 8% on the work done by the assessee.

2. The facts of the case involved the assessee-company filing its return after notice under Section 148 of the Act, with the assessment being completed applying the provisions of Section 44AD of the Act, computing the profit at the rate of 8% of the total receipt for the work done. The CIT(A) affirmed this rate, but the Tribunal directed the Assessing Officer to apply a net profit rate of 5% instead of 8%, leading to the present appeal by the revenue.

3. The Tribunal's decision to reduce the net profit rate to 5% was based on the claim made by the assessee that the net profit was declared at 3.07% for the present assessment year. However, the Tribunal's finding was challenged by the revenue, stating that the departmental representative had never agreed to the concession as recorded by the Tribunal. The Tribunal rejected this challenge, but the High Court found discrepancies in the Tribunal's decision-making process.

4. The High Court, upon considering the discrepancies in the Tribunal's decision and the challenge raised by the revenue, allowed the appeals and set aside the order dated 27.11.2008. The matter was remitted to the Tribunal to decide afresh on merits, emphasizing the need for a decision in accordance with the law.

This analysis highlights the key legal issues surrounding the Tribunal's decision on the net profit rate and the subsequent challenges and discrepancies leading to the High Court's decision to remit the matter back to the Tribunal for a fresh consideration.