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Issues:
1. Application of NP rate on net contract receipts. 2. Justification for enhancement of NP rate. 3. Entitlement to relief under section 80J of the IT Act. Issue 1: Application of NP rate on net contract receipts The appeal was filed by the assessee against the order of the Commissioner of Income-tax (Appeals) sustaining the Income-tax Officer's decision to apply a net profit rate of 12.5% on net contract receipts, resulting in an addition of Rs. 21,126. The Income-tax Officer rejected the book results due to various defects in accounting, such as lack of details on work expenses, closing stock, and irregular maintenance of the cash book. The assessee argued that the NP rate was unreasonably enhanced, citing past history and substantial business growth. The Appellate Tribunal independently considered the case, noting the significant increase in business turnover and decided to adopt an NP rate of 11% for the current year, directing the ITO to calculate the relief accordingly. Issue 2: Justification for enhancement of NP rate The assessee contended that there was no justification for the increase in the NP rate after rejecting the book results, emphasizing substantial business growth and inability to maintain profits at the same level due to increased activities. The assessee argued that the authorities erred in making the addition, urging for deletion or reduction based on past case history. The Departmental Representative supported the CIT's order, stating that the defects in accounting highlighted by the ITO justified the 12.5% NP rate. The Appellate Tribunal, after considering arguments from both sides and the significant business turnover increase, deemed an 11% NP rate appropriate for the current year, directing relief calculation by the ITO. Issue 3: Entitlement to relief under section 80J of the IT Act The assessee raised an additional ground during the hearing, claiming entitlement to relief under section 80J of the IT Act as the business involved a process of manufacturing. The assessee argued that being an industrial undertaking, the relief was admissible. The Department resisted this claim, stating that it did not arise from the impugned order as the assessee did not raise it before the ITO. The Appellate Tribunal allowed the additional ground to be raised, considering the claim's legal nature. The assessee cited decisions from the IT Appellate Tribunal, Delhi Bench, and the Bombay High Court to support the claim. The Tribunal decided that the point should be examined by the AAC, providing both parties with a fair opportunity to present their case and dispose of the claim in accordance with the law. In conclusion, the appeal was allowed for statistical purposes, with the Appellate Tribunal addressing the issues related to the application of NP rate on net contract receipts, justification for the enhancement of the NP rate, and the entitlement to relief under section 80J of the IT Act in a detailed and reasoned manner.
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