2008 (4) TMI 470 - HC - Income Tax

Civil Construction The assessee firm carried on the business of construction of roads. The case was reopened by issuing the notice under section 148 of the Act and the assessing officer rejected the accounts and the accounting system followed by the assessee while passing the assessment order u/s 143(3) of the Act. The Commissioner (Appeal) allow the appeal filed by assessee. Tribunal justified the of the Commissioner (Appeals) applying a net profit rate of 12 percent. It also held that the assessee was not entitled to depreciation since it had been allowed while determining the income by applying the net profit rate on the gross receipt. No appeal by revenue. Held that- there was no error in the order of Tribunal.

Issues:
1. Appeal against order dated May 31, 2006 passed by the Income-tax Appellate Tribunal, Chandigarh Bench "B" Chandigarh in I. T. A. No. 381/Chandi/2004 for the assessment year 2000-01.
2. Appeal against order dated April 20, 2007 passed by the Tribunal in I. T. A. No. 380/Chandi/2004 for the assessment year 1999-2000.
3. Dispute over the method of calculating profit for contractors based on gross receipts.
4. Disagreement on the application of net profit rate of 12% on gross receipts.
5. Challenge to the rejection of expenses claimed by the assessee and the application of flat rate of 12% for assessment.

Analysis:
1. The High Court addressed two appeals concerning the same legal issue raised by the Revenue against orders of the Income-tax Appellate Tribunal. The first appeal pertained to the assessment year 2000-01, while the second related to the assessment year 1999-2000. Both appeals questioned the calculation of profit for contractors based on gross receipts and the application of a 12% net profit rate.

2. The Revenue contended that the Tribunal erred in upholding the application of a 12% net profit rate on the gross receipts declared by the assessee without evidence of expenses incurred in the contract work. The Tribunal's decision was challenged on the grounds that the assessee failed to produce proper books of account for verification despite claiming to maintain them.

3. The High Court observed that the Assessing Officer lacked the authority to change the system of accountancy without providing an opportunity to the assessee. It was noted that the system of presumptive taxation under section 44AD was suitable for contractors engaged in civil construction work. Therefore, the Commissioner of Income-tax (Appeals) rightly directed the assessment based on a flat rate of 12%.

4. The Court found no merit in the Revenue's argument against the application of the net profit rate of 12%. The Revenue failed to challenge the Commissioner's order or provide evidence supporting a higher net profit rate. Consequently, the appeals were dismissed as no errors were identified in the Tribunal's decision.

5. The High Court emphasized that in the absence of challenges or new arguments raised by the Revenue, the application of the 12% net profit rate was deemed appropriate. The Court concluded that there was no basis to overturn the Tribunal's decision, leading to the dismissal of both appeals.

← Previous Next →