2013 (8) TMI 290 - HC - Income Tax

Computation of G.P. rate - Rejection of books of accounts - Tribunal reduced G.P. rate by 2% without giving cogent reasons - Held that - there was order of affirmance no detailed reasons were otherwise required to be assigned and it was observed by the learned Tribunal that as regards assessment years 1992-93 to 1994-95 the departmental appeals were dismissed and application of 8% profit rate was held to be reasonable and the present appeal is in respect of assessment year-1997-98 and the question decided by the learned Tribunal is one and the same - Decided against Revenue.

Summary

Issues:
- Appeal against order of Income Tax Appellate Tribunal regarding assessment years 1997-98.
- Rejection of books of accounts under section 145(3) of the Income Tax Act.
- Application of net profit rate on contract receipts.
- Reduction of profit rate to 8% by Commissioner of Income Tax (Appeals).
- Delay in filing appeal before the High Court.
- Condonation of delay under section 5 of the Limitation Act.
- Lack of detailed reasons for affirming profit rate at 8% by the Tribunal.
- Absence of substantial question of law for consideration in the appeal.

Analysis:
The appeal before the High Court was filed by the department against the order of the Income Tax Appellate Tribunal concerning the assessment years 1997-98. The respondent, a civil contractor, declared gross profit and net profit against contract receipts for the said assessment year. The assessing officer rejected the books of accounts under section 145(3) of the Income Tax Act and applied a net profit rate of 10% on the contract receipts, allowing deductions for depreciation, salary to partners, and interest to partners to determine the income from business. The Commissioner of Income Tax (Appeals) reduced the profit rate to 8% and directed the taxation of interest from Fixed Deposit Receipts under the head "Income from Business and Profession."

The High Court noted a delay of 79 days in filing the appeal before the Court, which was attributed to the alleged lack of cogent reasons assigned by the Tribunal in its order. The appellant filed an application under section 5 of the Limitation Act, claiming that the appeal was within the 120-day limitation period. However, the Court observed a lack of documentary evidence supporting the date of receipt of the impugned order, ultimately condoning the delay and proceeding to hear the matter on merits.

The appellant contended that the Tribunal did not provide sufficient reasons for affirming the profit rate at 8% instead of 10%. However, the Court held that detailed reasons were not necessary for an order of affirmance. The Tribunal's decision was based on past precedents where the 8% profit rate was deemed reasonable for similar assessment years. The Court concluded that the matter decided by the Tribunal was a question of fact, and no substantial question of law emerged for consideration in the instant appeal.

In light of the above analysis, the High Court found the appeal to be devoid of merit and subsequently dismissed it, upholding the Tribunal's decision regarding the profit rate and the assessment for the relevant year.