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TMI Blog1990 (10) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... tment namely the balance sheet and the profit and loss account, the work in progress was shown at Rs. 4,50,000 but that has no basis and that was on estimate basis. The ITO also noticed that the assessee did not maintain any stock register and in the absence of stock register, it was not possible to correctly estimate the work in progress. As regards receipts, he found that the actual payments received by way of cheques was of Rs. 14,63,470 and the amounts deducted by the Government towards material supplied was of the order of Rs. 6,26,320, thus totalling to Rs. 20,89,790. The ITO took the opinion that even though there is a Supreme Court decision in the case of Brij Bhushan Lal Parduman Kumar v. CIT [1978] 115 ITR 524, that in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63,470 and not Rs. 17,96,000. Other discrepancies also were stated to have been satisfactorily explained before the CIT(Appeals). It was also pointed out through a comparative chart filed that in all the previous years, the book results were accepted, except for minor variations in one year namely 1977-78. Even that also was deleted in appeal. Keeping in view the reconciliation statement between the receipts shown by the assessee and the receipts shown by the Department and the accepted past history, the CIT(Appeals) felt that there was no need to reject the book results and estimated the income at Rs. 1,50,000. The ITO was, therefore, directed to accept the income as shown. It was against this order of the CIT(Appeals) that the present app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee the learned counsel Shri S.P. Verma relying upon the order of the CIT submitted that once reconciliation of the receipts was made and once the basis for the estimate of work in progress was explained and when the contract was the same as in earlier years, it would be very wrong to say that the previous record was not a proper guide to determine the reasonableness of the income estimated. The estimate made by the Department would give a net profit rate of about 10.5%. That was never the rate shown by the assessee in any of the previous years starting from assessment year 1971-72. Therefore, it cannot be said that the estimate made by the Officer was right and showed the normally correct income. The CIT was justified in deleting the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... timated, it cannot be said that the book results were not to be accepted and that proviso to Section 145 is applicable unless it is shown that the work in progress was arrived in such a way as to be too far from the reality. In this case, the ITO attempted to prove the unreliability of the amount of work in progress arrived at by pointing out that the closing stock ought to have been Rs. 3,82,900 as against Rs. 1 lakh shown by the assessee. The basis for this is the assumption that normally the advance is given at 75% of the material lying at site. There was no basis for this assumption nor any figures were given to show that this hypothesis could be accepted as correct. It is the mere ipsi dixit of the ITO without any basis to support it. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e previous results are the best guide in any case. The previous results are only the points of reference, in relation to which the results of subsequent years are to be judged and reasons for variations are investigated. The range of profit charged will be discernible from the previous records. The lowest rate of net profit rate shown and accepted by the Department was 2.8%. In the immediately preceding assessment year rate of net profit shown and accepted was 2.75% and the gross profit was 11.75% on total receipts of Rs. 2,63,000 as against which the results shown this year were 4.5% net profit and 14.5% gross profit on the receipts of Rs. 14,63,470 as against 4.5% shown by the assessee and 2.75% accepted in the immediately preceding asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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