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TMI Blog1975 (10) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... hese were also taken on appeal to the AAC. As its appeals to the AAC were not successful, the assessee took up the matter on further appeal to the Tribunal. By their order dt. 7th April, 1972, the Tribunal confirmed the orders of the ITO refusing to re-open the assessment under s. 146 of the Act and dismissed the appeals filed under s. 146. In the quantum appeals, however, the Tribunal considered that the ITO has not made the assessments on a proper basis keeping in view that past record of the appellant. In this view, the Tribunal restored the matter to the ITO for making a proper and reasonable estimate of the income of the appellant adopting a reasonable rate of gross profit keeping in view the past record of the appellant and after allowing reasonable overhead expenses. 3. In pursuance of these orders of the Tribunal, the ITO passed fresh orders of assessment under s. 144 r/w s. 253 of the Act for both these years. He examined the evidence and other statements placed on record by the assessee at the time of the original assessment and also the past record of the assessee. He found that the appellant was executing contract works for construction of quarters at Sarni and Channel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al receipts excluding the work in progress, that if such work in progress was also taken into account, the assessee's gross profit worked out to 12.3 per cent and 10.3 per cent only for 1967-68 and 1968-69 respectively. He pointed out that this was certainly a low margin of gross profit compared to the rate of 15.07 per cent admitted by the assessee in 1966-67 and that the AAC was not justified in relying on the rate of 8.74 per cent for 1965-66 only and in ignoring the rate of 15.0 per cent in 1966-67 while judging the reasonableness of the gross profit adopted by the ITO. According to the learned Departmental Representative the rate of 14 per cent gross profit applied by the ITO provided for all the adverse factors pleaded by the assessee and that the AAC should not have reduced the said estimates by relying only on the Tribunal's order for 1965-66. He therefore, contended that the orders of the AAC should be reversed and that of the ITO restored. 7. Shri M.C. Purohit, the learned counsel for the assessee, relied on the orders of the AAC and also on the order of the Tribunal in the case of this assessee for 1965-66. He pointed out that the assessee's rates were lower than the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad tendered for the same job. This statement, he claimed was furnished to the ITO also. He argued that from the rates quoted by others, it would be seen that the assessee's quotations were the lowest under each and every head. For instance, for excavation in ordinary soil the assessee had quoted Rs. 35 as against Rs. 60 quoted by Attar Singh Sathi & Sons and Rs. 100 by United Builders. For excavation in murum and bolder the assessee had quoted Rs. 50 while the other two had quoted Rs. 80 and Rs. 100. For R.C.C. the assessee had quoted Rs.250 as against Rs. 300 and Rs. 400 quoted by others. The statement in fact included 31 items of different types of work. He added that learning from the experience of constructing D-Type quarters, the assessee revised the rates for F-type quarters, which were more or less in line with the rates quoted by other contractors and as a result earned a good profit of 18 per cent in the immediately succeeding year when the receipts were mostly for F-Type quarters. He therefore argued that when the assessee had itself quoted extremely low rates for D-Type quarters, mainly because of its anxiety to enter the filed in competition with others, it could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no day-to-day quantity account for the stores yet the consumption could not be said to be excessive or unreasonable. He, therefore, pleaded that the accounts were fit to be accepted because in spite of all the adverse circumstances the company had been able to show gross profit of 9 per cent in Sarni contract. The bonafides of the assessee company were established by the fact that in the M.E.S. road contract it had shown as high a gross profit as 33 per cent. "7. The assessee's learned counsel has given sufficient reasons to indicate as to why the percentage earned in Sarni contract was less. By looking into the quotations for different items of work in comparison with the rtes quoted by other contractors, we are convinced that the assessee had offered very low rates while tendering for this job and they could not have earned the usual margin or 15 to 20 per cent as mentioned by the ITO. It is also correct that the labour wages did go up because of the rise in rates. It is possible that this being the first year of business of the assessee company the overhead expenditure might be more to some extent. No doubt, the business has been started, as we were told in the immedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndings of the Tribunal for 1965-66, where it was held that the assessee could not clear as high a margin of profit as 15 to 20 per cent as in the case of other contractors, the overall rate of 12.4 per cent for gross profit shown by the assessee for the entire work appears to be fair and reasonable considering the various adverse factors affecting its margin of gross profit in this work. Looked at from any point of view, we are satisfied that the order of the AAC is right in respect of both the years and that there is no basis for the estimate of gross profit at 14 per cent by the ITO in respect of these two years. The ITO's estimate completely overlooks the adverse factors affecting the assessee's contract work at Sarni. We, therefore, see no reason to interfere with the orders of the AAC. Accordingly, the orders of the AAC are confirmed and the Department's appeals are dismissed. The cross objections filed by the assessee simply support the order of the AAC as justified. They shall be treated as allowed for statistical purposes.
11. In the result, ITA Nos. 426 & 427 (Jab)/74-75 are dismissed. The assessee's cross objections are treated as allowed. X X X X Extracts X X X X X X X X Extracts X X X X
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