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TMI Blog2016 (5) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... ely upon the book version of the assessee. The assessee even did not file return unless the same was detected during the search. Keeping all the factors in view, the Assessing Officer adopted net rate of 10% on the gross receipts on estimate basis which was reduced by the Tribunal to 9% to meet the ends of justice The estimation of gross profit rate at 9% could not be held to be arbitrary or unreasonable warranting interference by this Court in the facts and circumstances of the case. - ITA No. 399 of 2015 - - - Dated:- 4-2-2016 - MR. AJAY KUMAR MITTAL AND MRS. RAJ RAHUL GARG, JJ. For The Appellant : Mr. Sandeep Goyal, Advocate Ajay Kumar Mittal, J. 1. This appeal has been preferred by the appellant-assessee under Section 260A of the Income Tax Act, 1961 (in short, the Act ) against the order dated 31.3.2015, Annexure A.7 passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'B', Chandigarh (in short, the Tribunal ) in ITA No.244/Chd/2015 for the assessment year 2007-08, claiming following substantial questions of law:- i) Whether on the facts and in the circumstances of the case, the order passed by the learned Tribunal is violative of prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition of ₹ 3,82,400/- had been made in the income besides other petty additions totalling ₹ 1,64,581/-. Aggrieved by the order, the assessee filed appeal before the first appellate authority. Vide order dated 3.12.2012, Annexure A.2, the first appellate authority deleted the addition with regard to receipt from Anil Talwar holding that the said amount was on account of imprest amount and therefore could not be treated as business receipt. The appeal was partly allowed. Similarly for the assessment year 2007-08, the Assessing officer carried out proceedings under section 147 of the Act in which certain enquiries were made. The appellant submitted written submissions and produced necessary documents. Certain defects were noticed by the Assessing Officer which were not removed by the appellant. The Assessing Officer vide order dated 8.3.2013, Annexure A.3 without rejecting the books of account applied net profit rate of 10% on the gross receipts working out the receipts at ₹ 5,42,83,935/-. The income was worked out at ₹ 54,28,393/-. After giving deduction of interest paid to partners at ₹ 6,28,455/-, the income was calculated at ₹ 47,99,938/-. Agg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opening and closing stock were filed. In view of these facts, the Assessing officer could not verify various details and in this way he could not rely upon the book version of the assessee. The assessee even did not file return unless the same was detected during the search. Keeping all the factors in view, the Assessing Officer adopted net rate of 10% on the gross receipts on estimate basis which was reduced by the Tribunal to 9% to meet the ends of justice. The relevant findings recorded by the Tribunal in paras 11 to 16 read thus:- 11.We have considered the rival submissions carefully. Before us the issue of rejection of books was not seriously pressed but it is clear from the material available on record that assessee is a firm and was having two permanent account numbers. It was admitted before us that there was a firm with the same name but the partners were different and the firm was again started with the same name with different partners. Since this issue is not before us we are not going into the details. Further, it is also admitted fact that assessee did not file any return despite having taxable income. This fact becomes clear because assessee has itself filed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t rate of profit should be applied. We agree with the contention of learned counsel that profit should be estimated on the basis of various facts a particular case. Even the Hon'ble Punjab and Haryana High Court in the case cited by learned counsel in the case of Telelinks vs. CIT(supra) has observed that while discussing the nature of power to be exercised for determining the net profit, it was observed as under:- The first question relates to the nature of the power exercised while determining a net profit rate. The question must necessarily be answered by holding that where books of account rejected or not produced, the Assessing Officer would be well within the limits of his jurisdiction to access income by applying a fictional net profit rate. The power so conferred is quasi judicial and, therefore, not unbridled as it must be guided by reason and though it may involve a degree of guesswork, must be based upon a rational analysis of facts. The first question of law is answered accordingly . 14. While discussing the second question, factors required to be taken into consideration for determination of the net profit rates, it was observed as under:- The second que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment in a given situation will be a question of fact unless such an assessment is shown to be arbitrary or perverse. In the present case, it cannot be said that any substantial question of law arises. Assessment of 12 per cent of net profit rate of contract receipt is not shown to be arbitrary or perverse. Thus, wherein in a case wages were found not verifiable, 12% profit reached was held to be reasonable. 16. Now in the case before us we have already noted that assessee did not file even the return unless the same was detected during search made in the case of M/s Talwar Group. Anyway the most relevant factor in the case before us was that assessee is engaged in the business of construction of house for private parties. It is a common knowledge that rate of profit in construction of a private houses is much higher than in comparison to the mass construction contracts for government or other government authorities. This is so because the construction of a private house involves superior quality of work, fancy items for which generally the contractor charges higher rate of margin. Further, it is to be noted that assessee had huge amount of sundry creditors amounting to ..... 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