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TMI Blog1977 (8) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... was not properly maintained. Because of these defects the ITO did not accept the book results of the assessee. He found that the gross receipts amounted to Rs. 10,53,806. The ITO also considered the net profit of 7.2 per cent. as low and he estimated the gross profit at 12 1/2 per cent., which amount came to Rs. 1,31,726. The assessee came up in appeal before the AAC and it was contended that the ITO should have accepted the book results. It was further contended that in any case the cost of material supplied by the Government amounting to Rs. 2,97,088 should not have been included in the gross receipts before estimating the net profit. The AAC agreed with the ITO that the book results could not be accepted on account of defects pointed out by the ITO as also of some other defects which were noticed by the AAC. The AAC upheld the rate of net profit as estimated by the ITO. He, however, accepted the contention of the assessee that the cost of material supplied by the Government amounting to Rs. 2,97,088 should be excluded from the gross receipts before applying the net profit at the rate of 12 1/2 per cent. This contention of the assessee was accepted on the grounds that from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal held that the assessee had not made any application for condonation of delay, nor had stated the reasons why, the certified copy could not be filed within a reasonable time of its receipt by the assessee and the appeal became barred by time. The Tribunal, accordingly, dismissed the appeal by its order dated 9th March, 1971. In the appeal in I. T. A. No, 134 (Cal) of 1969-70, it was submitted on behalf of the department before the Tribunal that the two reasons which were given by the AAC in deducting the cost of materials supplied by the Government from the gross receipts were not valid. The department also relied upon a decision of the Calcutta Bench of the Tribunal in I. T. A. No. 12976 of 1964-65 (Sri B. N. Chowdhury v. ITO) dated February 22, 1968, in support of its contention. On behalf of the department it was contended that, before deciding the question, the nature of the contract executed by the assessee should be kept in view. It was stated that the contracts were 11 in number. The Tribunal found that out of 11 contracts three were for supply of materials while 8 were for construction work. The Tribunal was of the view that the nature of the contract did not help t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the circumstances of the case, it is perverse to hold that in estimating the net profit of the assessee in the business of contract with the Government department the percentage is to be calculated on the gross receipt inclusive of the value of the materials supplied by the department itself ? (3) Whether, on the facts and in the circumstances of the case, while the assessee-firm keeps its account on cash basis the Tribunal was right in upholding the estimate made by the Income-tax Officer by application of twelve and half per cent. of the net profit on the receipt including the sum of Rs. 2,97,088 being the value of the materials supplied by the Government department which sum was never received by the assessee-firm ? " Question No. 3 has not been pressed by the assessee and, therefore,we decline to answer it. Regarding question No. 1, counsel for the assessee drew our attention to s. 253(1), (3), (5) and (6) of the I. T. Act, r. 47 and Form No. 36 of the I.T. Rules, 1962, as also to rr. 8, 9, 12 and 23 of the Appellate Tribunal Rules, 1963. He has submitted that the requirements regarding filing of a certified copy of the order of the AAC along with the filing of the mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Sheonath Singh v. CIT [1958] 33 ITR 591 (Cal), Gouri Kumari Devi v. CIT [1959] 37 ITR 220 (Pat), Chhotey Lal Krishan Lal v. CIT [1962] 45 ITR 490 (All), Punjab Co-operative Bank Ltd. v. CIT [1940] 8 ITR 635 (PC). Pratap Singh v. Shri Krishna Gupta, AIR 1956 SC 140, Anil Kumar Dutta v. Additional Member, Board of Revenue [1967] 20 STC 528 (Cal) as also a passage at pages 314-315 of Maxwell on the Interpretation of Statutes (12th edn.). On the question No. 2 it was submitted on behalf of the assessee that, no income accrued to the assessee out of the goods supplied by the Government and there was no profit to the assessee on the sum of Rs. 2,97,088 and, therefore, in making the estimate as the Tribunal included the said amount, its order is perverse. Counsel has referred to the case of Addl. CIT v. Trikamji Punia Sons [1977] 106 ITR 597 (AP) [FB] and CIT v. K. S. Guruswami [1973] 92 ITR 90 (Mad). Referring to a portion of the order of the AAC, at page 19 of the paper book, counsel submitted that the finding of facts by the AAC, viz , the rates at which " cement " and " steel materials " were supplied by the P.W.D. or the Railway department were higher than the market rates and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-filing of the certified copy of the order along with the memorandum of appeal. Counsel urged that, reading s. 253(3) and (5) of the I.T. Act and r. 9(1) and (2) of the Income-tax (Appellate Tribunal) Rules, there cannot be any doubt that the requirement of these provisions for filing of the certified copy along with the memorandum of appeal is mandatory in nature. Counsel submitted that in the instant case the memorandum of appeal originally presented to the Tribunal was not admitted by it. The assessee neither obtained any order for acceptance of its appeal under r. 9(2) of the Income-tax (Appellate Tribunal) Rules nor applied for extension of time for filing of the appeal under s. 253(5) of the I.T Act, 1961. Therefore, according to counsel, the Tribunal was right in its decision that as the appeal became competent on the day when the certified copy of the order was filed, i.e., 1st March, 1971, the assessee's appeal was time barred. Counsel has referred to the cases of Behari Lal Laxminarain v. ITO [1960] 39 ITR 649 (All) and Jagat Dhish Bhargava v. Jawahar Lal Bhargava, AIR 1961 SC 832. Counsel for the revenue drew our attention to the order of the ITO appearing at page 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as proper memoranda at all, and, as the assessee had not applied for condonation of delay, dismissed the appeal. It was held, inter alia, that the absence of or defect in the signature of the appellant in the memorandum of appeal was not an illegality or fatal but only an irregularity which could be rectified by amendment, the amendment taking effect from the date when the document had originally been filed. The memoranda as originally filed were not nullities and the Tribunal had power to accept them in the condition in which they found them at the time they were hearing the appeal provided they were satisfied that the assessee had in fact intended the appeal to be placed before them and had done so through the authorised representative although he had not himself signed the memorandum. It appears that in coming to the above decision Chakravorti C.J. mainly relied on the principles governing the question of signing of the pleadings and memorandum of appeal under the relevant provisions of the Civil Procedure Code and in particular on a decision of the Privy Council in the case of Mohini Mohun Das v. Bungsi Buddan Saha Das [1890] ILR l7 Cal 580 (PC) as also other cases deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectify the mistake and implead the ITO. In the case of Anil Kumar Dutta v. Additional Member, Board of Revenue [1967] 20 STC 528 (Cal), regarding defective filling up of declaration forms under the Bengal Finance (Sales Tax) Act, 1941, it was held that the omission to date the form when the transactions were all dated was not a matter of great importance. Similarly, the omission to put the date below the signature was not fatal. It was also held that unless a signature was forged, difference in styles or signatures would not invalidate declaration forms, because they were not required to be signed according to specimen signature. The cases cited above are in respect of omission or defective signature or defective description of the parties in the memorandum of appeal filed before the Tribunal and they were decided on the basis of the relevant rules of the Civil Procedure Code governing the questions of signing of the pleadings and memorandum of appeal or joinder of parties and the court decisions in that behalf. Therefore, it appears that the above cases stand on a different footing from the case where the memorandum of appeal is filed without being accompanied by the certifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointed out to the assessee who rectified the defects and filed a proper memorandum in triplicate on July 22, with an application for admission of the appeal. The Appellate Tribunal passed an order on the application " admit ". When the appeal came up for hearing an objection was raised by the department that the appeal was barred by time. It was held by the court that by passing the order " admit " the Appellate Tribunal accepted the prayer of the assessee to substitute the memorandum of appeal in proper form for the original one which was presented on July 6, in time. The order of admission had the effect of allowing the original memorandum of appeal to be amended so as to conform to the requirements of rule 10 of the Appellate Tribunal Rules. Such an amendment permitted by the Tribunal dated back to the date of presentation of the original memorandum of appeal, so that for purposes of computing limitation as well as for all other purposes, it would be deemed that the memorandum of appeal in proper form and in triplicate had been filed on July 6, and the appeal was not barred by limitation. From the cases cited above, it appears that when the signature in the memorandum of appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the order complained of was served and, if the assessee was not furnished with a copy of the order when notice of the order was served upon him, the time requisite for obtaining a copy of such order, shall be excluded. Rule 47(1) of the I.T. Rules, 1962, provides, inter alia, that an appeal under sub-s. (1) or sub-s. (2) of s. 253 to the Appellate Tribunal shall be in Form No. 36. Form No. 36 prescribed by the Board in exercise of the power conferred by the Act contains " Notes " and item No. 1 thereof provides that the memorandum of appeal must be in triplicate and should be accompanied by two copies (at least one of which should be a certified copy) of the order appealed against and two copies of the relevant order of the ITO. Rule 9(1) of the Income-tax (Appellate Tribunal) Rules, 1963, provides that every memorandum of appeal shall be in triplicate and shall be accompanied by two copies (at least one of which shall be a certified copy) of the order appealed against and two copies of the order of the ITO. Sub-rule (2) provides that the Tribunal may in its discretion accept the memorandum of appeal which is not accompanied by all or any of the documents referred to in sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Appellate Tribunal Rules that the memorandum of the appeal shall be accompanied by a certified copy of the order appealed against appears to us to be mandatory. From the facts recited earlier it appears that as the appeal when filed on 12th August, 1968, was defective because the memorandum of appeal was not accompanied by a certified copy of the order appealed from the office of the Tribunal by its letter informed the assessee of such defect and asked him to rectify the same. It, therefore, appears that the appeal was not admitted by the Tribunal. It further appears that a certified copy of the order was also not filed by the assessee immediately after it was received by it. Therefore, the position was that until 1st March, 1971, when the assessee filed a certified copy of the AAC's order the appeal remained incomplete, defective and incompetent and was not admitted by the Tribunal. Such defect was removed and the appeal became complete and competent on 1st March, 1971, when the certified copy of the order was filed. But on that date the time for filing of the appeal had already expired. Therefore, without an order of the Tribunal under s. 253(5) of the Act condoning the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contractor. Furthermore, in this case as we have to keep in mind, the total amount of profit had to be computed by applying the proviso of section 13 of the Indian Income-tax Act, 1922. The rate of profit had also to be determined by applying the proviso to section 13 of the Indian Income-tax Act, 1922. As the Tribunal had pointed out that if the normal experience and expectation of a contractor as to how the profit would vary, were taken into consideration and in the circumstances where the contractor had not been actually able to satisfy the terms of the contract and where the estimates were to be based by applying the provisions to section 13 of the Indian Income-tax Act, 1922, it cannot be said, in our opinion, that the Tribunal was not justified in upholding the decision of the Appellate Assistant Commissioner in the manner as it did. In cases where there was clear and unambiguous evidence that there was contract which provided sufficient limit, beyond which the tender could not be quoted and there was a stipulation that the contract was to be quoted at a particular rate, excluding the cost of materials, to be supplied by the contractee, other considerations might apply." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal was acting on surmise and guess without any evidence. Firstly, we have to observe that in this case the assessee has not maintained any books of account and the revenue applied a rate of profit of 12.6% on the gross amounts of bills received by the assessee. The assessee had tendered for the contract as a whole including the cost of materials which were subsequently supplied by the Government. There is no evidence on record to show that the assessee did not know about the supply of materials by the Government to be made or at what price. Furthermore, the gross profit has been computed on the total gross bill of the assessee. In the aforesaid background the Tribunal had come to the conclusion that the assessee, though tendered the contract as a whole, it must have included the cost of materials which were supplied by the Government as an element of profit in respect of cost of materials also. We are of the opinion that in the aforesaid background it cannot be said that the Tribunal was indulging in any surmise or acting without any proper evidence. Furthermore, we may point out that the question as referred to this court does not really challenge the findings of the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the railway authorities to the contractor should be taken into consideration for the purpose of computing the income of the contractor depends upon the facts and circumstances of each case. When the agreement provides that the materials will be supplied by the railway authorities to the contractor and the quotation was given by the contractor on that footing, the cost of materials supplied by the other party to the contractor cannot be included in the total receipts for the purpose of arriving at the profit earned by the assessee. In that case, it was further held that the very fact that some materials, viz., cement, iron and steel were to be supplied by the railway authorities and it was not open to the assessee to purchase the same from outside, would go to show that these items could never have entered into the making of the profits by the assessee. Hence, the cost of materials supplied by the railway authorities should not be taken into consideration in estimating the net income of the assessee. In that case distinguishing the case of V. D. Rajarathanam v. CIT [1968] 68 ITR 19 (AP) it was observed as follows : " Thus, it is clear from what has been pointed out by Jaganm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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