Tribunal adjusts profit rates for tax appeals, cites lack of evidence.

The appeals in ITA Nos. 818, 819 & 865/Chd/2009 were partly allowed by the Tribunal, setting aside the CIT(A)'s enhancement of the net profit rate to 12% and directing the application of a 7% rate for the individual assessee and an 8% rate for the partnership firm. The Tribunal found no merit in the CIT(A)'s decision to increase the rate without sufficient evidence and upheld the Assessing Officer's application of the lower rates based on previous business conditions and precedents.

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Issues Involved:
1. Validity of the CIT(A)'s order.
2. Justification of enhancing the income by applying a net profit rate of 12%.
3. Ignoring the CBDT circular.
4. Denial of deductions for depreciation, interest, and other expenses.
5. Non-reduction of payment made to subcontractors from gross receipts.

Summary:

1. Validity of the CIT(A)'s Order:
The ground No.1 raised by the assessee being general, is dismissed.

2. Justification of Enhancing the Income by Applying a Net Profit Rate of 12%:
The CIT(A) enhanced the net profit rate to 12% based on the Punjab & Haryana High Court's decision in M/s Prabhat Kumar (ITA No. 293 of 2008). The assessee argued that the business conditions were the same as in previous years where a 7% rate was applied. The Tribunal found no merit in the CIT(A)'s order to apply a 12% rate without evidence of higher profits and upheld the Assessing Officer's application of a 7% rate.

3. Ignoring the CBDT Circular:
The Tribunal did not specifically address this issue in the judgment.

4. Denial of Deductions for Depreciation, Interest, and Other Expenses:
The CIT(A) held that no further deduction is to be allowed against the income estimated by applying a net profit rate, following the Tribunal's decision in Shivam Construction Company (ITA No.383 and 384/Chandi/2004). The Tribunal upheld this view, stating that no further deductions are allowable once the income is determined by applying a net profit rate.

5. Non-Reduction of Payment Made to Subcontractors from Gross Receipts:
The Tribunal upheld the Assessing Officer's method of determining income by applying a net profit rate of 7% to the total contract receipts, less the cost of material supplied by the Department, and dismissed the ground raised by the assessee.

Additional Issue in ITA No.865/Chd/2009:
The assessee, a partnership firm, had its net profit rate enhanced from 8% to 12% by the CIT(A). The Tribunal directed the Assessing Officer to apply an 8% net profit rate, consistent with the earlier years and the father's business.

Ex-Parte Order Without Reasonable Opportunity:
The Tribunal dismissed the ground regarding the ex-parte order, upholding the application of an 8% net profit rate.

Conclusion:
The appeals in ITA Nos. 818, 819 & 865/Chd/2009 are partly allowed, with the Tribunal setting aside the CIT(A)'s enhancement to a 12% net profit rate and directing the application of a 7% rate for the individual assessee and an 8% rate for the partnership firm.

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