Tribunal Upholds Net Profit Rate Based on Assessee's Past History for Civil Contracts

The appeal involved the application of a net rate of profit on turnover from civil contracts for A.Y. 2008-09. The AO rejected the books of accounts and increased the net profit rate to 11.50%. The Tribunal ruled that the rate applied in the previous year was relevant post-rejection of books, emphasizing the importance of the assessee's past history. Despite lack of scrutiny in A.Y. 2007-08, the Tribunal held that past history is crucial after book rejection. Consequently, the Tribunal applied the net profit rate of the past year, allowing the appeal.

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Issues involved: Application of net rate of profit on turnover derived from civil contracts for A.Y. 2008-09.

Summary:
The appeal pertains to A.Y. 2008-09 and concerns the application of a net rate of profit on the turnover derived from civil contracts. The assessee disclosed a net profit rate of 8% on a total turnover of &8377; 1,21,49,964. However, due to lack of substantiation of expenses and failure to maintain proper records, the AO rejected the books of accounts and applied a net rate of 8.5%, which was further increased to 11.50% by the ld. CIT(A).

The argument put forth by the ld. AR was that after the rejection of books of account, the rate applied in the immediately past year becomes relevant. The Tribunal agreed with this argument, emphasizing the significance of the assessee's past history in determining the net profit rate. Despite the absence of scrutiny in A.Y. 2007-08, the Tribunal held that the past history of the assessee is crucial post-rejection of books, irrespective of whether the profit rate was accepted in a scrutiny assessment or a regular assessment. Consequently, the Tribunal applied the net profit rate of the past year and allowed the appeal.

In conclusion, the appeal of the assessee was allowed, and the order was pronounced in the open court on 23/09/2013.

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