Net profit estimation on contract receipts reduced to 5% after comparable industry data and lack of books of account.

Income from contract receipts was estimated because the assessee did not maintain books of account. The Income-tax Officer applied an 8% net profit rate and the first appeal reduced it to 7%, but the Tribunal relied on comparable contract cases and a Coal Mines Authority certificate showing lower industry margins of 2.94% to 5.37%. On that material, it held that a 5% net profit rate on total receipts was appropriate and granted consequential relief to the assessee.

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Issues: Whether the net profit from the assessee's contract receipts was correctly estimated at 8% by the Income-tax Officer and 7% in first appeal, or whether a lower rate was warranted on the material placed before the Tribunal.

Analysis: The assessee did not maintain books of account, so income had to be estimated. Comparable instances from similar contract work showed lower net profit rates, and a certificate from the Coal Mines Authority indicated that net profit in such business generally ranged between 2.94% and 5.37% of receipts. On that material, the Tribunal held that a 5% rate on total receipts was appropriate.

Conclusion: The net profit was to be estimated at 5% of the total receipts, with consequential relief to the assessee.

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