Contractor profit estimation on gross receipts was rejected where regular books were maintained and no defects were found.

Where a contractor maintained regular books of account and no specific defects were pointed out, profit could not be estimated merely on gross receipts. The appellate authority noted that the works were executed for the State Government, materials supplied by the Government remained its property and under its control, and the declared book results were reasonable in the circumstances. It held that there was no general rule requiring estimation of profit on gross receipts in every case, and the addition was therefore unwarranted; the declared results were accepted.

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Issues: Whether the addition made by the Income-tax Officer by estimating the contractor's profits on the gross receipts was justified when the books of account were found to be properly maintained and no specific defects were pointed out.

Analysis: The assessee, a contractor, had maintained regular books of account. The Income-tax Officer made a summary addition without recording any defects in the accounts. The appellate authority found that the works were executed for the State Government, that materials supplied by the Government remained its property and were under its control, and that the book results were reasonable in the circumstances. It further held that no general rule required profit to be estimated on gross receipts in every case and that the facts did not justify disturbing the declared results.

Conclusion: The addition was not warranted and the declared results were accepted.

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