2006 (7) TMI 188

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.... the net profit rate is applied on contract receipts of an assessee for estimating his income from contract work when the provisions of sections 68 and 69B of the income-tax Act are directly hit in the instant case ?" 2. The assessee is a civil contractor. He filed income-tax return for the assessment year 1996-97 on January 10, 1996. The assessment was made which was cancelled under section 263 of the Income-tax Act, 1961 (for short, "the Act"). Fresh assessment was made on February 28, 2002, under section 144 of the Act at total income of Rs. 24,99,250 including additions of Rs. 9,25,939 on account of cash introduced in the books and Rs. 9,77,535 on account of payments made for purchases outside the books of account. 3. On appeal, the C....

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.... basis of these details were the same books of account, the sum total of these factors proves that it is a case where the profits were not supported by the complete books of account and even the books for one contract were not reliable. Therefore, the net profit rate had to be estimated in such a case as done by the Assessing Officer. Herein I do not agree with the contention of the appellant as held by the hon'ble jurisdictional Income-tax Appellate Tribunal that the rate of 10 per cent. will be reasonable because that was a case where the proper books were maintained by the assessee but it is not so in the case of the appellant. Considering the factors that the appellant initially defaulted in not declaring all the receipts and then also ....

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.... addition on account of cash credits even if the net profit rate is applicable could be made but it depends upon the facts of each case. This is a case before us which clearly shows that the addition on account of cash credits would be unjustified. We accordingly do not find any merit in the submissions of the learned DR with regard to the making separate addition on account of cash credit of Rs. 12,28,600. Similarly, the addition of Rs. 1,75,766 was rightly deleted by the Commissioner of Income-tax (Appeals) as it was part of the payment of purchases, which would merge with the addition made on account of addition of net profit rate. The hon'ble Allahabad High Court in the case of CIT v. Banwari Lal Banshidhar reported in [1998] 229 ITR 22....