TMI Blog1978 (8) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... ein an income of Rs.1,20,670. 3. The assessee appellant was deriving income from contract business and it showed total payments, net profit and its rate at Rs. 17,73,421, Rs. 1,20,688 and 6.8 per cent respectively. 4. The ITO found the net profit shown at 6.8 per cent to be low as he was of the view, that in the line of business, the net profit rate was about 12 per cent. Consequently, he asked the assessee respondent to explain the causes for the low rate of net profit. The assessee respondent stated the reason for it in its letter wherein it stated that out of total payments of Rs. 17,73,421, Rs. 1,13,000 were on account of material supplied by the Government of which there was hardly any profit; that it was the period of steep rise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and thereby concluded as under :- "The appellant showed before the Ld. ITO that the cost of pipes and M.S. Rounds increased by 52 per cent. That the contract was awarded by the Improvement Trust, Jullunder @ 116.91 per cent above the schedule. These contracts subsequently due to rise in the prices were issued at the rate of 136.91 per cent above the schedule prices. The Ld. Officer has mistakenly stated the subsequent rate of awarding contracts at 118.1 per cent. The rates of pipes for example G.I. pipes 1/2" was raised from Rs. 1.20 on 25th April, 1973 to Rs. 2.50 on 10th Nov., 1973. Similarly, G.I. pipe 3/4" has registered an increase in prices from Rs. 1.40 to Rs. 3.00. Keeping in view the enormous increase in the prices of raw mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting year 1973-74 and the profit was adversely affected. It also stated comparative rates during the accounting year 1973-74 which are hereinafter reproduced :- . Rate on . Rate on . M.S. Round 14-6-73 per qtl. 137.20p. 15-11-73 Rs. 148 per qtl. G.I. Pipe 1/2" A Class 25-4-73 per qtl. 1.20p. 10-11-73 Rs.2.50 per ft. G.I. Pipe 1/4" A Class -do- 1.40p. -do- Rs.3.00 per ft. G.I. Pipe 3" June, 73 per Pipe. 17.50p. 15-9-73 Rs.26.15 per pipe. G.I. Pipe 4" -do- 20.50p. -do- Rs.29.15 per pipe The assessee respondent also stated that on 25th Feb., 1974, the tender for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition that the material supplied to the assessee respondent was of the value of Rs. 1,13,000. The material was purchased by the assessee respondent when the prices has risen abundantly as is evident from the finding of the AAC and that of his explanation referred to above. Therefore, in this situation, it is natural for the assessee respondent to have little margin of profit. 13. Besides, the contention of the assessee respondent that it took the contract at 116.91 per cent above the schedule when on Feb., 25, 1974, such contracts were taken at 136.91 per cent above schedule rates. This shows that there is hard competition in this line of business and as such the margin of profit in the accounting period cannot be said to be on better ..... X X X X Extracts X X X X X X X X Extracts X X X X
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