TMI Blog2011 (12) TMI 583X X X X Extracts X X X X X X X X Extracts X X X X ..... of gross profit and net profit for the last four years and the same is reproduced as under:- A.Y. Turnover G.P. G.P.% N.P.% 2002-03 5,27,32,870 53,36,566 10.12% 2.08% 2003-04 4,37,62,856 53,74,078 12.21% 1.03% 2004-05 4,50,07,549 54,98,488 12.22% 0.89% 2005-06 5,48,46,737 65,26,761 11.90% 0.84% 2006-07 14,01,79,045 1,71,15,840 12.21% 4.83% From the above chat, the AO noticed that the assessee has shown the gross profit at 12.21% which is better as compared to preceding year. It is lower than the gross profit rate disclosed in the assessment year 2004-05. Before the AO, the assessee agreed that he is not maintaining any stock register of material consumed on day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als or evidence to suggest that the contract works were taken on below schedule rates. It is true that past history of the case is the best guide to determine the rate of profit but in case there is substantial increase in the turnover then one will have to consider as to whether some discount is to be given in respect of application of gross profit rate as applied in the preceding year. During the year under reference, the turnover is to the extent of ₹ 14.01 crores as against ₹ 5.48 crores of the preceding year. The net profit rate is better as compared to preceding year. We will have also to take note of the facts noticed by the AO that the auditor has pointed out that there might be some personal expenses pertaining to the partners in the form of travelling expenses, food expenses and entertainment expenses. We therefore, feel that it will be fair and reasonable to restrict the addition to ₹ 2,03,000/- as against ₹ 4,06,547/- made by the AO. 4.1 The fourth ground of assessee is that the ld. CIT(A) has erred in enhancing the income by disallowing claim of sub-letting commission amounting to ₹ 33,38,926/- paid to the main contractor from whom the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commission crystallizes prior to receipt of payment of bill and credits on account of execution of contract by the subcontractor. The gross receipt is also to be received by cheque in the bank account of the main contractor and at no stage the cheque of the gross amount is received by the sub contractor in his bank account. This clearly establishes that the gross receipt of the sub contractor is the receipt of payment received against bills from the contractee department as reduced by the amount of sublet commission. The method of accountancy as provided in the sublet contract according to which the gross amount received on account of work executed by the sub contractor shall be credited to the account of the sub contractor is of no consequence to determine the moment when the liability regarding payment of subject commission crystallize which as has pointed out above, had already crystallized at the moment the agreement was entered into by the two parties. The agreement does not provide any precondition upon fulfillment of which the amount of sublet commission shall become payable by the assessee to the main contractor which establishes that the liability to pay the sublet commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y proceedings u/s 271(1)(c) r.w.s. 274 is initiated by issue of notice u/s 274 separately. 4.4 For the assessment year 2003-04, the AO allowed the claim of deduction on account of sublet commission. In that assessment year, the ld.CIT(A) has not issued any show cause notice for enhancement and the deduction allowed by the AO was not disturbed. Similarly, for the assessment year 2005-06, the AO allowed deduction on account of sublet commission and in the appeal, the ld.CIT(A) has not issued any show cause notice for enhancement. ITAT Jodhpur Bench in the case of Bhawan Va Path Nirman (Bohra) and Co. vide order dated 28-05-2001 upheld the order of the ld.CIT(A) in which subletting commission was held to be separately allowed. It will be useful to reproduce para 8 and 9 from the order of the Tribunal dated 28-05-2001 8. The second issue relates to the allowability of deduction on account of subletting commission separately from the income of the assessee from contracting business estimated by applying net profit rate . This issue has been raised in Revenue s appeal being ITA No. 17(JDPP)/98 in ground no. 2 (sub-part) 9. After considering the rival submissions and perusing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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