TMI Blog1991 (10) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Grounds Nos. 2 3 raised by the assessee are under: "(2) on the facts and circumstances of the case, the learned CIT(A) erred in confirming addition of Rs. 54,676 when the appellant had maintained perfect books of accounts and that the book result ought to have been accepted. (3) Without prejudice to the above, the addition is excessive." This ground has not been properly framed. The assessee declared gross profit of Rs. 54,676 on total declared contract receipts of Rs. 15,18,715 giving a G.P. rate of 3.6 per cent. The ITO observed that the rate of profit declared by the assessee is ridiculously low. He applied net profit rate (before allowing depreciation) of 12 per cent. Profit on disclosed receipts was estimated at Rs. 1,82, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his appellate order. He, therefore, urged that the order of the CIT(A) in relation to the aforesaid point should be confirmed. 3.4. We have carefully considered the rival submissions made by the learned representatives and have also gone through the orders of the departmental authorities, as well as other relevant documents to which our attention was drawn during the course of hearing. The comparative statement of contract receipts and profit declared and assessed in the case of the assessee for asst. yrs. 1981-82 to 1987-88 clearly reveals that the correctness of the declared results shown as per books of account maintained by the assessee was never accepted except in asst. yrs. 1983-84 and 1986-87. The assessment for asst. yr. 1986- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts the additions made by the ITO is those two years were confirmed by the CIT(A). It appears no further appeals were preferred by the assessee in those two years. In the year under consideration no details have been furnished as to whether or not the declared contract receipts of Rs. 15,18,715 includes the value of any material supplied by the government Departments for execution of the contracts in question. In view of the aforesaid facts and circumstances, we are of the view that the ITO was justified in resorting to estimation of profit by rejecting the book version. We, however, find that the net profit rate of 12 per cent (before depreciation) applied by the ITO and confirmed by the CIT(A) is excessive. The ratio of net profit assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar is the position as regards payment of Rs. 5,000 to M/s Narayan Transport, which is also a sister concern of the appellant. 4.1. Before us the learned counsel for the assessee contended that the said amount cannot be separately added as addition in the declared G.P. has been separately made. The payments were covered by the exceptions provided in r. 6DD(j). It was also pointed out that when the profits are estimated by resort to estimation by invoking the provisions of s. 145(2) the provisions of s. 40A(3) would not remain applicable, He, therefore, urged that the said addition should be deleted. 4.2. The learned Departmental Representative submitted that the provisions of s. 40A(3) can be independently applied in relation to cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In view of our finding given in relation to application of net profit rate, the net profit before depreciation at the rate of 6 per cent on declared contract receipts will work out to Rs. 91,123. It is a case where the method of accounting as well as the account books have been rejected and the profits have been computed by applying a flat rate of net profit at the aforesaid percentage on the declared amount of contract receipts. Provisions of s. 145(2) have, therefore, been clearly invoked in the present case. The provisions of s. 40A enumerate exceptions of payments not deductible in certain circumstances. Sub-s, (3) of s. 40A provides for disallowances out of expenditure the payment of which is made otherwise than by a crossed cheque o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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