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Commissioner of Income-tax Vs. Kartar Singh Gill - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Reference No. 18 of 1974
Judge
Reported in[1979]117ITR618(P& H)
ActsIncome Tax Act, 1961 - Sections 145(1)
AppellantCommissioner of Income-tax
RespondentKartar Singh Gill
Appellant Advocate D.N. Awasthy and; B.K. Jhingan, Advs.
Respondent Advocate B.S. Gupta and; C.R. Dahiya, Advs.
Excerpt:
.....by way of limitation is in the nature of a restraint on the remedy provided under the act. so viewed two inferences are clear viz., (1) sections 80 and 89 of the act read with rule 85 of the rules make it obligatory for the authorities making the order to communicate it to the applicant concerned and (2) the period of limitation for any appeal against the order is reckonable from the date of such communication of the reasons would imply communication of a copy of the written order itself, a party who knows about the making of an order cannot ignore the same and allow grass to grow under its feet and do nothing except waiting for a formal communication of the order or to choose a tenuous plea that even though he knew about the order, he was waiting for its formal communication to..........price of stores supplied by government was not to be included while applying the flat rate to the assessee's contract receipts ?'2. a division bench of this court in brij bhushan lal v. cit took the view that where the assessee does not produce his accounts to satisfy the ito so as to enable him to assess actual profits or income earned by him from contracts and leaves it to the officer to determine the same on the basis of estimate, the percentage of profit, is not determined with reference to each item of the material involved in theperformance of the contract but on the amount of the whole contract which cannot be divided into different parts according to the nature and source of supply of the materials used for that purpose. this view has been followed in cit v. brij bhushan lal.....
Judgment:

B.S. Dhillon, J.

1. This is a reference made by the Income-tax Appellate Tribunal under orders of this court. The assessee is a military contractor. During the accounting period relevant to the assessment year 1964-65, the assessee took three M.E.S. contracts. The ITO found that the expenditure of the assessee was not supported by vouchers and he detected some other mistakes also in the accounts. After applying the provisions of Section 145(1) of the I.T. Act (hereinafter called 'the Act'), the ITO assessed the profit from these contracts by applying a flat rate of 10% on the total receipts. The AAC allowed the appeal of the assessee and held that no rate of profit could be applied on the value of the stores supplied by the Government and this order was upheld by the Tribunal. The question of law referred at the instance of the Tribunal in accordance with the directions of this court is as follows :

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in confirming the order of the Appellate Assistant Commissioner that price of stores supplied by Government was not to be included while applying the flat rate to the assessee's contract receipts ?'

2. A Division Bench of this court in Brij Bhushan Lal v. CIT took the view that where the assessee does not produce his accounts to satisfy the ITO so as to enable him to assess actual profits or income earned by him from contracts and leaves it to the officer to determine the same on the basis of estimate, the percentage of profit, is not determined with reference to each item of the material involved in theperformance of the contract but on the amount of the whole contract which cannot be divided into different parts according to the nature and source of supply of the materials used for that purpose. This view has been followed in CIT v. Brij Bhushan Lal Ramesh Kumar and CIT v. K. S. Reddy : [1976]103ITR822(AP) . The latter authority is that of the Andhra Pradesh High Court, which stands over-ruled by a Full Bench of the same High Court in Addl. CIT v. Trikamji Puma & Sons : [1977]106ITR597(AP) .

3. On the other hand, we find that a contrary view has been taken in CIT v. K. S. Guruswami Gounder & K. S. Krishnaraju : [1973]92ITR90(Mad) , M. P. Alexander & Co. v. CIT : [1973]92ITR92(Ker) , Trilokchand Chunilal v. CIT : [1976]104ITR732(Guj) , Addl. CIT v. Trikamji Punia & Sons : [1977]106ITR597(AP) and CIT v. J. S. Serwarey . The main ground, on which the above mentioned authorities are based, is that the tax has to be levied on the income, which would, in turn, mean the profit. The value of the goods, which were supplied by the Government and for which an amount was deducted by the Government from the contract account, cannot form the basis of any profit. Therefore, the said value has to be deducted and no tax can be levied on the said amount. Mr. Gupta, the learned counsel for the assessee, contends that the view taken in Brij Bushan Lal's case and other decisions while following the said view is not the correct position in law. We are of the opinion that the matter requires reconsideration by a larger Bench. The papers may be placed before my Lord the Chief Justice for constituting a larger Bench.


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