Law:

Section:

JUDGMENT Obul Reddi, CJ.-The question referred for our decision is; "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the net profits should be estimated on the net amount received by the assessee, i.e., after deducting the cost of material supplied by the Government from the gross amount of the bills?" The assessee is a contractor executing works of various Government departments. He filed a return declaring an income of Rs. 20,852 from his contract business and from a printing press which he runs. It has been the assessee's case throughout that he has not maintained any accounts for the various contract works executed by him. He, however, produced receipts showing the amounts received by him from the Government for the various contract works executed by him. He supplied the following figures for the three assessment years in question: Period Gross amount Materials supplied by the Govt. Net amount Rs. Rs. Rs. 1.1960-61 1,41,834 67,454 74,380 2.1961-62 1,86,412 94,212 92,200 3.1962-63 1,46,754 89,241 87,543 According to him, the total receipts mentioned in the statement related only to the actual receipts, etc., the gross value of the bills less the cost of materials. It was, therefore, his case that the assessing authority as well as the Appellate Assistant Commissioner erred in estimating his net profit on the gross value of the bills, which includes the material supplied by the Government. This contention of the assessee found favour with the Tribunal and the Tribunal, therefore, held that the assessee was liable to be taxed only on the net receipts as shown by him and not on the basis of the gross value of the bills. The Commissioner of Income-tax moved the Tribunal for reference under section 66(1) of the Income-tax Act, but as that application was dismissed, he moved this court under section 256(2) and this court directed the Tribunal to submit the statement of case and refer the question formulated by it to this court for decision. Mr. Srinivasa Murthy, the learned counsel appearing for the revenue, contended that the decision of the Appellate Tribunal runs contrary to the view expressed by…

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