Law:

Section:

Section 145 of the Income-tax Act, 1961 – Method of accounting – Estimation of profit – Assessment years 1957-58 to 1962-63 – Assessee was a contractor and undertaking jobs of various Govt. departments – Books of account of assessee were rejected by ITO and he determined assessee's income on estimate – Terms and conditions as to supply of materials by contractee was not known – Element of profit on such supply if any was to be ascertained and it was also not known whether assessee had submitted its tenders for said contracts anticipating on being assured of supply of such materials – Whether case was to be remanded back to Tribunal to ascertain terms and conditions of contract – Held, yes FACTS The assessee was a contractor and undertook jobs under various Government departments. The books of accounts were maintained by the assessee. The were not accepted by the ITO at the time of assessment and the assessee's income was determined on estimate. For the assessment years 1957-58 to 1959-60, estimated amounts were added to the net receipts of the assessee. For 1959-60, this figure was 10 per cent on account of the materials supplied by the Government departments. For the assessment years 1957-58 and 1958-59, lump sum additions were made on this account. For the assessment year 1962-63, the ITO went into the matter in detail. The assessee was called upon to produce certificates from various authorities under which he had carried on the work. Independent enquiries were also made from such authorities. On the basis of the aforesaid the ITO came to the conclusion that the total gross receipts during the said year would be Rs. 7,76,000 as against the amount of Rs. 5,25,000 as shown by the assessee. On such material, the ITO also reopened the proceedings for the earlier assessment years including the assessment years 1954-55, 1955-56 and 1956-57. On appeal, the AAC held that in all the years the assessee's income should be determined by applying a flat rate of 12.5 per cent on the net receipts of the assessee and that the value of materials supplied to the assessee by the departments concerned should not be included in such net receipts for the purpose of application of…

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