Law:

Section:

Section 145 of the Income-tax Act, 1961 - Method of accounting - Works contract - Assesses was carrying on business of executing contracts - Without recording any finding as to whether material supplied to assessee by housing department was in accordance with any agreement between them or not and as to under whose control material supplied existed, allowed exclusion of value of material supplied from gross receipt of assessee in order to determine net profit - Whether Tribunal was not justified and matter was to be referred back for reconsideration - Held, yes FACTS The assessee was carrying on business of executing contracts. In the relevant accounting year, while considering the rate of profit the ITO did not deduct the value of raw materials supplied by the housing department for which the assessee had executed a contract. On appeal, the AAC, however, held that the value of the materials should have been deducted and only on a net payment profit should have been estimated. On appeal by the revenue, the Tribunal also upheld the AAC's order. However, the Tribunal also did not consider as to whether there was any contract between the assessee and the housing department. On reference: HELD It was necessary that the agreement of contract, if it was in existence between the assessee and the housing department, then the Tribunal should have considered it. From the orders of the ITO, the AAC and the Tribunal it was not evident whether there was any agreement of contract between the assessee and the housing department and whether it was filed by the assessee. Without the agreement of contract relating to the housing department, it was not possible to answer the question referred by the Tribunal. Whether the Tribunal had come to a finding on the basis of the agreement and/or any other material or whether the housing department had control over the materials supplied to the assessee or not and unless this finding was specifically given by the Tribunal, it was not possible to answer the reference. Accordingly, the matter was referred back to reconsider the question afresh. CASE REVIEW Kalpnath Rai v. CIT [1985] 151 ITR 281 (Pat.) followed and relied upon. CASES REFERRED…

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