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Section 145 of the Income-tax Act, 1961 - Method of accounting - Estimation of profits - Assessment year 1984-85 - Assessee-firm was carrying on construction business - During period relevant to assessment year under consideration, it had taken a contract for construction of hotel building - Assessee contended that it was only on completion of project that profitability or otherwise of contract could be judged - Assessing authority, however, found that there was no day-to-day maintenance of accounts and, therefore, concluded that profit from return could not be ascertained and, accordingly, estimated profit at 8 per cent of gross receipts which was reduced to 5 per cent by Commissioner (Appeals) - Whether in absence of properly maintained accounts, authorities were bound to follow accepted method of calculating profits on yearly basis and 'project-completion-method' was inapplicable - Held, yes FACTS The assessee-firm was in the business of building and construction. During the year relevant to the assessment year under consideration, there were some small contracts which were completed more or less in a year and there was a big contract which was to continue for many years. During assessment proceedings, the assessing authority found that there was no day-to-day maintenance of accounts and, therefore, he came to the conclusion that the profits from the return could not be ascertained and, accordingly, estimated the profit. In appeal, the Commissioner (Appeals) rejected the assessee's contention that it was only on the completion of the contracts that profitability or otherwise of the same could be judged. He directed the assessing authority that in respect of the said big contract, the profit be assessed on ad hocbasis at 5 per cent of gross receipts. On further appeal, the Tribunal disapproved the Commissioner (Appeals)'s order and directed the assessing authority to determine the profit only on the year of completion of the project. On reference : HELD There were no proper contract accounts whatsoever. Therefore, there was no way in knowing as to what were the receipts and the spendings on the part of the assessee. Therefore, if the Commissioner (Appeals)…

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