Law:

Section:

Section 145 of the Income-tax Act, 1961 - Method of accounting - Rejection of accounts - Assessment year 1993-94 - Assessee-firm entered into a civil contract work for an irrigation project - As there were disputes and differences between assessee and irrigation department, matter was referred to arbitration - Arbitrator awarded certain amount in favour of assessee - Subsequently, even though assessee produced books of account and other documents along with special audit report under section 44AD, Assessing Officer did not accept said books of account and treated entire amount awarded as income of assessee - On appeal, Commissioner (Appeals) sustained rejection of accounts but followed a different method of estimating income and directed Assessing Officer to adopt 8 per cent of gross receipt as income - Tribunal confirmed order of Commissioner (Appeals) - Whether, on facts, appellate authorities were justified in totally discarding books of account relied upon by assessee in matter of estimation of income - Held, no - Whether question of estimation of income from contract receipt was to be considered by Assessing Officer himself in accordance with law - Held, yes - Whether, therefore, matter involving treatment of entire award amount was to be remitted to assessing authority for fresh consideration - Held, yes FACTS The assessee-firm was engaged in the execution of civil work. It entered into a civil contract work for an irrigation project. However, as there were disputes and differences of opinion between the assessee and the irrigation department, the matter was referred to arbitration. The arbitrator passed an award under which the assessee had obtained an additional amount of Rs. 87,51,092, consisting of payment towards additional and extra work, compensation for loss and damage and interest. The main dispute in the instant appeal filed by the department related to the substitution of method of estimation of the income made by the Assessing Officer and the adoption of estimation of income based on percentage of the profit. Though the assessee had produced the books of account and other documents along with a special audit report under section 44AD, yet the…

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