1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR J U D G M E N T INCOME TAX APPEAL NO.177/2010 COMMISSIONER OF INCOME TAX -II, JODHPUR Vs. SHRI RADHA KISHAN BENIWAL Date of Judgment : 22.12.2010 HON'BLE MR. JUSTICE A.M. SAPRE HON'BLE MR. JUSTICE C.M. TOTLA Mr. M.R. Singhvi, for the appellant. BY THE COURT : (PER HON'BLE SAPRE,J.) This is an appeal filed by the Commissioner of Income Tax under Section 260-A of the Income Tax Act against an order dated 9.7.2009 passed by I.T.A.T., Jodhpur Bench, Jodhpur (for short called Tribunal) in I.T.A. No.115/JU/2009 for the period AY 2006-07. 2. The dispute relates to assessment year 2006 –2007. The assessee (respondent) is engaged in the business of civil construction work. Their accounts are audited as required under Section 44 AB of the Act. 3. The dispute arose as to what should be the % of the gross profit that should be applied on the turn over of the assessee for the year under consideration. The A.O. invoked the provisions of Section 145(3) ibid and applied the 6% net profit and accordingly worked out the taxing liability. The assessee filed an appeal before the Commissioner of Appeals and it is in this appeal; the Commissioner of Appeals enhanced the rate of net profit as 10.372%. It is against this 2 order; the assessee felt aggrieved and filed further appeal before the Tribunal. By impugned order, the Tribunal allowed the assessee’s appeal in part and while modifying the order passed by Commissioner of Appeals applied the rate of 8%. It is against this order, the Commissioner of Income Tax has felt aggrieved and filed this appeal under section 260-A of the Act. 4. This is what the Tribunal while allowing assessee’s appeal held in para 5 and 6 of the impugned order: “On careful analysis of the material available before the Tribunal in the light of the submissions made by both the parties the undisputed facts relating to the issues under consideration are that the facts and circumstances for the assessment year 2005-06 are not similar to the facts and circumstances prevailing in the present year under consideration, that is, assessment year 2006-07. This is substantiated by the assessee with his contention that the assessee has quoted lower rate than BSR rates due to keen competition, and increase in cost of bitumen as well as diesel from the date of filing the tenders till the date of actual execution of contracts have also contributed for heavy reduction on the profit earned by the assessee. In view of the peculiar circumstances, even the past history of the assessee is not to be based for estimating the profit for the present period under consideration. This contention of the assessee finds favour from the decision rendered in the case of ITO Vs. Bhatu Bros [2004] 1 SOT 569 [Jod], Madan Lal Vs. ITO [2006] 99 TTJ 538 [Jod], Micro Investments Co. Vs. ITO [2008] 12 DTR 501 [Chd.]. As can be seen from the assessment order passed for assessment year 2003-04 made available at page 11 to 16 of the APB, it is found that the Assessing 3 Officer has allowed deduction on account of sales tax even after application of net profit rate. Apart from that, the orders passed by the Jaipur Bench and this Bench of the Tribunal in the case of Ashok Kumar Tiwari ITA No.2272, 2273/JU/1994, made available at page 17 to 23 of the APB, Mhata construction Co. ITA No.253/JU/2006 placed at pages 24 to 27 of the APB and in the case of DCIT Vs. Jain Construction Company ITA No. 4/JU/2005 placed 28 to 29 of the PB also support the contention of the assessee that even after estimation of net profit rate, sales tax is further to be deducted. In the assessment order at page 2, the Assessing Officer has extracted the contracts taken by the assessee during the period under consideration along with their amount showing whether the tenders are below the BSR which is extracted as below: S.NO PACKAGE NO. %above/below Tendered amount Difference to BSR 1 RJ-21-07 05.66% below 15871615/- 898333/- 2 RJ-21-32 19.23% below 33352166/- 64113621/- 3 RJ-24-08 11.26% below 6252402/- 704020/- 4 RJ-24-08 17.29% below 12760240/- 2206245/- 5 RJ-24-06 13.66% below 13323478/- 18199987/- 6 EEN-5907 23.66% below 12609705/- 2983456/- 7 RJ-24-05 12.86% below 3867844/- 1783404/- 108037450/- 16809066/- 6.On going through the above said table, it is clear that the assessee has quoted below the BSR rates in the tenders from minimum 5.66% to 23.66%. Therefore, on an average the assessee has quoted above 15% below the BSR rates. Taking all these peculiar circumstances, prevailing for the period under consideration, which were not controverted either by the Assessing Officer or by the ld. CIT(A) bringing on record any material 4 whatsoever. Under these facts and circumstances of the case, we are of the considered view that the rates fixed by the ld. CIT(A) is also on higher side. More so, when it is established by the assessee that his gross contract receipts for the period under consideration increased by 300% to that of for the assessment year 2005- 06. Thus, in the absence of any contra material made out by the departmental authorities, the statistics given by the assessee are to be accepted in view of the peculiar circumstances that were made out by the assessee before the departmental authorities. Accordingly, we are of the considered view that the profit rate to be taxed in the hands of the assessee for the period under consideration is fixed at a reasonable rate of 8% on net contract receipts of Rs. 6,98,05,911(13,02,01,119, minus Bitumen Rs.5,10,97,765andSub- Contracts Rs.92,97,443) subject to depreciation of Rs. 11,55,967/- and Sales Tax paid at Rs. 19,53,016/- during the year under consideration. Accordingly, the issue number 3 is hereby allowed. This finding is given basing on peculiar circumstances detailed supra and hence it will not have any effect of binding precedence.” 5. Mere perusal of para 5 and 6 would go to show that Tribunal has gone into the facts and then accepted the factual explanation offered by the assessee as to why and on what basis and for what reason their turn over was increased and why a particular % G.P rate was applied. This in our opinion does not involve any substantial question of law. Since the Tribunal examined the whole issue on facts and came to a conclusion that the reasons assigned by the assessee are plausible. This Court in an appeal filed under Section 260-A ibid cannot examine the correctness of factual findings 5 recorded by the Tribunal. It is not permissible because it does not involve any issue of law much less substantial question of law. 6. Though learned counsel for the appellant tried to press in service submissions but in our view the submissions are mostly on facts and hence we are not impressed with such submissions. 7. In view of foregoing discussion, we find no merit in the appeal which does not involve any substantial question of law within the meaning of section 260-A ibid . The appeal thus fails and is hereby dismissed in limini. No costs. [C.M. Totla ], J. [A .M. Sapre],J. /Anil/