1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR <<>> :: ORDER :: Commissioner of Income, Bikaner Vs. M/s J.R. Construction Company D.B.INCOME TAX APPEAL NO.72/2010. ... Date of Order :::: 11.08.2010 PRESENT HON'BLE MR. JUSTICE DINESH MAHESHWARI HON'BLE MR. JUSTICE C.M. TOTLA Mr.K.K.Bissa for the appellant. <><><> BY THE COURT: This appeal under Section 260-A of the Income Tax Act, 1961 ['the Act'] by the appellant (Revenue) is directed against the judgment and order dated 15.12.2009 passed by the Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur ['the Tribunal'] in ITA No.256/JU/2009. Put in brief, the relevant background aspects of the matter are that the return filed by the respondent assessee, a civil sub contractor, was taken up for scrutiny assessment. During the assessment proceedings, after hearing the assessee and considering the record made available, the 2 Assessing Officer ['the AO'] rejected the books of account and, invoking Section 145(3) of the Act, proceeded to make estimate of the net profit taxable in the hands of the assessee while applying the net profit rate of 8.17% based on the assessment completed in the case of the assessee for the immediate preceding year. Aggrieved by the aforesaid order dated 28.11.2008, the assessee preferred an appeal that was considered and partly allowed by the Commissioner of Income Tax (Appeals), Bikaner ['the CIT (A)'] by the order dated 09.02.2009. The learned CIT (A) did not approve of reduction of sublet premium of Rs.22,88,414/- from the gross contract receipts and held that the same was rightly claimed out of the Profit & Loss account by the assessee. The learned CIT (A) further found that the computation and calculation of net book profit, which gives 5.55% net profit rate existed on record and the same was in accordance with the guidelines of CBDT. The learned CIT (A) held that the AO was not fair to enhance the income and directed him to amend the order accepting the books result. Aggrieved by the order so passed by the CIT (A), the appellant (Revenue) filed an appeal before the Tribunal that has been dismissed by the impugned order dated 15.12.2009. 3 In the appeal before the Tribunal, the appellant (Revenue) raised the ground that on the facts and in the circumstances of the case, the CIT (A) has erred in directing the application of 5.55% profit rate; and submitted that the so-called guidelines of CBDT only provide the criteria of selection of the case for scrutiny and not the directions for application of profit rate. The Tribunal, however, found no reason to interfere while saying,- “On careful analysis of the impugned order passed by the Ld. CIT (A) in the light of submissions of Ld. D.R., it is found that the Ld. CIT (A) has considered thread bare the issues and analyzing them in the light of previous history of the assessee as well as the directions given by CBDT and the decisions rendered in the cases of CIT Vs. British Paints India Ltd reported at 188 ITR 44 and S.N. Namisiyam Chettiar, 38 ITR 579 thereby came to the conclusion that the assessing officer is well justified in invoking the provisions of Section 145(3) of IT Act. The Ld. CIT (A) further found that in view of entire facts and circumstances of the case, addition made by the assessing officer at Rs. 39,82,680 cannot be sustained and accordingly deleted the same. He also found that the reduction of sub let premium at 3.5% on gross contract receipts which comes to Rs. 22,88,414 was rightly claimed by the assessee but the assessing officer has reduced it out of gross contract receipts to arrive at the income assessed by applying NP rate. Therefore, he found that the income or the gross contract receipts after reduction of sub let premium from payment, was rightly reduced and debited to the profit & loss account by the assessee. He further found that computation and calculation of NP rate which comes to 5.55% NP rate is existing on record and is in accordance with guidelines of CBDT and hence found that the assessing officer was not fair to enhance the income and accordingly directed the 4 assessing officer to amend his order accepting the book results. The findings of Ld. CIT (A) were found well reasoned and in accordance with judicial pronouncements stated by him as well as the material available in the assessment record. Therefore, the said findings of Ld. CIT (A) are hereby upheld by finding the issue raised by the department as devoid of merits.” It is contended in this appeal that the CIT (A) has wrongly placed reliance on the so-called CBDT guidelines and the Tribunal has erred in endorsing the views of CIT (A) without examining that such guidelines do not apply for assessment of profit rate. It is also contended that the AO had applied the profit rate of the previous year i.e., 8.17% and had rightly made the calculation that called for no interference. Having heard the learned counsel for the appellant and having perused the orders impugned, in our opinion, this appeal cannot be considered involving any substantial question of law. The matter in issue essentially relates to the process of best judgment assessment. The learned CIT (A) has found a fundamental error in the approach of the AO when the AO proceeded to reduce the sublet premium out of the gross contract receipts and found it justified that the same was claimed in the Profit & Loss account. The learned CIT (A) further upheld the computation and calculation of net book profit @ 5.55% on the basis of the record and observed that 5 the same was in accordance with the guidelines of CBDT. Leaving aside the question of guidelines, the finding that the basis of rate of profit exists on record can only be said to be that related to the questions of fact and a matter of appreciation of evidence. So far the learned AO adopting 8.17% profit rate on the basis of previous year assessment is concerned, it is noticed from the facts stated in CIT (A)'s order that such rate of 8.17% in the previous year was also not of any basis and rather a lump sum addition of Rs.50,000/- was made. A lump sum addition of an amount of Rs.50,000/-in the previous year would have hardly provided a basis to estimate the profit rate for the year in question. In an overall analysis, in the our opinion, the matter essentially relates to the questions of fact and with concurrent findings of CIT (A) and the Tribunal, there does not arise any substantial question of law within the meaning of Section 260-A of the Act. In view of what has been discussed above, the appeal fails and is, therefore, dismissed. (C.M. TOTLA),J. (DINESH MAHESHWARI),J. MK