IN HIGH COURT OF DELHI AT NEW DELHI ITA 317/2015 COMMISSIONER OF INCOME TAX-21.Appellant Through Ms. Suruchi Aggarwal, sr. standing counsel with Ms. Lakshmi Gurung and Mr. Abhishek Sharma, Advs. versus SH. RAJENDER SINGH.Respondent Through None CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE R.K.GAUBA ORDER % 22.05.2015 1. ITAT s order impugned in present appeal by revenue under Section 260A of Income Tax Act, 1961 confirmed order of CIT(A). AO had contrary to assessee s case, rejected books of account and assessed income at 1,17,92,350/-. 2. assessee was engaged in construction business and claimed various expenses as well as credits. In course of assessment, AO issued notices under Section 133(6). said parties did not respond. amounts claimed against them were added and AO proceeded to reject books of accounts and apply net profit rate of 5% of gross receipts. CIT(Appeals), after considering submissions of parties held as follows : It is noted that appellant filed copies of account books of appellant on demand of Assessing Officer and filed confirmations of building material suppliers who furnished their addresses and PANs. appellant had made payments against purchases invariably by means of account payee cheques to building material suppliers. Further wages were supported by muster rolls wherein recipients of wages had acknowledged their receipts of wages. I have also observed comparable case of Shri Mukesh Kumar Sharma who had disclosed net profit rate of 1.1% on contract receipts of Rs. 4,50,86,832 for assessment year 2008-09, where Assessing Officer applied net profit rate of 8% on contract receipts for assessment year 2008-09. However, in appeal net profit rate of 1.3% was upheld. It is noted that there was substantial increase in contract receipts for this year as compared with net contract receipts in each of preceding two years. Similarly, net business profit shown is much better as compared with net business profits for each of preceding two years. few and short objections listed by Assessing Officer in assessment Order have been effectively answered by appellant in his detailed submission. Assessing Officer has not pointed out any discrepancies and infirmities in account books of appellant. In view of facts and circumstances of case and judicial pronouncements relied upon by appellant, Assessing Officer was not justified in rejecting books of accounts by applying section 145(3) of IT Act and estimating Net Profit @ 5% of Gross Receipts. It is not Proper on Part of Assessing Officer to apply ad hoc and arbitrary net profit rate of 5% on contract receipts for this year and to make addition of Rs.74,92,760 in business profit of Rs.43,63,846 shown by appellant without referring to any comparable case in matter. Keeping all factors in mind net profit is estimated @ 2% i.e, 45,02,424/-. appellant has already disclosed N.P @ 1.94% i.e. 43,63,846/-. Therefore, difference amount of.06% is sustained i.e. Rs.1,38,578/-. Appeal on these grounds is partly allowed. 3. ITAT went through records, including finding of CIT(Appeals) that no rationale was shown for estimating net profit @ 5% and that evidence of supplies were otherwise forthcoming. In these circumstances, ITAT refused to interfere after knowing that net profit rate had been reduced by CIT(Appeals). This Court holds that no substantial question of law exists. appeal is therefore dismissed. S. RAVINDRA BHAT, J R.K.GAUBA, J Commissioner of Income-tax-21 v. Rajender Singh