KRISHNA AND CO Vs. STATE OF U P

JUDGEMENT

(1.) THIS is an application by Messrs. Krishna & Co., under Section 66(3) of the Indian Income-tax Act praying that the Commissioner of Income-tax be directed to refer certain questions of law, to be presently stated for decision to this Court. The facts that led to the present application are as follows :-

(2.) THE assessee, Messrs. Krishna & Co., is a registered firm carrying on business in the district of Bareilly. THE assessee does various kinds of business including the taking of contracts for making constructions. THE assessee was called upon to make a return of its income for the year 1934-35 and in the return submitted by it, it was stated that the assessee had in the year in question undertaken a contract for the construction of certain buildings for a concern styled as "Kesar Sugar Works, Baheri" and that, the contract having been executed, a bill of charges due to the assessee amounting to Rs. 1,15,199 was submitted to the proprietors of Kesar Sugar Works, but the Kesar Sugar Works had in the year in question paid to the assessee only a sum of Rs. 86,500 and a sum of Rs. 28,669 was still due. It was also stated by the assessee that some dispute had arisen between the assessee and the Kesar Sugar Works with the result that a suit for recovery of the amount alleged to be due to the assessee was pending in the Civil Court. THE assessee maintained that as the amount spent by it in making the constructions was in excess of the amount received from the Kesar Sugar Works it must be taken that the assessee had made no profit from the contract referred to above. 3. This contention of the assessee was overruled by the Income-tax Officer who held that the assessee was unable to say when the dispute between it and the Kesar Sugar Works would be settled, and it was impossible to wait for the settlement of the dispute ad infinitum and therefore the assessee must be assessed on the profits made by it from the contract. THE Income-tax Officer further held that the accounts submitted by the assessee were incomplete and accordingly he estimated the profits from the contract of building at a flat rate of 15 per cent on the outlay. THE assessee appealed to the Assistant Commissioner who affirmed the assessment made by the Income-tax Officer.