Badar Durrez Ahmed, C.J. :-
The present appeal is directed against the order dt. 11th May, 2012 passed by the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (Tribunal) in, inter alia, ITA Nos. 495/Asr/2010 and 382/Asr)/2010, both pertaining to the asst. yr. 2007-08. ITA No. 495/Asr/2010 was an appeal by the assessee and ITA No. 382/Asr/2010 was an appeal by the Revenue against the order of the CIT(A) dt. 28th June 2010 which in turn was in respect of the assessment order dt. 30th Dec., 2009.
2. By virtue of an order dt. 2nd July, 2013, a Division Bench of this Court, while admitting the present appeal, had framed the following substantial questions of law :
"(i) Whether the learned Tribunal in the facts of the case was justified to assume that net profit rate must be 7 per cent and not 10.5 per cent as recorded by the fact finding authority i.e., AO, especially when the assessee itself pleaded that it should be assumed between 9 per cent and 10 per cent ?
(ii) Whether in the facts and circumstances and in law, the learned Tribunal was justified in deleting the addition made on account of other receipts amounting to Rs. 6,69,340 when the assessee has himself shown the same income in its second return of income which he filed before the AO ?"
3. However, the order also indicated that it would be open to the counsel for the assessee to argue that no substantial question of law had in fact arisen at the time of regular hearing of the appeal.
4. On examining the facts of the case and after hearing the learned counsel for the parties, we are of the view and it is also agreed by the learned counsel for the parties that question No. (ii) does not arise. Therefore, we are left with the determination of question No. (i) only.
5. This is a case where the assessee's books were rejected and a best assessment was done under s. 144 of the IT Act, 1961. The issue relates to the net profit rate which has to be adopted based on the gross contract receipts. The net profit rate which was adopted by the AO was 10.5 per cent which was reduced by the CIT(A) to 10 per cent and on further appeal by the assessee was reduced to 7 per cent. The Revenue on the other hand in its appeal before the Tribunal had requested that the CIT(A) had wrongly reduced the rate of net profit from 10.5 per cent to 10 per cent.
6. The question that has been framed clearly indicates that the assessee had pleaded that the net profit rate should be between 9 per cent and 10 per cent and, if that be the case, there was no ground for the Tribunal to have adopted the net profit rate of 7 per cent lower than what the assessee itself had pleaded.
7. The learned counsel for the Revenue drew our attention to a letter dt. 15th Dec., 2009 addressed by the Addl. CIT to the assessee wherein the assessee was required to explain why the total income in the assessee's case should not be estimated @ 12.5 per cent of the gross contract receipts without giving any further deduction on account of salary etc. In response by a letter dt. 24th Dec., 2009, the assessee submitted that the proposed rate of 12.5 per cent was too excessive in view of a number of decisions of Courts and of the Tribunal. Several cases were mentioned in the said letter, in all of which either the rate of 10 per cent or the rate of 9 per cent was applied. Based thereupon, the assessee requested that the rate proposed was very high and that the rate of 9 per cent with interest and salary to partners and depreciation to be allowed be considered. Thus, it is evidently clear that the assessee itself had requested for a net profit rate of 9 per cent. As against this, the Tribunal, without citing any reasons, has adopted the net profit rate of 7 per cent. On this ground alone, the appeal is liable to be allowed insofar as the issue of net profit rate is concerned.
8. Consequently, we set aside the finding of the Tribunal to the effect that the net profit rate should be 7 per cent. The matter is remitted to the Tribunal to ascertain the appropriate net profit rate which must not be less than 9 per cent which was admitted by the assessee itself.
9. The appeal stands allowed as above.