JUDGMENT BY THE COURT :
Heard counsel for the parties.
2. Petitioners seek quashing of the impugned order dt. 20th Jan., 1983 (annexure-7 to the writ petition) passed by the CIT, Allahabad under S. 264 of the IT Act, 1961.
3. The assessee - a partnership firm - executed certain works under a contract which it entered with the Uttar Pradesh State Electricity Board (UPSEB) during the accounting year, relevant to the asst. yr. 1975-76. The assessee disclosed total payments at Rs. 4,38,551 in the P&L a/c after deducting the cost of the material, supplied by the UPSEB. Later, from the Audit Report, the assessing authority discovered that the assessee did not take into account the cost of the material, supplied by the UPSEB to disclose the total payments, received from the UPSEB and then reassessment proceedings under S. 148 of the IT Act were initiated against the petitioners. The assessing authority while making reassessment observed as under :
"Thus the total gross payments amount to Rs. 5,38,473 on which net profit disclosed is Rs. 43,560 only and is low. The position of the accounts is the same as in past. Various expenses claimed are not verifiable and Proviso to S. 145(1) is applicable in the case. As such after discussion, income is being determined at Rs. 53,850 by applying net profit rate of 10 per cent on the total gross payments of Rs. 5,38,973."
From the above reproduced order, it is clear that income of the assessee was worked out applying the net profit rate of 10 per cent to the gross payments, which include the value of the materials supplied by the UPSEB.
4. The submission of learned counsel for the petitioners before us is that the materials supplied by the UPSEB to the petitioner cannot be taken into consideration for working out the income of the assessee. In Brij Bhushan Lal Praduman Kumar Etc. vs. CIT (1978) 115 ITR 524 (SC), which was relied on by the assessee, the Supreme Court held that the property in the materials, supplied to the assessee for executing the works under the contract, remained with the MES and not with the assessee and that the latter was required to account for the materials, which remained unutilised. It is on that basis, the Supreme Court said that since no element of profit was involved in the turnover represented by the cost of the materials supplied by the Government to the appellant, the income or profits derived by the appellant from such contracts, had to be determined on the basis of the value of the contracts, represented by the cash payments, received by the appellant from the Government exclusive of the cost of the materials received for being used, fixed or incorporated in the works.
The counsel for the petitioners relying on the Tribunals order dt. 7th Oct., 1981 (annexure-6 to the writ petition) which relates to the case of the assessee for the asst. yr. 1977-78, submits before us that there is no difference in the terms and conditions of its contract and the contract which was granted by the MES in the case of Brij Bhushan Lal Parduman Kumar (supra) and, therefore, the ratio of the case of Brij Bhushan Lal Parduman Kumar (supra) is squarely applicable to the case of the assessee and that the CIT erroneously held that the case of Brij Bhushan Lal Parduman Kumar (supra) was distinguishable.
5. We do not find any substance in the submission of the counsel for the petitioners, inasmuch as, no case was set up by the petitioners before the assessing authority or before the CIT that the terms and conditions of its contract were identical to the contract, which was involved in the case of Brij Bhushan Lal Parduman Kumar (supra). This being so, no exception can be taken to the observations made by the CIT in the impugned order.
6. The petition, therefore, fails and is dismissed.