DIPAK KUMAR SEN, J.

( 1 ) THE following questions have been directed to be referred under Section 256 (2) of the Income-tax Act, 1961 :" 1. Whether, on the facts and in the circumstances of the case, it is perverse to hold that, in estimating the net profit of structural contracts entered into with the Goverment department, the percentage is to be calculated on the gross receipts inclusive of the value of materials supplied by the department themselves.

( 2 ) WHETHER, on the facts and circumstances of the case, while holding that in estimating the net profit of the structural contracts the percentage is to be calculated on the gross receipts, it should have been decided also whether the percentage adopted by the authorities concerned need any modification ?"2. The reference is at the instance of the assessee, N. K. Sengupta, Calcutta. The assessment years involved are 1957-58, 1958-59, 1959-60 and 1962-63. The facts found or admitted as appearing in the statement and the annexures thereto may be shortly noted as hereunder : the assessee is a contractor and in the relevant assessment years undertook jobs under various Government departments like the Construction Board of the Government of West Bengal.

( 3 ) THE books of accounts were maintained by the assessee. They were not accepted by the Income-tax Officer at the time of assessment and the assessee's income was determined on estimate. For the assessment years 1957-58 to 1959-60, estimated amounts were added to the net receipts of the assessee. For 1959-60, this figure was 10% on account of the materials supplied by the Government departments. For the assessment years 1957-58 and 1958-59, lump sum additions were made on this account.

( 4 ) FOR the assessment year 1962-63, the Income-tax Officer went into the matter in detail. The assessee was called upon to produce certificates from various authorities under which he had carried on the work. Independent enquiries were also made from such, authorities. On the basis of the aforesaid the Income-tax Officer came to the conclusion that the total gross receipts during the said year would be Rs. 7,76,000 as against the amount of Rs. 5,25,000 as shown by the assessee.

( 5 ) ON such material the Income-tax Officer also reopened the proceedings for the earlier assessment years including the assessment years 1954-55, 1955-56 and 1956-57.

( 6 ) THE assessee preferred appeals against the assessment of 1962-63 as also against reopening of assessments of the other assessment years. The Appellate Assistant Commissioner held that in all the years the assessee's income should be determined by applying a flat rate of 12. 5% on the net receipts of the assessee and that the value of materials supplied to the assessee by the departments concerned should not be included in such net receipts for the purpose of application of this fiat rate.

( 7 ) FROM this order of the Appellate Assistant Commissioner, the department came up on further appeal before the Income-tax Appellate Tribunal. The assessee also filed cross objection. The Tribunal held that the Appellate Assistant Commissioner was not justified in directing the application of the flat rate of 12'5% on the net receipts only, i. e. , receipts without the value of the materials, and held that the assessments made by the Income-tax Officer on the gross receipts of the assessee including the cost of materials supplied by the contractee were correct. But the Tribunal in disposing of the cross-objections filed by the assessee held that on the facts and circumstances the original assessment orders made for the assessment years 1957-58 to 1959-60 were correct and thus set aside the reassessments made under Section 147.

( 8 ) THE appeal preferred by the department in respect of the assessment for the assessment year 1962-63 was allowed. It was held by the Tribunal that the assessment made by the Income-tax Officer was correct and the total receipts for the purpose of estimation of the assessee's

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