1981 (3) TMI 112 - AT - Income Tax

Summary

Issues:
1. Dispute over addition made in arrack business and money lending business due to lack of maintained books of account.
2. Estimation of income from arrack business and money lending business.
3. Consideration of search findings as evidence in determining income estimation.

Analysis:
1. The assessee disputed the addition made in the arrack and money lending businesses due to the absence of maintained books of account. The Income Tax Officer (ITO) estimated the income from the arrack business at Rs. 20,610 based on a 10% estimate of the disclosed turnover, as the assessee failed to provide supporting details for expenses and turnover. The Appellate Authority upheld this estimate but allowed certain deductions, leading to the assessee's further appeal.

2. In the money lending business, where no books of accounts were maintained, the ITO estimated the income at Rs. 2,869 after considering advances made and interest collected. The Appellate Authority, based on previous assessments, estimated the interest rate at 6% and allowed additional expenditure. The ITO for the current year followed the previous year's method and estimated income at Rs. 50,000. The Appellate Authority found the expenditure insufficient, suggesting an increase to Rs. 25,000. The assessee appealed against these findings, arguing against the interest rate and insufficient expenses.

3. Subsequent to the assessment, a search was conducted at the assessee's premises, revealing assets and advances made. The question arose whether these search findings could be considered as evidence. The Tribunal concluded that the search materials were relevant evidence and should be admitted, as they provided insights into the assets acquired and expenses incurred, influencing the estimation of income. The search revealed that the advances in the money lending business remained stable, contradicting the Department's claims of high profits. The total assets and liabilities indicated a more reasonable income estimate of Rs. 40,000 per year, leading to a revised income estimation for both businesses at Rs. 40,000, lower than the initial assessment of Rs. 70,610.

4. The Tribunal allowed the appeal in part, adjusting the income estimation for both businesses based on the search findings and concluding that the estimate should not exceed Rs. 40,000.