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Issues:
1. Estimation of gross profits by the assessing officer. 2. Addition of interest on loan advanced for construction. 3. Addition of unexplained investment in furnishing additional space. Analysis: 1. The assessing officer rejected the book results of the assessee, a registered firm deriving income from a hotel and restaurant, due to low profits and unverifiable sales. The officer estimated gross profits at 35% for certain years, resulting in additional profits. The assessee appealed to the AAC, who reduced the estimated gross profit rate to 30% and turnover figures, thereby lowering the additions. The counsel argued for a further reduction to 25% citing income from the Bar. Ultimately, a consolidated gross profit rate of 25% was applied for the relevant years, adjusting the additional income accordingly. 2. The assessing officer disallowed interest on a loan advanced by the assessee for construction, calculating interest at 12% and adding it to the income. The AAC upheld this disallowance despite the assessee's argument that the loan was for business purposes and the additional space was provided without increased rent. The counsel contended that the loan was essential for the hotel business, and the disallowance was unjustified. The Tribunal agreed, stating that the loan was utilized for business purposes, leading to the deletion of the disallowance. 3. An addition of unexplained investment was made by the assessing officer based on a report indicating a higher investment amount than claimed by the assessee. The AAC reduced the estimated investment but the counsel argued for further reduction or deletion, emphasizing that the expenditure was duly recorded in the books. The Tribunal found the AAC's estimate excessive and restricted the investment amount, considering the expenditure accounted for in the books. The Tribunal partly allowed the appeals, directing modifications to the assessments of the assessee and its partners.
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