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TMI Blog2008 (12) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... d 1 (2), Nagapattinam, dated March 28, 2005 in assessment number and year GI : 4227P/2002-03. 2. The following are the substantial questions of law raised for our consideration: "(1) Whether, on the facts and in the circumstances of the case, the Tribunal erred in confirming the disallowance of the deduction under the opening capital account for 2002-03 when the returns filed for 1996-97 to 2001-02 were accepted by the Department ? 2. Whether the opening capital account for 2002-03 can be rejected without rejecting the closing balance declared for 2001-02 in the respective return ? 3. Whether the Tribunal has considered the fact that the appellant is a physically handicapped person and, therefore, he was eligible for a flat deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) opined that the estimate cannot be based an hypothetical situation and on comparison of sales and the probable profit, the addition made by the Assessing Officer was reduced to Rs. 1,25,000. With regard to the disallowance of opening capital the Commissioner (Appeals) found that the assessee filed a bunch of returns for the year 1996-97 to 2001-02 only on October 29, 2002 and in those returns, he has shown income varying from Rs. 41,000 to Rs. 53,500. The Commissioner of Income-tax was of the view that it was not possible for the appellant to have a capital balance of Rs. 5,73,960 and, accordingly, a factual finding was arrived at by the Commissioner (Appeals) that it was not possible for the assessee to accumulate the capital to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce in spite of due opportunity given to him by the authorities and as such the Assessing Officer was fully justified in adding 50 per cent. of the opening balance as income and for recomputing the total income. The learned standing counsel also contended that there is no question of law involved in the matter and the issue was decided by the authorities below only on the basis of factual materials. Analysis 8. The assessment in question relates to the year 2002-03 and in the return filed by the assessee, he had declared income of Rs. 52,970. However, the assessee failed to produce the books of account despite the issue of notice by the Assessing Officer and as such pre-assessment notice was issued to the assessee and on his failure to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be based on well established principles and there should be materials available with the Assessing Officer to come to a definite conclusion. However, strict rules of evidence are not applicable to a proceeding before the tax authorities. In case the estimate made by the Assessing Officer is based on some materials, no interference is possible. Such estimation also involves some guess work and no mathematical formula could be developed in such cases for the purpose of making the estimation and to pass a best judgment assessment. The estimation made by the Assessing Officer by determining the net profit at 5 per cent. was reduced by the Commissioner (Appeals), and the said estimate being made on the basis of the established principles, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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