1977 (2) TMI 30 - AT - Income Tax

Summary

Issues:
1. Estimation of turnover and net profit by the Income Tax Officer (ITO) for assessment years 1970-71, 1972-73, and 1973-74.
2. Appeal against the assessment order by the assessee before the Appellate Assistant Commissioner (AAC).
3. Further appeal by the assessee before the Appellate Tribunal challenging the AAC's decision.

Detailed Analysis:
1. The ITO estimated turnover and net profit for the assessment years 1970-71, 1972-73, and 1973-74 due to the absence of maintained books of account by the individual contractor. The turnover was estimated at Rs. 55,000 for 1970-71 and Rs. 1,60,000 for the subsequent years, applying a net profit rate of 30%. The net business income was determined accordingly. The AAC, while upholding the estimation method, reduced the net profit rate to 25% for all years, providing relief to the assessee.
2. The assessee appealed the AAC's decision before the Appellate Tribunal, presenting various statements and documents to support their case. The counsel argued that the income returned by the assessee should not be interfered with, emphasizing that all expenses were vouched. The revenue contended that the ITO had valid reasons for not accepting the income returned due to the lack of maintained accounts.
3. The Appellate Tribunal analyzed the past assessment years and noted that the turnover and net profit rates accepted for those years differed from the disputed years. The Tribunal found merit in the assessee's arguments and directed the ITO to accept the turnover as disclosed by the assessee for the disputed years. Additionally, the Tribunal instructed the ITO to estimate the net profit at 15%, increasing it by 2.5% from the earlier rate, aligning with previous years' practices. Consequently, the Tribunal partly allowed the appeals, directing modifications to the assessment orders for the relevant years.