1976 (10) TMI 44 - AT - Income Tax

Tribunal adjusts financing business income estimate, balancing parties' positions

The Appellate Tribunal ITAT BOMBAY-A allowed the appeal in part, reducing the estimated income from the financing business to 12.5% of the capital ... - Issues: Estimation of assessee's income from financing business at 15% of capital employed.In this judgment by the Appellate Tribunal ITAT BOMBAY-A, the appeal was made by the assessee against the decision of lower authorities estimating the income from the financing business at 15% of the capital employed. The assessee, engaged in film financing and money lending, did not maintain proper books of account, leading to the rejection of the details provided as unverifiable. The Income Tax Officer (ITO) estimated the capital at Rs. 6,80,000, and the net profits at 15%. The assessee contested the high profit rate adopted, arguing that in previous years, the profit rate was only 10%. The Tribunal had observed that the profit rate on the admitted capital worked out to be 15% in earlier assessments. However, considering the lack of proper accounts and the increasing interest rates, the Tribunal estimated the income for the year at 12.5% of the capital, amounting to Rs. 85,000, allowing the appeal to that extent.The main issue in this case was the estimation of the assessee's income from the financing business at 15% of the capital employed. The assessee, involved in film financing and money lending, failed to maintain proper books of account, leading to the authorities estimating the capital at Rs. 6,80,000 and the net profits at 15%. The assessee contested the high profit rate, citing previous years where the profit rate was only 10%. The Tribunal observed that in earlier assessments, the profit rate on admitted capital worked out to be 15%. However, considering the lack of proper accounts and the increasing interest rates, the Tribunal decided to estimate the income for the year at 12.5% of the capital, resulting in an income of Rs. 85,000.