The application of estimate in the very first year of business does not give rise to a question of law.

1. - Having heard learned counsel for the appellant, we are of the opinion that no substantial question of law arises in this appeal. The respondent was admittedly a contractor for civil construction and the assessment in question is for the first year of his business and after rejecting his books of account, the Assessing Officer passed the assessment order. The assessment was made by the Assessing Officer on the basis of applying the net profit rate of 12.5 percent on the turnover shown by the assessee. The Assessing Officer has also made additions on account of unexplained cash credit found in his books of account.

2. The Commissioner of Income-tax (Appeals) in appeal gave a relief in lump sum and deleted the additions made on account of unexplained cash credit by holding that this being the first year of the business of the assessee and the additions made in the returned income is offsets cash credits in respect of which additions made by the Assessing Officer. He was of the opinion that in the very first year when the additions in the returned income are made as if it was undisclosed income for that year and cash credit entries in the books in that very year the source of such cash credit can be attributed to such additions made. That being the position, double additions of the same income was not justified.

3. These findings were affirmed by the Tribunal.

4. Apparently in application of estimate to make best judgment assessment, there is bound to be some guess work and one cannot expect pointed exactitude in assessments considering the case of very first year of business variation in net profit rate applied to declared turnover of the assessee by the Assessing Officer and the Commissioner of Income-tax (Appeals) and also taking into account the provisions of section 44AD adopting 8 percent net profit rate as criterion for assessing minimum income from such business, restricted the assessee's income from business at 8 percent net profit rate. Such a finding does not give rise to a question of law.

5. It is true that section 44AD was inserted in the statute with effect from April 1, 1994, to apply to assessment for the assessment year 1994-95 onwards, and it was not a mandatory requirement for the assessment year 1993-94 to assess profit of civil construction at such rate, yet the rate which is mandatorily required to be applied in the cases of business which the assessee was carrying, where income returned was less than 8 percent of its gross receipts, it cannot be said to be an irrelevant consideration while considering the rate to be applied for estimating the income from like businesses for earlier years in its discretion by the authorities under the Act. In the facts and circumstances of the case, it cannot be said to be perverse finding of fact. Hence, no question of law arises on that ground. So also considering the investment by way of cash credit from the income of very first year of business came out of additions made in the returned income also cannot be said to be based on irrelevant consideration.

6. Thus, no substantial questions of law arise in this appeal. Accordingly, the appeal is dismissed.

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