“estimation of income”

Assessment ProceduresSection 145Section 1453,061 judgments

The decision most relied on for estimation of income is CIT v. Simit P. Sheth (356 ITR 451), cited in 1,465 judgments on BharatTax.

Leading authorities on estimation of income

CIT v. Simit P. Sheth

356 ITR 451 · 2013 · High Court

1,465

citing judgments

When purchases are unproved or presumed to be from the grey market, the entire amount of such purchases should not be disallowed; instead, income can be estimated by applying a reasonable gross profit rate to the unaccounted sales or turnover, especially in assessments arising from search proceedings involving seized documents.

Rotork Controls India Pvt. Ltd. v. CIT

314 ITR 62 · 2009 · Supreme Court

739

citing judgments

A provision for expenses, such as warranty, is a deductible liability for income tax purposes if it constitutes a present obligation arising from past events, and a reliable estimate of the amount of obligation is possible.

Sanjay Oilcake Industries v. CIT

316 ITR 274 · 2009 · High Court

460

citing judgments

In cases of alleged bogus or unverifiable purchases, rather than disallowing the entire purchase value, a reasonable profit element or a proportionate percentage of the purchases should be added back to the assessee's income.

Kachwala Gems v. JCIT

288 ITR 10 · 2007 · Supreme Court

332

citing judgments

In a best judgment assessment, some guesswork is inherent, but the estimate must be fair and not arbitrary. Books of account can be rejected under Section 145(3) if the assessee fails to substantiate entries or prove the genuineness of transactions, leading to estimation of income.

CIT v. Devi Prasad Vishwanath Prasad

72 ITR 194 · 1969 · Supreme Court

272

citing judgments

If there is an unexplained cash credit, the Assessing Officer can treat it as the assessee's income, even when the income is finalized on an estimation basis, without proving its specific source. The onus then shifts to the assessee to prove that the income represented by the cash credit has already been taxed.

Commissioner of Sales Tax v. H.M. Esufali H.M. Abdulali

90 ITR 271 · 1973 · Supreme Court

232

citing judgments

The Supreme Court established principles for best judgment assessments, stating that some guesswork is inevitable but the assessment must be bona fide, rational, and free from bias or capriciousness. An appellate authority cannot substitute its judgment for that of the Assessing Officer unless the AO's assessment is shown to be biased, irrational, vindictive, or capricious, especially when the assessee fails to provide proper accounts or counter-evidence.

CIT v. Balchand Ajit Kumar

263 ITR 610 · 2003 · High Court

212

citing judgments

When making an addition for unaccounted receipts, on-money, or non-genuine purchases/sales, the addition should be restricted to the estimated profit element embedded in such transactions, rather than the entire gross amount, particularly when evidence of corresponding expenditure is incomplete. This estimation often involves applying a net profit rate.

Harigopal Singh v. CIT

258 ITR 85 · 2002 · High Court

203

citing judgments

Penalty under section 271(1)(c) cannot be levied when an addition to income is made on an estimated basis without concrete evidence of concealment or furnishing inaccurate particulars of income. The provisions of section 271(1)(c) are not attracted to cases where income is assessed on an estimate basis.

Judgments citing estimation of income

Savaliya Developers Pvt. Ltd., Ahmedabad vs. The Dy.CIT, Central Circle-2(1), Ahmedabad

Appeals are dismissed whereas assessee’s three appeals and three cross objections are allowed

ITA 402/AHD/2014[2011-12]Status: DisposedITAT Ahmedabad30 Apr 2019AY 2011-12

Bench: Shri Pradip Kumar Kedia & Shri Mahavir Prasad

For Respondent: Shri Surendra Kumar, CIT.DR

also to co-operate with the department as a goodwill gesture without any substantive evidences in possession of the Revenue. In the circumstances, estimation of income for the remaining period post search between 06.01.2011 to 31.03.2011 merely on surmises and conjunctures’ is totally uncalled for. 6.2 Without prejudice

M/S. Savaliya Buildcon, Ahmedabad vs. The Dy.CIT, Central Circle-2(1), Ahmedabad

Appeals are dismissed whereas assessee’s three appeals and three cross objections are allowed

ITA 401/AHD/2014[2011-12]Status: DisposedITAT Ahmedabad30 Apr 2019AY 2011-12

Bench: Shri Pradip Kumar Kedia & Shri Mahavir Prasad

For Respondent: Shri Surendra Kumar, CIT.DR

The ACIT, Circle-1(2), Baroda vs. Iwi Cryogenic Vaporization System (I) Pvt. Ltd., Baroda

In the result, appeal filed by the Assessee is partly allowed

ITA 1508/AHD/2014[2009-10]Status: DisposedITAT Ahmedabad30 Apr 2019AY 2009-10

Bench: Shri Mahavir Prasad & Shri Waseem Ahmed)

For Appellant: Shri Lalit P. Jain, Sr. D.RFor Respondent: Shri Mukund Bakshi, A.R

without any sound basis held that the G.P. rate for the year under consideration ought to be 25.46% and has accordingly directed the estimation of income by applying such rate to the turnover obtained resulting into an addition of Rs. 1,65,98,304/-. Such addition, having no basis

Infrastructure Leasing & Financial Services Ltd., Mumbai vs. Addl. CIT, Range-10(1), Mumbai

In the result, appeals filed by the Revenue for all assessment years are partly

ITA 3339/MUM/2011[2005-06]Status: DisposedITAT Mumbai30 Apr 2019AY 2005-06

Bench: Shri G. Manjunatha & Shri Ravish Sood, Assessment Years: 2005-06 Addl. Commissioner Of Infrastructure Leasing & Income Tax-Range 10(1) Financial Services Limited बनाम/ Mumbai The Il&Fs Financial Center Vs. Plot No. C-22, G Block Bandra Kurla Complex Bandra (E) Mumbai 400051 (राज"व /Revenue) ("नधा"रती /Assessee) P.A. No. Aaaci-0989-F Assessment Years: 2005-06 Infrastructure Leasing & Addl. Commissioner Of Financial Services Limited Income Tax-Range 10(1) बनाम/ The Il&Fs Financial Center Mumbai Vs. Plot No. C-22, G Block Bandra Kurla Complex Bandra (E) Mumbai 400051 (राज"व /Revenue) ("नधा"रती /Assessee) P.A. No. Aaaci-0989-F Assessment Years: 2006-07 Addl. Commissioner Of Infrastructure Leasing & Income Tax-Range 10(1) Financial Services Limited बनाम/ Mumbai The Il&Fs Financial Center Vs. Plot No. C-22, G Block Bandra Kurla Complex Bandra (E) Mumbai 400051 (राज"व /Revenue) ("नधा"रती /Assessee) P.A. No. Aaaci-0989-F

Section 10(230)Section 14A

have not received any interest income from MPSIDC and hence the direction of the Learned Conimr. of Income Tax (A) to tax the estimated interest income may be set aside. 13. On the facts and circumstances of the case the Learned Commr. of Income Tax (Appeals) has erred in confirming ... circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the action of the Assessing Officer in estimating the income from the toll road at Rs. 7 INFRASTRUCTURE LEASING & FINANCIAL SERVICES LIMITED 1,50,00,0001- as the assessee has the right to receive such

M/S. Raj Buildcon Construction Ltd., Gurgaon vs. JCIT, Gurgaon

In the result, the appeal of the assessee is allowed partly for statistical purposes

ITA 2422/DEL/2015[2010-11]Status: DisposedITAT Delhi29 Apr 2019AY 2010-11

Bench: Shri Bhavnesh Saini & Shri O.P. Kantassessment Year: 2010-11 M/S. Raj Buildcon Vs. Jcit(A), Construction Ltd., Range-Ii, Gurgaon (Haryana) 404, Welldone Tech Park, Sector-48, Sohna Road, Gurgaon (Haryana) Pan :Aadcr6387F (Appellant) (Respondent) Appellant By Shri Rohit Tiwari, Adv. Respondent By Smt. Rinku Singh, Sr.Dr

Section 143(3)Section 145(3)Section 3

books regularly maintained by the assessee. If those books are not correct or complete, the TTO may reject those books and estimate the income to the best of his judgment. When such an estimate is made it is in substitution of the income that is to be computed under ... complete and hence proceeded to reject the same. When such an estimate is made, the A.O substituted the income computed u/s 29 by estimation of income u/s 145 of the Income Tax Act. As per Section 29 of the Act, deductions contained in Sections 30 to 43D have

Muslin, Paschim Medinipur vs. ITO, Ward - 39(3), Midnapore

In the result, the appeal of assessee is allowed

ITA 2416/KOL/2018[2012-13]Status: DisposedITAT Kolkata26 Apr 2019AY 2012-13

Bench: Shri A. T. Varkey, Jm]

Section 144Section 145(3)Section 44A

cannot be disbelieved. We also note that the books of account maintained by the assessee have not been rejected by the AO, therefore, estimation of income could not have been ventured into by the AO without following sec. 145(3) and sec. 144 of the Act. We note that

Varun Gupta, New Delhi vs. ITO, Ward-47(4), New Delhi

In the result, the appeal of the assessee is partly allowed for statistical purposes

ITA 7058/DEL/2018[2006-07]Status: DisposedITAT Delhi25 Apr 2019AY 2006-07

Bench: Shri N.S. Sainiassessment Year: 2006-07

Section 154Section 250

also observed that apart from statement dated 22.03.2006 of the assessee, Varun Gupta, there is no document/material on record to corroborate the estimation of income of M/s Balaji Perfumes at Rs. 1 crore based on above surrender. 24. Furthermore, when this fact is examined in the light of the order

Sri Balaji Wines, Hyderabad vs. Income Tax Officer, Ward-14(1), Hyderabad

In the result, assessee’s appeal is allowed

ITA 1134/HYD/2018[2014-15]Status: DisposedITAT Hyderabad17 Apr 2019AY 2014-15

Bench: Smt. P. Madhavi Devi & Shri S.Rifaur Rahmanm/S. Sri Balaji Wines Vs Income Tax Officer Hyderabad Ward 14(1) Pan: Acjfs9987P Hyderabad (Appellant) (Respondent)

For Appellant: Shri A.V. RaghuramFor Respondent: Shri Phani Raju, DR

against the order of the CIT (A)-6, Hyderabad, dated 08.01.2018. 2. In this appeal, the assessee is aggrieved by the estimation of income from liquor trading at 5% of the cost of goods put to sale. The learned Counsel for the assessee submitted that in similar cases, the Tribunal ... been holding 3% of the cost of goods put to sale as reasonable estimation of income. He prayed for similar relief in the assessee’s case as well. 3. The learned DR was also heard. Page 1 of 3 ITA No 1134 of 2018 Sri Balaji Wines Hyderabad

Kamala Bussa, Siddepet vs. Income Tax Officer, Ward-1, Siddipet

In the result, assessee’s appeal is allowed

ITA 2198/HYD/2017[2014-15]Status: DisposedITAT Hyderabad17 Apr 2019AY 2014-15

Bench: Smt. P. Madhavi Devi & Shri S.Rifaur Rahmansmt. Kamala Bussa, Prop. Vs Income Tax Officer Bhuvaneshwari Wines, Ward – 1 Siddipet 502103 Siddipet Pan: Afipb9143E (Appellant) (Respondent)

For Appellant: Smt. S. SandhyaFor Respondent: Shri Nilanjan Dey, DR

against the order of the CIT (A)-7, Hyderabad, dated 23.10.2017. 2. In this appeal, the assessee is aggrieved by the estimation of income from liquor trading at 5% of the cost of goods put to sale. The learned Counsel for the assessee submitted that in similar cases, the Tribunal ... been holding 3% of the cost of goods put to sale as reasonable estimation of income. He prayed for similar relief in the assessee’s case as well. 3. The learned DR was also heard. Page 1 of 3 ITA No 2198 of 2017 Kamala Bussa Siddipet. 4. We find

Assistant Commissioner of Income Tax, Circle-1(1), Rajahmundry vs. K.S.V. Raja, Narasapur

In the result, appeal of the revenue is dismissed in limine and the cross objections filed by the assessee have become infructuous and dismissed

ITA 207/VIZ/2018[2010-11]Status: DisposedITAT Visakhapatnam03 Apr 2019AY 2010-11

Bench: Shri V. Durga Rao& Shri D.S. Sunder Singhआयकर अपील सं./I.T.A.No.207/Viz/2018 (निर्धारण वर्ा/ Assessment Year:2010-11) Asst.Commissioner Of Income-Tax Vs. Sri K.S.V.Raja Circle-1(1) D.No.6-12-18, Main Road Rajahmundry Narsapur West Godavari Dist. [Pan : Akupk9237H] (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) Cross Objection No.43/Viz/2018 (Arising Out Of I.T.A 207/Viz/2018) (निर्धारण वर्ा/ Assessment Year:2010-11) Sri K.S.V.Raja Asst.Commissioner Of D.No.6-12-18, Main Road Income-Tax Narsapur Circle-1(1) West Godavari Dist. Rajahmundry [Pan : Akupk9237H] (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) रधजस्व की ओर से /Revenue By : Smt Suman Malik, Dr निर्धाऩरती की ओर से / Assessee By : Shri G.V.N.Hari, Ar सुिवधई की तधरीख / Date Of Hearing : 27.03.2019 घोर्णध की तधरीख/Date Of Pronouncement : 03.04.2019

For Appellant: Shri G.V.N.Hari, ARFor Respondent: Smt Suman Malik, DR

Section 143(3)

r.w.s. 147 was only Rs.5,00,860/-. Though the grounds of appeal raised on various issues are related to the estimation of income, no such assessment order was placed before us. Inspite of giving several opportunities, the revenue failed to rectify the defects and the appeal is defective

Raghunath Babu Gadamsetty, Nellore vs. Income Tax Officer, Ward-1, Nellore

In the result, appeal filed by the assessee is allowed

ITA 945/HYD/2018[2014-15]Status: DisposedITAT Hyderabad03 Apr 2019AY 2014-15

Bench: Smt. P. Madhavi Devi

For Appellant: Sri K. PandurangaiahFor Respondent: Smt. Neeju Gupta, DR

quantity wise sales and also the stock particulars. The assessee did not comply with the said letter and therefore, A.O. proposed to estimate the income @ 5% of the goods put to sale. The assessee contended that the assessee has paid license fees of Rs. 48 lakhs and in view ... rival contentions and on perusal of the material available on record, I find that under similar circumstances, this Tribunal has been upholding the estimation of income @ 3% of the cost of goods put to sale. For the sake of convenience and ready reference, the decision of the coordinate Bench

Raghunath Babu Gadamsetty, Nellore vs. Income Tax Officer, Ward-1, Nellore

In the result, appeal filed by the assessee is allowed

ITA 944/HYD/2018[2013-14]Status: DisposedITAT Hyderabad03 Apr 2019AY 2013-14

Bench: Smt. P. Madhavi Devi

For Appellant: Sri K. PandurangaiahFor Respondent: Smt. Neeju Gupta, DR

Shk Hospitals Private Limited, Hyderabad vs. Income Tax Officer, Ward-3(1), Hyderabad

In the result, assessee’s appeal is treated as partly allowed

ITA 493/HYD/2018[2012-13]Status: DisposedITAT Hyderabad03 Apr 2019AY 2012-13

Bench: Smt. P. Madhavi Devim/S.Shk Hospitals P Ltd Vs Income Tax Officer Hyderabad Ward 3(1) Pan:Aamcs50007N Hyderabad (Appellant) (Respondent)

For Appellant: Shri A.V. RaghuramFor Respondent: Shri Kiran Katha, DR

Section 143(3)Section 144

material available on record. He observed that the assessee had gross receipts of Rs.4,46,65,456/- and he sought to estimate the income at 10% of the gross receipts clear of all the expenditure Page 1 of 4 ITA No 493 of 2018 SHK Hospitals P Ltd Hyderabad. including ... show cause notice was issued to the assessee but the assessee did not file any objection to the same. Therefore, the AO estimated the income at 10% of the gross receipts and brought it to tax. 3. Aggrieved, the assessee preferred an appeal before the CIT (A) stating that under

Garine Chandramouli, Khammam vs. Income Tax Officer, Ward-1, Khammam

In the result, appeal of the assessee is allowed

ITA 429/HYD/2018[2014-15]Status: DisposedITAT Hyderabad03 Apr 2019AY 2014-15

Bench: Smt. P. Madhavi Devi & Shri S. Rifaur Rahman

For Appellant: Shri M. Chandramouliswara Rao, ARFor Respondent: Shri Satya Prashant, DR

Section 142(1)Section 143(1)Section 145(3)

Income Tax (Appeals) has erred in sustaining the assessment order rejecting the books of accounts maintained by the Appellant" and resorting to estimation of income without pin pointing the defects in the maintenance of such books of accounts. He ought to have considered the fact that, the weakness in maintenance ... taxable income. 5. On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in estimating the income at a rate which is not practicable and achievable in the line of business of the Appellant. He ought to have considered the fact

Sneha Restaurant & Bar, Warangal vs. Income Tax Officer, Ward-1, Warangal

In the result, the appeal of assessee is allowed

ITA 1658/HYD/2018[2015-16]Status: DisposedITAT Hyderabad03 Apr 2019AY 2015-16

Bench: Smt. P. Madhavi Devi & Shri S. Rifaur Rahman

For Appellant: Smt. S. Sandhya, ARFor Respondent: Shri Kiran Katta, DR

Section 145

produce the relevant details, the book results were rejected u/s. 145 of the Income Tax Act [Act] and the Assessing Officer estimated the income from liquor business at 5% of the purchases and at 15% of sales of food items, as income from restaurant. 2.1. Aggrieved, the assessee preferred ... order of the Assessing Officer and assessee is in second appeal before us. 3. In this appeal, the assessee is only challenging the estimation of income from liquor business at 5%. Ld. Counsel for the assessee submitted that the estimation of income at 5% of purchases is very high. Considering

Sri Subhas Jaiswal, Howrah vs. ITO, Ward - 47(2), Kolkata

In the result, the appeal of assessee for AY 2008-2009 is disposed of as not maintainable and appeal for AY 2013-14 is allowed for statistical purposes

ITA 643/KOL/2018[2013-14]Status: DisposedITAT Kolkata03 Apr 2019AY 2013-14

Bench: Shri A. T. Varkey, Jm]

Section 144Section 147Section 263

which were not shown by the assessee. Therefore, the AO asked for explanation from the assessee and not satisfied with it, went for estimation of income. For that the AO taking note that in the ROI for this assessment year, since the assessee has declared its turnover of Rs.12 ... this observation, the appeal for AY 2008-09 is disposed off. 7. Coming to AY 2013-14. The AO rejected the books and estimated the income @ 75% of turnover of Rs.34,36,41,460/- at Rs.25,77,311/- by assessment order dated 04.03.2016. As noted above

Sri Subhas Jaiswal, Howrah vs. ITO, Ward - 47(2), Kolkata

In the result, the appeal of assessee for AY 2008-2009 is disposed of as not maintainable and appeal for AY 2013-14 is allowed for statistical purposes

ITA 642/KOL/2018[2008-09]Status: DisposedITAT Kolkata03 Apr 2019AY 2008-09

Bench: Shri A. T. Varkey, Jm]

Section 144Section 147Section 263

Royal Seeds & Fertilisers Pvt. Ltd., Kolkata vs. ITO, Ward-10(1), Kolkata

In the result, the appeal filed by the assessee is allowed

ITA 956/KOL/2017[2011-12]Status: DisposedITAT Kolkata29 Mar 2019AY 2011-12

Bench: Shri A.T.Varkey, Jm &Dr. A.L.Saini, Am आयकरअपीलसं./Ita No.956/Kol/2017 ("नधा"रणवष" / Assessment Year:2011-12)

For Appellant: Shri Subash Agarwal, AdvocateFor Respondent: Shri Robin Choudhury, Addl. CIT Sr. DR

Section 133(6)Section 143(3)

accounts by the Ld. CIT(A) is not in accordance with law and hence we delete the addition on account of 5% estimation of income on sales. 13. We note that assessee has incurred administrative expenses for the purpose of business; to the tune of Rs. 31,84,849/- therefore

Sri G.T. Umesh, Chitradurga vs. The Income Tax Officer Ward-1, Chitradurga

In the result, the appeal filed by the assessee is allowed

ITA 1321/BANG/2017[2009-10]Status: DisposedITAT Bangalore29 Mar 2019AY 2009-10

For Appellant: Shri Narendra Sharma, AdvocateFor Respondent: Shri K.R. Narayana, JCIT (DR)

Section 144Section 145Section 234BSection 44A

rejecting the income reported by the appellant based the books of accounts maintained and consequently, the direction of the learned CIT[A] to estimate the income at 14.09% deserves to be vacated. 4. Without prejudice to the above, the income estimated is excessive and liable to be reduced substantially. Page ... supported the order of CIT(A). 4. We have considered the rival submissions. We find that in the present case, the AO has estimated the income of the assessee by applying GP @ 20% on the basis of reply received from KSBCL authorities in which it is stated that the assessee

Punjab Sind Dairy Products P.Ltd, Mumbai vs. DCIT Cen Cir 33, Mumbai

In the result, appeal of the assessee in ITA no

ITA 6247/MUM/2017[2007-08]Status: DisposedITAT Mumbai26 Mar 2019AY 2007-08

Bench: Shri Pawan Singh & Shri Ramit Kocharआयकर अपीऱ सं./I.T.A. No.6246 & 6247/Mum/2017 (नििाारण वर्ा / Assessment Year : 2006-07 & 2007-08) बिाम/ Punjab Sind Dairy Product Acit Central Circle- P. Ltd., 33,Room No. 32(3), Ag-2 Cama Industrial Aayakar Bhavan, V. Estate, Walbhatt Road, Mumbai-400020 Goregaon (W), Mumbai- 400063 स्थायी ऱेखा सं./ Pan: Aadcp5419Q (अपीऱाथी /Appellant) .. (प्रत्यथी / Respondent) Assessee By: Shri. K.K. Lalkaka (Ar) Revenue By: Shri. D.G Pansari (Dr) सुनवाई की तारीख /Date Of Hearing : 16.01.2019 घोषणा की तारीख /Date Of Pronouncement : 26.03.2019 आदेश / O R D E R Per Ramit Kochar: These Two Appeals, Filed By Assessee, Being Ita No. 6246 & 6247/Mum/2017, Are Directed Against Two Separate Appellate Orders Both Dated 22.08.2017 In Appeal No. Cit(A)-53/Dccc-5(2)/It- 123/2012-13 & Cit(A)-53/Dccc-5(2)/It-124/2012-13 Respectively, Passed By Learned Commissioner Of Income Tax (Appeals)-53, Mumbai (Hereinafter Called “The Cit(A)”), For Assessment Year 2006-07 & 2007- 08 Respectively, The Appellate Proceedings Had Arisen Before Learned Cit(A) From Two Separate Penalty Orders Both Dated 29.03.2012 Passed By Learned Assessing Officer (Hereinafter Called “The Ao”) U/S 271(1)(C)

For Appellant: Shri. K.K. Lalkaka (AR)For Respondent: Shri. D.G Pansari (DR)

Section 131Section 132Section 133ASection 143(3)Section 153ASection 271(1)(c)

suppression of profits and consequently income chargeable to tax declared in return of income with an intent to evade taxes . This led to estimation of income by the AO by applying higher G.P ratio to the sale of milk based upon profits earned on milk products dealt with ... under:- I.T.A. No.6246 & 6247/Mum/2017 “ 4. I have considered the submissions of the assessee. First issue related to rejection of books of account and estimation of income. During the course of Search and Seizure action it was notices that the assessee did not maintain proper record regarding inward, outward, production