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“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

Naresh Reddy Singireddy, Rr District vs. Income Tax Officer, Ward-15(4), Hyderabaed

In the result, appeal filed by the assessee is allowed

ITA 2095/HYD/2017[2014-15]Status: DisposedITAT Hyderabad15 Mar 2019AY 2014-15

Bench: Shri V. Durga Rao & Shri D.S. Sunder Singh

For Appellant: Shri S. Rama RaoFor Respondent: Sri P.V. Subba Raju, DR
Section 143(3)Section 234A

erred in confirming the order of the Assessing Officer in rejecting the books of account and resorting to estimation of income. 3. The Ld. CIT(A) erred in confirming the estimation of income at 4% of the cost of goods sold without considering the explanations submitted before ... assessee is not maintaining proper book of account and therefore, failed to produce before him when called for. Therefore, A.O. proceeded to estimate the income at 5% of the stock put to sale and business income was estimated at Rs. 35,77,673/- and the assessed income was determined

Danam Dharmender, Hyderabad vs. Income Tax Officer, Ward-14(3), Hyderabad

In the result, appeal filed by the assessee is dismissed

ITA 1627/HYD/2017[2013-14]Status: DisposedITAT Hyderabad15 Mar 2019AY 2013-14

Bench: Shri V. Durga Rao & Shri S. Rifaur Rahman

For Appellant: Sri Sunil Kumar Jain & SanjayFor Respondent: Smt. V. Rajitha, DR
Section 143(3)

after considering the assessee’s submissions with regard to the changes brought in by the Government in the Excise Policy, A.O. proceeded to estimate the income @ 2.5% of the stock put to sale of Rs. 10,10,53,685/- which comes to Rs. 25,26,342/- and the assessed income ... cost of goods sold would come to Rs. 25.77 lakhs (3% of Rs. 8,59,03,927/-). The Assessing Officer has estimated the income at Rs. 25,26,342/- (though as a percentage of sale) which is less than the estimate of income at 3% of cost of goods sold

ITO 9(1)(4), Mumbai vs. A. Surti Developers P.Ltd, Mumbai

In the result revenues appeal stands dismissed

ITA 4846/MUM/2015[2011-12]Status: DisposedITAT Mumbai15 Mar 2019AY 2011-12

Bench: S/Shri Shamim Yahya & Ram Lal Negiassessment Year : 2011-12

For Appellant: Shri M RajanFor Respondent: Shri Rajesh Sanghvi

profit and loss account. The said method determines results only when the project/contract is completed. There was no method of accounting which permitted estimation of income from business at 8% of the 'work-in-progress completed during the year’. 4.6 On perusal of facts of the case and documents filed ... during appellate proceedings, the appellant was fully justified in deviating from the method of estimating income followed by it and not estimating any income from the building projects during the year under consideration under these extra- ordinary developments, particularly when the assessing officer could not point out to any defect

Ravikanth Jelli, Hyderabad vs. Income Tax Officer, Ward-11(1), Hyderabad

In the result, the appeal of assessee is partly allowed

ITA 778/HYD/2018[2014-15]Status: DisposedITAT Hyderabad13 Mar 2019AY 2014-15

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

For Appellant: Shri K.C. Devdas, ARFor Respondent: Shri Satya Pinisetty, DR

expenditure vouchers in support of his claim arrive at the net profit, the Assessing Officer rejected the same and proceeded to estimate the income of the assessee at 5% of the goods put to sale and brought it to tax. 2.1. Aggrieved, assessee preferred an appeal before ... regard to the rival contentions and the material on record, we find that in similar cases, this Tribunal has been holding that the estimation of income at 3% of the cost of goods put to sale is reasonable and both of us are signatories to various decisions holding as above

Venkat Narsimha Reddy Katkuri, Hyderabad vs. Income Tax Officer, Ward-11(5), Hyderabad

In the result, appeal filed by the assessee is allowed

ITA 692/HYD/2018[2014-15]Status: DisposedITAT Hyderabad13 Mar 2019AY 2014-15

Bench: Shri V. Durga Rao & Shri Rifaur Rahman

For Appellant: Shri P. BalakrishnaFor Respondent: Smt. M. Narmada, DR
Section 143(3)

assessee is involved in retail business of liquor and therefore, could not furnish the relevant books of account properly. Therefore, A.O. has estimated the income @ 5% of the cost of goods put to sale and the CIT(A) has confirmed the same. In similar circumstances, this Tribunal, in the case ... rival contentions and the material on record, we find that the assessee has not maintained any books of account and therefore, the estimation of income is justified. It is only the rate at which the income is to be estimated is before us. A.O. has estimated the income

Chirtanuru Murali, Nellore vs. Income Tax Officer, Ward-5, Nellore

In the result, appeal filed by the assessee is allowed

ITA 1572/HYD/2018[2014-15]Status: DisposedITAT Hyderabad13 Mar 2019AY 2014-15

Bench: Shri V. Durga Rao & Shri Rifaur Rahman

For Appellant: Shri K.A. Sai PrasadFor Respondent: Smt. M. Narmada, DR
Section 143(3)

further opportunity of being heard. 3. The Learned First Appellate Authority is not justified in confirming the addition made by the Assessing Officer estimating the income of Rs. 20,37,581/- at 5% on cost of goods put to sale ... assessee is not maintaining proper book of account and therefore, failed to produce before him when called for. Therefore, A.O. proceeded to estimate the income at 5% of the stock put to sale and relied on the decision of the ITAT in the case of M/s. Prabhu Wines, Hyderabad

Doonuru Sanjeeva Reddy, Hyderabad vs. Income Tax Officer, Range-11(1), Hyderabad

In the result, appeal filed by the assessee is allowed

ITA 1140/HYD/2018[2014-15]Status: DisposedITAT Hyderabad13 Mar 2019AY 2014-15

Bench: Shri V. Durga Rao & Shri Rifaur Rahman

For Appellant: Shri T. Srinivasa MurthyFor Respondent: Shri Rajeev Benjwal, DR

assessee is involved in retail business of liquor and therefore, could not furnish the relevant books of account properly. Therefore, A.O. has estimated the income @ 5% of the cost of goods put to sale and the CIT(A) has confirmed the same. In similar circumstances, this Tribunal, in the case ... rival contentions and the material on record, we find that the assessee has not maintained any books of account and therefore, the estimation of income is justified. It is only the rate at which the income is to be estimated is before us. A.O. has estimated the income

Sri Narsi Reddy Pylla, Hyderabad vs. Income Tax Officer, Ward-15(2), Hyderabad

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

ITA 2110/HYD/2017[2014-15]Status: DisposedITAT Hyderabad13 Mar 2019AY 2014-15

Bench: V. Durga Rao & Shri S. Rifaur Rahman

For Appellant: Sri A. Kiran ManoharFor Respondent: Smt. M. Narmada, DR
Section 143(3)

erred in confirming the action of the Assessing Officer in rejecting the books of account. 3. The Ld. CIT(A) erred in estimating the income at 5%, without appreciating the facts stated before him.” 3. Brief facts of the case are that the assessee, an individual, carrying on retail trading ... turnover of Rs. 5,18,69,321/- with a net profit of Rs. 1,81,400/- and requested the A.O. to confirm the estimation of income @ 3% on the cost of goods put to sale. On observing that the assessee is not maintaining proper book of account and therefore, failed

Sri Narsi Reddy Pylla, Hyderabad vs. Income Tax Officer ;, Ward-15(2), Hyderabad

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

ITA 2109/HYD/2017[2013-14]Status: DisposedITAT Hyderabad13 Mar 2019AY 2013-14

Bench: V. Durga Rao & Shri S. Rifaur Rahman

For Appellant: Sri A. Kiran ManoharFor Respondent: Smt. M. Narmada, DR
Section 143(3)

erred in confirming the action of the Assessing Officer in rejecting the books of account. 3. The Ld. CIT(A) erred in estimating the income at 5%, without appreciating the facts stated before him.” 3. Brief facts of the case are that the assessee, an individual, carrying on retail trading ... turnover of Rs. 5,18,69,321/- with a net profit of Rs. 1,81,400/- and requested the A.O. to confirm the estimation of income @ 3% on the cost of goods put to sale. On observing that the assessee is not maintaining proper book of account and therefore, failed

M/S. Phadke and Phadke Wine Shop, Ahmednagar vs. Income-Tax Officer, Ward - 4, Ahmednagar

In the result, the appeal of the assessee is partly allowed

ITA 1784/PUN/2018[2015-16]Status: DisposedITAT Pune01 Mar 2019AY 2015-16
For Appellant: Shri M.K. KulkarniFor Respondent: Shri M. K. Verma
Section 145(3)

reject the books of account u/s 145(3) of the IT Act. It is accordingly held that such estimation impliedly was estimation of income as per section 145(3) of the I.T. Act. 10. In the light of aforesaid discussion on the facts of the case and decisions cited

DCIT, New Delhi vs. M/S. Pearl Bottling Pvt. Ltd., New Delhi

In the result, the ITA No

ITA 5306/DEL/2015[2012-13]Status: DisposedITAT Delhi27 Feb 2019AY 2012-13

Bench: Shri H.S. Sidhu & Shri L.P. Sahu

For Appellant: Sh. P.C. Yadav, AdvFor Respondent: Smt. Sulekha Verma, CIT(DR)
Section 132Section 142(1)Section 145(2)Section 153A

rejection of books was sustainable, where the Assessee had failed to produce the Registers indicating Production, Issuance and Consumption. It also upheld the estimation of income on the basis of the material on record and the statements made by the employees and directors during search and survey proceedings ... Bombay High Court) 1. rejection of books is sustainable, where the Assessee failed to produce the Registers indicating Production, Issuance and Consumption. 2. estimation of income on the basis of the material on record and the statements made by the employees and directors during search and survey proceedings

DCIT, New Delhi vs. M/S. Pearl Bottling Pvt. Ltd., New Delhi

In the result, the ITA No

ITA 5305/DEL/2015[2011-12]Status: DisposedITAT Delhi27 Feb 2019AY 2011-12

Bench: Shri H.S. Sidhu & Shri L.P. Sahu

For Appellant: Sh. P.C. Yadav, AdvFor Respondent: Smt. Sulekha Verma, CIT(DR)
Section 132Section 142(1)Section 145(2)Section 153A

rejection of books was sustainable, where the Assessee had failed to produce the Registers indicating Production, Issuance and Consumption. It also upheld the estimation of income on the basis of the material on record and the statements made by the employees and directors during search and survey proceedings ... Bombay High Court) 1. rejection of books is sustainable, where the Assessee failed to produce the Registers indicating Production, Issuance and Consumption. 2. estimation of income on the basis of the material on record and the statements made by the employees and directors during search and survey proceedings

Ambey Construction Company, Bathinda vs. The Assistant Commissioner of Income Tax, Bathinda

In the result, the appeal of the assessee is allowed

ITA 121/ASR/2017[2011-12]Status: DisposedITAT Amritsar21 Feb 2019AY 2011-12

Bench: Sh. N. S. Saini & Sh. N. K. Choudhryita No. 121/Asr./2017 : Asstt. Year : 2011-12 Ambey Construction Company, Vs Asstt. Commissioner Of #21605, Street No. 7, Power House Income Tax, Circle-1, Road, Bathinda Bathinda (Appellant) (Respondent) Pan No. Aanfa7199K

For Appellant: Dr. Rakesh GuptaFor Respondent: Sh. M. P. Singh, CIT DR
Section 143(3)Section 145(3)Section 147Section 148Section 282Section 68

DCIT (2013) 357 ITR 586 (Delhi) 10. Alternatively, without prejudice to the above submissions, the AR of the assessee submitted that estimation of income by the Assessing Officer by applying rate of 8% on business receipts of Rs.29,72,75,966/- and making addition of Rs.2

Ved Parkash, Ludhiana vs. DCIT, CC-II, Ludhiana

In the result, both the appeals of the assessee are treated as partly allowed

ITA 1203/CHANDI/2017[2002-03]Status: DisposedITAT Chandigarh20 Feb 2019AY 2002-03

Bench: Shri Sanjay Garg & Ms. Annapurna Guptaआयकर अपील सं./ Ita Nos. 1202 & 1203/Chd/2017 "नधा"रण वष" / Assessment Years : 2001-02 & 2002-03 Sh. Ved Parkash The Dcit, Central Circle-Ii, बनाम S/O Sh. Dewan Chand, Ludhiana 788-I, Brs Nagar, Ludhiana "थायी लेखा सं./Pan No: Aiapp7775R अपीलाथ"/Appellant ""यथ"/Respondent

For Appellant: Shri Deepak Aggarwal, AdvocateFor Respondent: Smt. Mona Mohanty, CIT DR
Section 143(3)Section 263Section 44A

identical to that for the assessment year 2001-02 and both the parties have agreed that since it is pure case of estimation of income , estimation of GP @ 3% will be justified, which is acceptable to both the parties. 16. In view of this, GP for the year under consideration

Ved Parkash, Ludhiana vs. DCIT, CC-II, Ludhiana

In the result, both the appeals of the assessee are treated as partly allowed

ITA 1202/CHANDI/2017[2001-02]Status: DisposedITAT Chandigarh20 Feb 2019AY 2001-02

Bench: Shri Sanjay Garg & Ms. Annapurna Guptaआयकर अपील सं./ Ita Nos. 1202 & 1203/Chd/2017 "नधा"रण वष" / Assessment Years : 2001-02 & 2002-03 Sh. Ved Parkash The Dcit, Central Circle-Ii, बनाम S/O Sh. Dewan Chand, Ludhiana 788-I, Brs Nagar, Ludhiana "थायी लेखा सं./Pan No: Aiapp7775R अपीलाथ"/Appellant ""यथ"/Respondent

For Appellant: Shri Deepak Aggarwal, AdvocateFor Respondent: Smt. Mona Mohanty, CIT DR
Section 143(3)Section 263Section 44A

identical to that for the assessment year 2001-02 and both the parties have agreed that since it is pure case of estimation of income , estimation of GP @ 3% will be justified, which is acceptable to both the parties. 16. In view of this, GP for the year under consideration

Srinivas Vudutha, Hyderabad vs. Income Tax Officer, Ward-15(3), Hyderabad

In the result, assessee’s appeal is allowed

ITA 2011/HYD/2017[2014-15]Status: DisposedITAT Hyderabad15 Feb 2019AY 2014-15

Bench: Smt. P. Madhavi Devi & Shri S.Rifaur Rahmanshri Srinivas Vudutha Vs Income Tax Officer Hyderabad Ward 15(3) Pan: Abspv5179J Hyderabad (Appellant) (Respondent)

For Appellant: Shri Harjeet SinghFor Respondent: Shri Nilanjan Dey, DR
Section 143(3)

Srinivas Vudutha Hyderabad. and requested the AO to treat 2 to 3% of the turnover as profit in his case. The AO, however, estimated the income at 5% of the purchases reduced by closing stock as shown in the P&L A/c for the A.Y 2013-14 and accordingly brought ... Officer in estimating income @ 5% stock put use is not justified as there are decided cases of the Honorable Appellate Tribunal allowing the estimation of income at much lower rate for the liquor trade business. 7. The Learned Commissioner of Income (Appeals)-7 Appellate Order upholding the estimation income

Shri Ajay Desai, Vadodara vs. The Income Tax Officer, Ward-1(2)(3), Vadodara

In the result, appeal of the assessee is allowed

ITA 1861/AHD/2016[2007-08]Status: DisposedITAT Ahmedabad15 Feb 2019AY 2007-08

Bench: Shri Rajpal Yadav & Shri Amarjit Singhआयकर अपील सं./I.T.A. No.1861/Ahd/2016 ("नधा"रण वष" / Assessment Year : 2007-08) Shri Ajay Desai Income Tax Officer बनाम/ Gf-1, Sai Villa Complex Ward-1(2)(3) Vs. Opp. Pitamber Soc., Vadodara – 390 007 Old Padra Road Vadoda – 390 015 "थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Abgpd 2903 E .. (अपीलाथ" /Appellant) (""यथ" / Respondent)

For Appellant: Shri Sunil Talati, ARFor Respondent: Shri S.K. Dev, Sr.DR
Section 143(2)Section 271(1)(c)

addition was confirmed on an estimate basis. Shri Ajay Desai vs. ITO Asst.Year – 2007-08 7. On the other hand Ld.DR contended that estimation of income at Rs.7,35,045/- is mode of computation. Hence, to this extent, assessee has concealed the income and deserves to be visited with penalty

Mudunuri Sridevi, Bhimavaram vs. Income Tax Officer, Ward-2, Bhimavaram

In the result, appeals of the assessees are allowed

ITA 421/VIZ/2018[2010-11]Status: DisposedITAT Visakhapatnam13 Feb 2019AY 2010-11

Bench: Shri V. Durga Rao& Shri D.S. Sunder Singhआयकर अपील सं./I.T.A.No.421-423/Viz/2018 (निर्धारण वर्ा/ Assessment Year: 2010-11 To 2012-13) . Smt. Mudunuri Sridevi Vs Income Tax Officer D.No.27-17-63 Ward-2 Asr Nagar Bhimavaram Bhimavaram West Godavari Dist. [Pan :Bdupm6273P] आयकर अपील सं./I.T.A.No.573-575/Viz/2018 (निर्धारण वर्ा/ Assessment Year: 2010-11 To 2012-13) Shri Mudunuri Subba Raju Vs. Income Tax Officer F.No.100, R R Enclave Ward-2 Opp.Aditya Public School Bhimavaram Suryanarayanapuram Bhimavaram West Godavari Dist. [Pan : Adlpm6979Q] (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) निर्धाऩरती की ओर से / Assessee By : Shri G.V.N.Hari, Ar रधजस्व की ओर से /Revenue By : Shri D.K.Sonowal, Cit Dr सुिवधई की तधरीख / Date Of Hearing : 30.01.2019 घोर्णध की तधरीख/Date Of Pronouncement : 13.02.2019

For Appellant: Shri G.V.N.Hari, ARFor Respondent: Shri D.K.Sonowal, CIT DR
Section 133ASection 148

Mudunuri Sridevi which are common to all the appeals. 2. All the grounds of appeal are related to the addition of Rs.9 lakhs estimating the income @ Rs.30,000/- per acre from fish ponds. A survey u/s 133A was conducted in the case of the assessee and the Assessing Officer ... requested the assessees to produce the books of accounts. Since the assessees failed to produce the books of accounts, the AO estimated the income @ Rs.30,000/- per acre. Accordingly made the addition of Rs.9,00,000/- in each case. As per the assessments completed by the AO, the returned income

Mamillapalli Jayaprakash, Eluru vs. Principal Commissioner of Income Tax, Rajahmundry

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

ITA 208/VIZ/2018[2013-14]Status: DisposedITAT Visakhapatnam13 Feb 2019AY 2013-14

Bench: Shri V. Durga Rao, Hon’Ble & Shri D.S. Sunder Singh, Hon’Blemamillapalli Jaya Prakash, Vs. Ito, Ward-2, D.No. 22C-13-6, Dr. Rangarao Eluru. Street, Near Vinayaka Temple, Powerpet, Eluru. Pan No. Agspm 4275 D (Appellant) (Respondent)

For Appellant: ShriG.V.N. Hari–AdvocateFor Respondent: Smt. Suman Malik –Sr.DR
Section 143(3)Section 263

return filed for the impugned assessment year. ii) The assessee owns 14 acres of fish tanks from which the Assessing Officer estimated the income at Rs. 15,000/- per acre, and according to the ld.Pr.CIT, normal estimation approved by the appellate authorities to Rs. 20,000/- per acre ... business and the Assessing Officer had examined the issue and accepted the same at the time of assessment. Secondly, with regard to the estimation of income on fish tanks, the assessee submitted that reasonable income estimated from the fish tank is Rs. 15,000/- per acre and the same

The Assistant Commissioner of Income Tax, Bathinda vs. Sh. Daljit Singh, Bathinda

In the result, the appeal filed by the Revenue Department stands dismissed

ITA 461/ASR/2015[2007-08]Status: DisposedITAT Amritsar12 Feb 2019AY 2007-08

Bench: Sh. N.S.Saini & Sh. N.K.Choudhryita No.461(Asr)/2015 Assessment Year:2007-08

For Appellant: Sh. Bhawani Shankar (Ld. DR)For Respondent: None
Section 250(6)Section 271Section 271(1)Section 271(1)(c)

immediately preceding Assessment Year. Application of a presumed net profit rate and addition thereon based on howsoever good and adequate reasons, tantamount to estimation of income. Such an estimated addition may be a good ground for quantum addition but the same cannot have a justification for imposition of penalty