“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

M/S. Nakshatra Hotels, Guntur vs. The ITO, Guntur

In the result, appeals of the assessee are partly allowed

ITA 30/VIZ/2017[2010-2011]Status: DisposedITAT Visakhapatnam07 Dec 2018AY 2010-2011

Bench: Shri V. Durga Rao& Shri D.S. Sunder Singhआयकर अपील सं./I.T.A.Nos.28-30 /Viz/2017 (धििाारण िर्ा/ Assessment Years: 2008-09 To 2010-11 Respectively) M/S Nakshatra Hotels Vs. Income Tax Officer Lakshmipuram Ward-2(2) Main Road Guntur Guntur [Pan :Aagfn3148J] (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलार्थी की ओर से/ Appellant By : Shri G.V.N.Hari, Ar प्रत्यार्थी की ओर से/ Respondent By : Smt. Suman Malik, Dr

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

Section 131Section 133ASection 142(1)Section 148

that the turnover found was pertaining to the assessee and did not bring any material to support the contention, Therefore we hold that estimation of income on the suppressed turnover as per the net profit at 3.23% is reasonable and meets the ends of justice. The estimation of profit

M/S. Nakshatra Hotels, Guntur vs. The ITO, Guntur

In the result, appeals of the assessee are partly allowed

ITA 29/VIZ/2017[2009-2010]Status: DisposedITAT Visakhapatnam07 Dec 2018AY 2009-2010

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

Section 131Section 133ASection 142(1)Section 148

M/S. Nakshatra Hotels, Guntur vs. The ITO, Guntur

In the result, appeals of the assessee are partly allowed

ITA 28/VIZ/2017[2008-2009]Status: DisposedITAT Visakhapatnam07 Dec 2018AY 2008-2009

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

Section 131Section 133ASection 142(1)Section 148

M/S J.S. Construction, Hzb vs. ITO Ward-1(2), Hazaribagh

In the result, appeal of the assessee is dismissed

ITA 227/RAN/2017[12-13]Status: DisposedITAT Ranchi27 Nov 2018

Bench: Shri N.S Sainiassessment Year :2012-13

For Appellant: Shri Rajesh Kumar, AdvFor Respondent: Shri A.K.Mohanty, JCIT

grievance of the assessee in this appeal is that the CIT(A) was not was not justified in directing the Assessing Officer to estimate the income of the assesse by applying rate of 8% on gross receipts in place of 9% made by the Assessing Officer. 3. The facts ... before him. Further, details of credit balance of Rs.2,76,394/- as on 31.3.2012 against labour charges was also not proved. Therefore, he estimated the income of the assesse by applying the rate of 9% of the civil contract receipts and arrived at the income of Rs.20

Prashant Kumar Singh, Jamshedpur vs. ITO WD-2(1), Jamshedpur

In the result, appeal of the assessee for assessment year

ITA 131/RAN/2017[09-10]Status: DisposedITAT Ranchi27 Nov 2018

Bench: Shri N.S Saini

For Appellant: Shri Devesh Poddar, AdvFor Respondent: Shri A.K.Mohanty, JCIT

Section 144Section 44Section 44A

Ground No.1 & 2 of appeal, the grievance of the assessee is that the CIT(A) was not was not justified in estimating the income at 8% of the receipts/turnover of the assessee. 3. The brief facts of the case are that the Assessing Officer observed that during the year under ... business as trading deposits for the assessment year 2010-2011 despite having passed the order u/s.144 of the Act of the Act and estimated the income on such deposit whereas the Assessing Officer has taken altogether different view in the assessment year under consideration. Based on the Assessing Officer

Shri Ajay T.Patel, HUF, Surat vs. The Income Tax Officer, Ward-3(2), Surat

Appeal are allowed for statistical purposes

ITA 2643/AHD/2013[2007-08]Status: DisposedITAT Surat16 Nov 2018AY 2007-08

Bench: Shri Rajpal Yadav & Shri Amarjit Singhsr.No.

For Appellant: Smt.Smita Nair, Sr.DRFor Respondent: Shri Pragnesh Jagasheth , C.A

Section 143(3)Section 148Section 50C

Departmental Representative fairly submits that even if agricultural income, as shown by the assessee, is to be rejected, there has to be an estimation of income from the agricultural land owned by the assessee, and he does not object to the matter being remitted to the file

Bhaskar Transport Private Limited, Hyderabad vs. Dy. Commissioner of Income Tax, Central Circle-2, Hyderabad

In the result, appeal of the assessee is partly allowed

ITA 1384/HYD/2018[2012-13]Status: DisposedITAT Hyderabad15 Nov 2018AY 2012-13

Bench: Smt. P. Madhavi Devi & Shri S. Rifaur Rahmanassessment Year: 2014-15 Nagaraju Kongara, Warangal Vs. Income-Tax Officer, Ward – 4, Warangal. Pan – Aoxpk 6424K (Appellant) (Respondent)

For Appellant: Shri K.C. DevdasFor Respondent: Date of hearing

hearing.” 5. Considered the rival submissions and perused the material on record. The coordinate benches of this Tribunal consistently taking a view that estimation of income at 3% of the cost of the goods sold is reasonable in this line of business. In the case of Sri Venkateswara Wines ... 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

Nagaraju Kongara, Warangal vs. Income Tax Officer, Ward-4, Warangal

In the result, appeal of the assessee is partly allowed

ITA 1339/HYD/2018[2014-15]Status: DisposedITAT Hyderabad15 Nov 2018AY 2014-15

Bench: Smt. P. Madhavi Devi & Shri S. Rifaur Rahmanassessment Year: 2014-15 Nagaraju Kongara, Warangal Vs. Income-Tax Officer, Ward – 4, Warangal. Pan – Aoxpk 6424K (Appellant) (Respondent)

For Appellant: Shri K.C. DevdasFor Respondent: Date of hearing

Prakesh Bhramla Palli, Hyderabad vs. Income Tax Officer, Ward-10(5), Hyderabad

In the result, assessee’s appeal is partly allowed

ITA 131/HYD/2018[2014-15]Status: DisposedITAT Hyderabad15 Nov 2018AY 2014-15

Bench: Smt. P. Madhavi Devi & Shri S. Rifaur Rahmanassessment Year: 2014-15

For Appellant: Sri S. Rama RaoFor Respondent: Sri Y.V.S.T. Sai, CIT-DR

Section 234B

erred in confirming the action of the Assessing Officer in rejecting the books of account and in resorting to estimation of income tax at 5% of the cost of goods sold or at Rs. 26,67,343/-. 3. The Ld. CIT(A) erred in confirming the action of the Assessing ... find that the assessee is involved in retail business of liquor and is not maintaining any books of account. 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

The DCIT, Circle-3, Surat vs. M/S. Sai Enterprise, Surat

In the result, penalty appeal for A

ITA 2373/AHD/2014[2010-11]Status: DisposedITAT Surat14 Nov 2018AY 2010-11

Bench: C .M. Garg & O. P. Meenaआ सं अ

Section 133ASection 14Section 69Section 69A

accounts on mercantile system and profit is offered for taxation on WIP method, in earlier year and in subsequent years, as regards, estimation of income at 15% it was submitted that when regular books of accounts are maintained and audited, estimation of income is prohibited. However ... been taken into account by the AO in making such estimation. Since the rejection of books of account is pre- condition for estimating business income of the assessee, the estimation of net profit at 15% of sale consideration of flats cannot be upheld. Sai Enterprise Vs. DCIT, Circle-3, Surat

Jonnalagadda Sravanth, Khammam vs. Income Tax Officer, Ward-3, Khammam

In the result, appeal of the assessee is partly allowed

ITA 92/HYD/2018[2014-15]Status: DisposedITAT Hyderabad14 Nov 2018AY 2014-15

Bench: Smt. P. Madhavi Devi & Shri S. Rifaur Rahmanassessment Year: 2014-15 Jonnalagadda Sravanth, Vs. Income-Tax Officer, Ward – 3, Khammam Khammam Pan – Akvpj 9897P (Appellant) (Respondent)

For Appellant: Shri M. Chandramouleswara RaoFor Respondent: Date of hearing

Section 143(2)

Commissioner of Income Tax (appeals) has erred in sustaining the Assessment order rejecting Books of Accounts maintained by the appellant and estimation of income. 3. On the facts in the circumstances of the case, the ld. Commissioner of Income Tax (appeals) has erred in sustaining the estimating income from liquor ... present Assessment year. 4. On the facts and in the circumstances of the case, the Ld. commissioner erred in sustaining the estimation of income from sale of food items in the restaurant at a very high rate @25% of the food sales. He ought to have considered that the Appellant

Madhura Wines, Hyderabad vs. Income Tax Officer, Ward-6(5), Hyderabad

In the result, assessee’s appeals is partly allowed

ITA 283/HYD/2018[2014-15]Status: DisposedITAT Hyderabad14 Nov 2018AY 2014-15

Bench: Smt. P. Madhavi Devi & Shri S.Rifaur Rahmanm/S. Madhura Wines Vs Income Tax Officer Hyderabad Ward 6 ( 5 ) Pan: Aavfm3296K Hyderabad (Appellant) (Respondent) For Assessee : Shri S. Rama Rao For Revenue : Shri Nilanjan Dey, Dr Date Of Hearing: 08.11.2018 Date Of Pronouncement: 15.11.2018 O R D E R Per Smt. P. Madhavi Devi, J.M. This Is Assessee’S Appeal For The A.Y 2014-15 Against The Order Of The Cit (A)-6, Hyderabad, Dated 03.10.2017. The Assessee Has Raised The Following Grounds Of Appeal: “ 1. The Order Of The Learned Cit (A) Is Erroneous Both On Facts & In Law. 2. The Learned Cit (A) Erred In Rejecting The Books Of Account & Resorting To Estimation Of Income. 3. The Learned Cit (A) Erred In Upholding The Estimation Of Profit At 5% Without Considering The Circumstances In Which The Trade Was Carried On During The Financial Year 2013-14. 4. The Learned Cit (A) Erred In Rejecting The Ground That The Remuneration & Interest Paid To Partners Is An Allowable Deduction Even After Resorting To Estimation Of Income.

For Appellant: Shri S. Rama RaoFor Respondent: Shri Nilanjan Dey, DR

Section 143(3)Section 234BSection 234D

erroneous both on facts and in law. 2. The learned CIT (A) erred in rejecting the books of account and resorting to estimation of income. 3. The learned CIT (A) erred in upholding the estimation of profit at 5% without considering the circumstances in which the trade was carried ... erred in rejecting the ground that the remuneration and interest paid to partners is an allowable deduction even after resorting to estimation of income. Page 1 of 4 ITA No 283 of 2018 Madhura Wines Hyderabad. 5. The learned CIT (A) erred in confirming charging of interest u/s 234B

K.Mallaiah Rajender Kumar, Sangareddy vs. Income Tax Officer, Ward-1, Siddipet

In the result, appeal of the assessee is partly allowed

ITA 473/HYD/2018[2013-14]Status: DisposedITAT Hyderabad31 Oct 2018AY 2013-14

Bench: Smt. P. Madhavi Devi & Shri S. Rifaur Rahmanassessment Year: 2013-14 K. Mallaiah Rajender Kumar, Vs. Income-Tax Officer, Ward – 1, Sangareddy. Siddipet. Pan – Amrpk 8302 Q (Appellant) (Respondent)

For Appellant: Shri S. Rama RaoFor Respondent: Date of hearing

Section 143(2)Section 143(3)

Considered the rival submissions and perused the material on record. The coordinate benches of this Tribunal consistently taking view that estimation of income at 3% of the cost of the goods sold is reasonable in this line of business. In the case of Sri Venkateswara Wines in ITA No. 1206/Hyd/2015 ... 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

Asst CIT 16(3), Mumbai vs. Th Zone Projects, Mumbai

The appeal of the Revenue is partly allowed

ITA 2617/MUM/2017[2009-10]Status: DisposedITAT Mumbai31 Oct 2018AY 2009-10

Bench: Shri Joginder Singh & Shri Manoj Kumar Aggarwalassessment Year: 2009-10 Acit-16(3), M/S Th Zone Projects, Room No.446, 705, B Wingh, Cosmic बनाम/ Aayakar Bhavan, Heights, Bhakti Park, Near Vs. M. K. Road, Imax, Wadala, Mumbai-400020 Mumbai-400035 (राज"व /Revenue) ("नधा"रती /Assessee) Pan. No. Aafft1015R

Section 69C

Apex Court in Kachwala Gems vs JCIT (2007) 158 taxman 71 observed that an element of guesswork is inevitable in cases, where estimation of income is warranted. 2.2 The Hon'ble Gujarat High Court in CIT vs Bholanath Poly Fab. Pvt. Ltd. (2013) 355 ITR 290 (Guj.) held/observed as under

Asit P Desai, Mumbai vs. ITO 25(2)(1), Thane

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

ITA 3599/MUM/2017[2009-10]Status: DisposedITAT Mumbai29 Oct 2018AY 2009-10

Bench: Shri C.N. Prasad & Shri Rajesh Kumarshri Asit P. Desai Income Tax Officer-25(2)(1) 506-B Wing Room No. 703, C-12 225 Nariman Road Vs. 7Th Floor, Bandra-Kurla, Vile Parle (E) Complex, Mumbai 400051 Mumbai 400057 Pan – Aabpd2828E Appellant Respondent

For Appellant: Shri D.C. Saboo &For Respondent: Ms. Harkamal Sohi

Section 271(1)(c)

confirmed by the CIT(A) in the appellate proceedings. The learned A.R. submitted that since this is a case of addition on estimation of income, therefore penalty is not leviable. In defence of his 2 Shri Asit P. Desai arguments, the learned A.R. relied on the decision

Solo Hardware P. Ltd, Mumbai vs. Asst CIT Cir 5(3)(2), Mumbai

The appeals of the assessee are dismissed

ITA 1486/MUM/2017[2011-12]Status: DisposedITAT Mumbai24 Oct 2018AY 2011-12

Bench: Shri Joginder Singh & Shri Ramit Kochar

Section 115JSection 139Section 142Section 142(1)Section 143Section 143(3)Section 147Section 148

Apex Court in Kachwala Gems vs JCIT (2007) 158 taxman 71 observed that an element of guesswork is inevitable in cases, where estimation of income is warranted. M/s Solo Hardware Pvt. Ltd. 3.4. The Hon'ble Gujarat High Court in CIT vs Bholanath Poly

Kalindi Estate, Mumbai vs. ITO WD 25(3)(2), Mumbai

In the result, the appeal is dismissed

ITA 4854/MUM/2015[2011-12]Status: DisposedITAT Mumbai23 Oct 2018AY 2011-12

Bench: Shri C.N. Prasad () & Shri N.K. Pradhan () Assessment Year: 2011-12 M/S Kalindi Estate Income Tax Officer, Developers, Laxmi Vs. Ward 25(3)(2), C/11, Shopping Centre, V.L. Lane, Pratyakshakar Bhavan, Kandivli (West), Mumbai- Bandra Kurla Complex, 400067. Mumbai. Pan No. Aaaak0052B Appellant Respondent Assessee By : Ms. Aarti Sathe, Ar Revenue By : Mr. Manoj Kumar Singh, Dr Date Of Hearing : 07/08/2018 Date Of Pronouncement : 23/10/2018

For Appellant: Ms. Aarti Sathe, ARFor Respondent: Mr. Manoj Kumar Singh, DR

Section 139Section 142(1)Section 143(3)Section 194ASection 194CSection 194HSection 194JSection 201Section 40Section 40a

case of Teja Constructions (supra) has taken the view that the rejection of books of accounts and the book result and consequent estimation of income takes care of the irregularities committed by the assessee. M/s Kalindi Estate 8 13. However, we find that the disallowance prescribed under section

Dwarkadheesh Batra, Alwar vs. ITO, Alwar

In the result, appeal of the assessee is partly allowed

ITA 351/JPR/2016[2011-12]Status: DisposedITAT Jaipur12 Oct 2018AY 2011-12

Bench: The Ld. Cit (A) – One Against The Order Passed

For Appellant: Shri Rajeev Sogani(CA)For Respondent: Shri J.C. Kulhari (JCIT)

Section 143(3)Section 145(3)Section 154

analysis of net profit declared by the assessee, then the only option with the AO to assess the income of the assessee by estimating the income on some reasonable basis whether it is average GP of the past years or the average net profit of the past years. There ... past years as declared by the assessee which has been accepted or attained finality may be a reasonable basis and good guidance for estimation of income after rejection of books of account. Admittedly, the net profit declared by the assessee for the year under consideration is much more than

Subhash Construction Co., Thane vs. Asst CIT Cir 3, Thane

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

ITA 1976/MUM/2017[2013-14]Status: DisposedITAT Mumbai12 Oct 2018AY 2013-14

Bench: Shri B.R. Baskaran & Shri Ravish Soodm/S. Subhash Construction Co. Acit, Circle - 3 4, Krishnanjali Building 2Nd Floor, Rani Mansion Vs. Tai Pingle Chowk, Dombivali (E) Murbad Road, Thane 421201 Kalyan (W) 421301 Pan – Abpfs5505E Appellant Respondent

For Appellant: Shri M. SubramanianFor Respondent: Shri Nishant Samaiya

Section 131Section 40Section 44A

view that the Ld CIT(A) was justified in confirming the rejection of books of accounts. 6. With regard to estimation of income, the Ld A.R submitted that the assessee is doing road repair works, which is labour intensive one. The assessee was constrained to engage local labourers and procure

Dinesh S. Jain, Mumbai vs. Income Tax Officer 19(1)(4), Mumbai

The appeal of the assessee is partly allowed

ITA 1828/MUM/2018[2012-13]Status: DisposedITAT Mumbai11 Oct 2018AY 2012-13

Bench: Shri Joginder Singh, Assessment Year:2012-13