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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

ITO 12(1)(2), Mumbai vs. L & T Hcc Joint Venture, Mumbai

In the result, the appeal filed by the revenue is hereby ordered to be dismissed

ITA 8451/MUM/2011[2007-08]Status: DisposedITAT Mumbai06 Jun 2018AY 2007-08

Bench: Shri R. C. Sharma, Am & Shri Amarjit Singh, Jm आयकर अपील सं/ I.T.A. No.8451/Mum/2011 (निर्धारण वर्ा / Assessment Year: 2008-09) Ito 12(1)(2) बिधम/ M/S. L&T Hcc Joint R.No. 116, 1St Floor, Venture L&T House, N.M. Vs. Aayakar Bhavan, M.K. Marg, Ballard Estate, Road, Mumbai-400020. Mumbai-400001. स्थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aaaal0661M (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) Revenue By: Shri R. P. Meena (Dr) Assessee By: Shri Vijay Mehta (Ar) सुनवाई की तारीख / Date Of Hearing: 08.03.2018 घोषणा की तारीख /Date Of Pronouncement: 06.06.2018 आदेश / O R D E R Per Amarjit Singh, Jm: The Revenue Has Filed The Present Appeal Against The Order Dated 15.09.2011 Passed By The Commissioner Of Income Tax (Appeals) -23, Mumbai [Hereinafter Referred To As The “Cit(A)”] Relevant To The A.Y.2008- 09. 2. The Revenue Has Raised The Following Grounds: - “1 On The Facts & In The Circumstances Of The Case & In Law, The Id. Cit(A) Erred In Holding That The Income Of The Assessee Is Liable To Be Assessed As A Separate Independent Entity & Can Not Be Assessed As An Aop. 1A While Doing So The Id Cit(A) Failed To Appreciate The Fact That The Assessee Being The Joint Venture It Can Be Treated As An Aop In A.Y.2008-09

For Appellant: Shri Vijay Mehta (AR)For Respondent: Shri R. P. Meena (DR)
Section 142(1)Section 143(1)Section 143(2)Section 194CSection 2Section 2(31)Section 2(31)(v)Section 40

whether the AO is right in treating the Joint Venture-AOP as the main contractor and its members as the sub-contractors, thereby estimating the income which was not earned by the Joint Venture. 11 11. On the basis of the understanding of the concept of “Joint Venture ... Main Contractor” and the members are the 13 “Sub-contractors”. Once this presumption has been found to be wrong, then the question of estimation of income by way of Sub-contract commission does not arise. So also the question of deduction of tax u/s 194C

Kalpit Trading P.Ltd, Mumbai vs. DCIT OSD-II Cen RG 7, Mumbai

In the result, the appeals filed by the assessee is hereby ordered to be dismissed

ITA 4876/MUM/2014[1998-99]Status: DisposedITAT Mumbai29 May 2018AY 1998-99

Bench: Shri R. C. Sharma, Am & Shri Amarjit Singh, Jm आयकर अपील सं/ I.T.A. No.4876/Mum/2014 (निर्धारण वर्ा / Assessment Year: 1998-99) M/S. Kalpit Trading P. Ltd. बिधम/ Dy. Cit, Osd-Ii, Central Range-7, Old Cgo Bldg, 1, Raj Bhavan, Marve Road, Vs. M.K. Road, Mumbai Malad West Mumbai- 400020. 400064. (Ita. No. 4875/Mum/2014) (निर्धारण वर्ा / Assessment Year: 1999-2000) बिधम/ M/S. Cavalier Trading P. Dy. Cit, Osd-Ii, Central Ltd. 1, Raj Bhavan, Marve Range-7 Old Cgo Bldg, Vs. Road, Malad West Mumbai- M.K. Road, Mumbai-400020 400064. स्थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aaacc5018P (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) Revenue By: Shri V. Vidyadhar (Dr) Assessee By: Shri Baboolal M. Ostwal (Ar) सुनवाई की तारीख / Date Of Hearing: 06.03.2018 घोषणा की तारीख /Date Of Pronouncement: 29.05.2018

For Appellant: Shri Baboolal M. Ostwal (AR)For Respondent: Shri V. Vidyadhar (DR)
Section 132Section 133ASection 143(1)(a)Section 143(2)Section 44A

respect purchase and sales bills. 3 On facts and in the circumstances of the case and in law. Id. AQ had erred in estimating the income at i.e Rs.3,89,505/- by applying flat rate of 3% on purchases and sales transactions of Shares and adding such estimated income ... books. It is argued that the estimate by the AO is only on guess work. I partially agree with the appellant that estimation of income @ 3% is on higher side, as transactions in shares have to be in accordance with the quoted prices. The AO has neither referred