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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

Mewar Hospital Pvt. Ltd., Udaipur vs. ACIT, Central Circle-2, Udaipur

In the result the appeal of the assessee in ITA No

ITA 144/JODH/2022[2018-19]Status: DisposedITAT Jodhpur12 Oct 2023AY 2018-19
Section 143(3)Section 145Section 153A

question but it will be appropriate to apply the gross profit rate on the aforesaid gross receipts as I find that the estimation of income out of such receipts is required to be computed as the receipts cannot, as it is, be added and it is only the profit earned ... this case and reject the trading result declared by the appellant. After rejection of the books of accounts, a fair and honest estimation of income is required to be deduced. The Hon'ble Rajasthan High Court in the case of CIT Vs. Amrapali Jewels

Mewar Hospital Pvt. Ltd., Udaipur vs. ACIT, Central Circle-2, Udaipur

In the result the appeal of the assessee in ITA No

ITA 143/JODH/2022[2017-18]Status: DisposedITAT Jodhpur12 Oct 2023AY 2017-18
Section 143(3)Section 145Section 153A

question but it will be appropriate to apply the gross profit rate on the aforesaid gross receipts as I find that the estimation of income out of such receipts is required to be computed as the receipts cannot, as it is, be added and it is only the profit earned ... this case and reject the trading result declared by the appellant. After rejection of the books of accounts, a fair and honest estimation of income is required to be deduced. The Hon'ble Rajasthan High Court in the case of CIT Vs. Amrapali Jewels

Mewar Hospital Pvt. Ltd., Udaipur vs. ACIT, Central Circle-2, Udaipur

In the result the appeal of the assessee in ITA No

ITA 142/JODH/2022[2016-17]Status: DisposedITAT Jodhpur12 Oct 2023AY 2016-17
Section 143(3)Section 145Section 153A

question but it will be appropriate to apply the gross profit rate on the aforesaid gross receipts as I find that the estimation of income out of such receipts is required to be computed as the receipts cannot, as it is, be added and it is only the profit earned ... this case and reject the trading result declared by the appellant. After rejection of the books of accounts, a fair and honest estimation of income is required to be deduced. The Hon'ble Rajasthan High Court in the case of CIT Vs. Amrapali Jewels

Mewar Hospital Pvt. Ltd., Udaipur vs. ACIT, Central Circle-2, Udaipur

In the result the appeal of the assessee in ITA No

ITA 141/JODH/2022[2015-16]Status: DisposedITAT Jodhpur12 Oct 2023AY 2015-16
Section 143(3)Section 145Section 153A

question but it will be appropriate to apply the gross profit rate on the aforesaid gross receipts as I find that the estimation of income out of such receipts is required to be computed as the receipts cannot, as it is, be added and it is only the profit earned ... this case and reject the trading result declared by the appellant. After rejection of the books of accounts, a fair and honest estimation of income is required to be deduced. The Hon'ble Rajasthan High Court in the case of CIT Vs. Amrapali Jewels

Mewar Hospital Pvt. Ltd., Udaipur vs. ACIT, Central Circle-2, Udaipur

In the result the appeal of the assessee in ITA No

ITA 140/JODH/2022[2014-15]Status: DisposedITAT Jodhpur12 Oct 2023AY 2014-15
Section 143(3)Section 145Section 153A

question but it will be appropriate to apply the gross profit rate on the aforesaid gross receipts as I find that the estimation of income out of such receipts is required to be computed as the receipts cannot, as it is, be added and it is only the profit earned ... this case and reject the trading result declared by the appellant. After rejection of the books of accounts, a fair and honest estimation of income is required to be deduced. The Hon'ble Rajasthan High Court in the case of CIT Vs. Amrapali Jewels

Mewar Hospital Pvt. Ltd., Udaipur vs. ACIT, Central Circle-2, Udaipur

In the result the appeal of the assessee in ITA No

ITA 139/JODH/2022[2012-13]Status: DisposedITAT Jodhpur12 Oct 2023AY 2012-13
Section 143(3)Section 145Section 153A

question but it will be appropriate to apply the gross profit rate on the aforesaid gross receipts as I find that the estimation of income out of such receipts is required to be computed as the receipts cannot, as it is, be added and it is only the profit earned ... this case and reject the trading result declared by the appellant. After rejection of the books of accounts, a fair and honest estimation of income is required to be deduced. The Hon'ble Rajasthan High Court in the case of CIT Vs. Amrapali Jewels

Ms Raja, Erode vs. ITO, Ward1(2), Erode

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

ITA 280/CHNY/2021[2012-13]Status: DisposedITAT Chennai11 Oct 2023AY 2012-13

Bench: Shri Manjunatha. G, Hon’Ble & Shri Manomohan Das, Hon’Bleआयकर अपील सं./Ita No.: 280/Chny/2021 िनधा"रण वष" / Assessment Year: 2012-13 M.S. Raja, Ito, 280, Brough Road, V. Ward 1(2), Erode – 638 001 Erode. [Pan: Aevpr-1501-E] (अपीलाथ"/Appellant) (""यथ"/Respondent) अपीलाथ" क" ओर से/Appellant By : Shri. S. Sridhar, Advocate (Erode) ""यथ" क" ओर से/Respondent By : Shri. Suresh Guduri, Jcit सुनवाई क" तारीख/Date Of Hearing : 05.10.2023 घोषणा क" तारीख/Date Of Pronouncement : 11.10.2023

For Appellant: Shri. S. Sridhar, Advocate (Erode)For Respondent: Shri. Suresh Guduri, JCIT
Section 139(1)Section 144Section 147Section 148

Officer, while assessing the income has considered total cash deposits into City Union Bank, Erode, amounting to Rs. 1,97,51,089/- and estimated 6% income on total cash deposits and made additions of Rs. 11,85,065/-. The appellant carried the matter in appeal before the first appellate authority ... profit estimated by the Assessing Officer @ 6% is on higher side. We find that, although the Assessing Officer has adopted 6% rate for estimating commission income, but has not given any reason or comparable cases of similar nature to justify rate of profit adopted for estimation of income

Das Karmakar Brick Field, Kolkata vs. ITO, WD.23(1), Kolkata, Hooghly

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

ITA 8/KOL/2017[2013-14]Status: DisposedITAT Kolkata06 Oct 2023AY 2013-14

Bench: Shri Sonjoy Sarma & Shri Girish Agrawal]

Section 133ASection 143(2)Section 40A(3)Section 44A

Jurisdiction High Court in the case of Arjun Bhowmick (supra). 10. Further, ground no. 4 is in respect of issue involved regarding the estimation of income u/s 44AE of the Act of Rs. 2,16,000/- made by the AO from the four vehicles which were not taken into account

Shri Bimal Paul, Silchar vs. Income Tax Officer, Ward-1, Silchar

In the result, both the appeals of the assessee are dismissed

ITA 8/GTY/2016[2011-12]Status: DisposedITAT Guwahati06 Oct 2023AY 2011-12

Bench: Shri Rajpal Yadav & Shri Girish Agrawalassessment Year: 2010-11 & Assessment Year: 2011-12

For Appellant: N o n eFor Respondent: Shri Arun Bhowmick, JCIT
Section 142Section 143(2)Section 143(3)Section 153(1)

course of assessment. A perusal of the assessment order shows that the AO had dwelt only upon the undisclosed bank accounts and estimation of income from transactions done through the two undisclosed bank accounts. 4.3.3 In para No.2 of CBDT Instruction dated 30.06.2011 it was stated that scrutiny

Shri Bimal Paul, Silchar vs. Income Tax Officer, Ward-1, Silchar

In the result, both the appeals of the assessee are dismissed

ITA 211/GTY/2014[2010-11]Status: DisposedITAT Guwahati06 Oct 2023AY 2010-11

Bench: Shri Rajpal Yadav & Shri Girish Agrawalassessment Year: 2010-11 & Assessment Year: 2011-12

For Appellant: N o n eFor Respondent: Shri Arun Bhowmick, JCIT
Section 142Section 143(2)Section 143(3)Section 153(1)

course of assessment. A perusal of the assessment order shows that the AO had dwelt only upon the undisclosed bank accounts and estimation of income from transactions done through the two undisclosed bank accounts. 4.3.3 In para No.2 of CBDT Instruction dated 30.06.2011 it was stated that scrutiny

Dudekula Dastagiri, Kurnool vs. Assistant Commissioner of Income Tax, Circle-1, Kurnool

In the result, appeal of the assessee is allowed

ITA 473/HYD/2021[2015-16]Status: DisposedITAT Hyderabad05 Oct 2023AY 2015-16

Bench: Shri Rama Kanta Panda & Shri K.Narasimha Chary

For Appellant: Shri K.C. Devdas, ARFor Respondent: Shri K. Madhusudan, CIT-DR
Section 143(2)Section 145(3)Section 263Section 29

susceptible for verification. Learned Assessing Officer accordingly rejected the books of accounts, invoke the provisions under section 145(3) of the Act and estimated the income at 8% of the gross receipts on main contracts and 1% on the sub-contracts. 4. Subsequently, learned PCIT, on a perusal of record ... however, after producing all the relevant material only the learned Assessing Officer had taken a conscious view to estimate the income of assessee at 8% of the gross receipts on main contract and 1% on subcontract works. Learned AR submits that in the circumstances, learned PCIT cannot impose

Manoj Kumar, Pali vs. ACIT, Central Circle-2, Jodhpur

In the result, the appeals of the assessee are allowed for statistical purposes

ITA 104/JODH/2019[2015-16]Status: DisposedITAT Jodhpur03 Oct 2023AY 2015-16
Section 131Section 132ASection 139Section 139(1)Section 143(1)Section 143(2)Section 153C

estimated by ld AO c] From the assessment order your honour will be observed that the ld AO made such arithmetical calculation and estimation of income from commission only assumption and presumption without brought on record any positive material or information found as a result of search in third party ... income decaled by the searched person is totally baseless and also arbitrary. Manoj Kumar vs. ACIT d] That the ld AO had estimated commission income without considering the commission income so declared by the assessee in the return of income for the above period and as such

Manoj Kumar, Pali vs. ACIT, Central Circle-2, Jodhpur

In the result, the appeals of the assessee are allowed for statistical purposes

ITA 103/JODH/2019[2014-15]Status: DisposedITAT Jodhpur03 Oct 2023AY 2014-15
Section 131Section 132ASection 139Section 139(1)Section 143(1)Section 143(2)Section 153C

estimated by ld AO c] From the assessment order your honour will be observed that the ld AO made such arithmetical calculation and estimation of income from commission only assumption and presumption without brought on record any positive material or information found as a result of search in third party ... income decaled by the searched person is totally baseless and also arbitrary. Manoj Kumar vs. ACIT d] That the ld AO had estimated commission income without considering the commission income so declared by the assessee in the return of income for the above period and as such

Manoj Kumar, Pali vs. ACIT, Central Circle-2, Jodhpur

In the result, the appeals of the assessee are allowed for statistical purposes

ITA 102/JODH/2019[2012-13]Status: DisposedITAT Jodhpur03 Oct 2023AY 2012-13
Section 131Section 132ASection 139Section 139(1)Section 143(1)Section 143(2)Section 153C

estimated by ld AO c] From the assessment order your honour will be observed that the ld AO made such arithmetical calculation and estimation of income from commission only assumption and presumption without brought on record any positive material or information found as a result of search in third party ... income decaled by the searched person is totally baseless and also arbitrary. Manoj Kumar vs. ACIT d] That the ld AO had estimated commission income without considering the commission income so declared by the assessee in the return of income for the above period and as such

Manoj Kumar, Pali vs. ACIT, Central Circle-2, Jodhpur

In the result, the appeals of the assessee are allowed for statistical purposes

ITA 101/JODH/2019[2011-12]Status: DisposedITAT Jodhpur03 Oct 2023AY 2011-12
Section 131Section 132ASection 139Section 139(1)Section 143(1)Section 143(2)Section 153C

estimated by ld AO c] From the assessment order your honour will be observed that the ld AO made such arithmetical calculation and estimation of income from commission only assumption and presumption without brought on record any positive material or information found as a result of search in third party ... income decaled by the searched person is totally baseless and also arbitrary. Manoj Kumar vs. ACIT d] That the ld AO had estimated commission income without considering the commission income so declared by the assessee in the return of income for the above period and as such

Manoj Kumar, Pali vs. ACIT, Central Circle-2, Jodhpur

In the result, the appeals of the assessee are allowed for statistical purposes

ITA 100/JODH/2019[2010-11]Status: DisposedITAT Jodhpur03 Oct 2023AY 2010-11
Section 131Section 132ASection 139Section 139(1)Section 143(1)Section 143(2)Section 153C

estimated by ld AO c] From the assessment order your honour will be observed that the ld AO made such arithmetical calculation and estimation of income from commission only assumption and presumption without brought on record any positive material or information found as a result of search in third party ... income decaled by the searched person is totally baseless and also arbitrary. Manoj Kumar vs. ACIT d] That the ld AO had estimated commission income without considering the commission income so declared by the assessee in the return of income for the above period and as such

Prabhunath Prasad Thikedar, Ballia vs. DCIT, Circle - 2, Varanasi

In the result, the appeal filed by the assessee is treated as allowed for statistical purpose

ITA 68/VNS/2019[2015-2016]Status: DisposedITAT Varanasi27 Sept 2023AY 2015-2016

Bench: Shri B.R. Baskaran & Shri Amit Shuklaassessment Year: 2015-16 Prabhunath Prasad Thekedar, Vs Dcit, Rajeshwari Sadan, Circle-2, Mohalla-Bedua, Varanasi. District Ballia, Uttar Pradesh – 277 001. Pan: Aagfp6680B (Appellant) (Respondent) Assessee By : None Revenue By : Shri A.K. Singh, Sr. Dr Date Of Hearing : 26.09.2023 Date Of Pronouncement : 27.09.2023 Order Per B.R. Baskaran, Am: The Assessee Has Filed This Appeal Challenging The Order Dated 28.11.2018 Passed By Ld Cit(A), Varanasi & It Relates To The Assessment Year 2015-16. 2. The Assessee Has Sought For Adjournment Of The Case. However, The Ld D.R Submitted That The Issue Is Related To Estimation Of Income. He Submitted That The Assessee Had Agreed Before The Ld.Cit(A) That The Ao Has Rightly Rejected The Books Of Account. However, The Ao Had Estimated The Profit At 9% Of The Turnover Of The Assessee As Against 8% Claimed By The Assessee. Accordingly, He Submitted That The Appeal May Be Disposed Of. 3. We Notice That The Case Of The Assessee Before The Tribunal Is That The Actual Interest Income Of Rs.13,72,848/- Arising From Fd Has Been Added To The Disclosed Income, Which Actually Formed Part Of Business Profit, I.E, It Is The Case Of The Assessee That The Estimate Made By The Ao Should Include The Above Said Interest Income Also. We Notice That This Plea Of The Assessee Has Not Been Adjudicated By The Ld.Cit(A). Accordingly, We Proposed To Restore This Matter To The File Of The Ld.Cit(A) & The Ld. Dr Also Agreed To The Same.

For Appellant: NoneFor Respondent: Shri A.K. Singh, Sr. DR

assessee has sought for adjournment of the case. However, the Ld D.R submitted that the issue is related to estimation of income. He submitted that the assessee had agreed before the ld.CIT(A) that the AO has rightly rejected the books of account. However, the AO had estimated the profit

M/S.Vibgyor Texotech Private Limited, Mumbai vs. ACIT-8(3)(2), Mumbai

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

ITA 489/MUM/2019[2011-12]Status: DisposedITAT Mumbai27 Sept 2023AY 2011-12

Bench: Shri S. Rifaur Rahman, Am & Ms. Kavitha Rajagopal, Jm

For Appellant: NoneFor Respondent: Shri Vranda U. Matkari
Section 10ASection 143(3)Section 144Section 147Section 148Section 250Section 264ASection 40

discussed this issue in detail and held that addition u/s 68 of the Act can be made along with estimation of income unless the assessee establish that unexplained cash credit was arising out of the profit of business of assessee. The relevant finding in para 6 to 7 is reproduced ... purchases made outside the books can be made once the net profit rate is applied on contract receipts of an assessee for estimating his income from contract work. Even when the books of account relating to the assessee's business are rejected and income from such business is determined

M/S.Vibgyor Texotech Private Limited, Mumbai vs. ACIT-8(3)(2), Mumbai

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

ITA 1514/MUM/2018[2008-09]Status: DisposedITAT Mumbai27 Sept 2023AY 2008-09

Bench: Shri S. Rifaur Rahman, Am & Ms. Kavitha Rajagopal, Jm

For Appellant: NoneFor Respondent: Shri Vranda U. Matkari
Section 10ASection 143(3)Section 144Section 147Section 148Section 250Section 264ASection 40

discussed this issue in detail and held that addition u/s 68 of the Act can be made along with estimation of income unless the assessee establish that unexplained cash credit was arising out of the profit of business of assessee. The relevant finding in para 6 to 7 is reproduced ... purchases made outside the books can be made once the net profit rate is applied on contract receipts of an assessee for estimating his income from contract work. Even when the books of account relating to the assessee's business are rejected and income from such business is determined

Gke Medical (P) Ltd., Kolkata vs. ACIT, Cir-7(2)/Kolkata, Kolkata

In the result, the appeal of assessee is allowed

ITA 693/KOL/2023[2016-17]Status: DisposedITAT Kolkata22 Sept 2023AY 2016-17

Bench: Shri Rajesh Kumar & Shri Sonjoy Sarma]

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

facts and circumstances, we are of the view that the invocation of section 145(3) of the Act and estimation of income at 1.35% is unreasonable and cannot be sustained. Accordingly, we set aside the order of Ld. CIT(A) and direct the AO to delete the addition