Income estimation at 6% of gross receipts upheld where no regular books were maintained and comparable material was lacking

Where regular books of account are not maintained, income may be estimated on available material, and the rate should be supported by the record. In this matter, the Assessing Officer applied 8% of gross receipts without comparable material, while the appellate authority reduced the estimate to 6% after treating transportation and hire charges as part of contract receipts and relying on a coordinate bench view. On those facts, the 6% estimation was found justified and the addition based on that rate was sustained.

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Issues: Whether the estimation of income at 6% of gross receipts in the absence of regular books of account was justified.

Analysis: The assessee had not maintained regular books of account, and income was therefore required to be estimated on the available material. The Assessing Officer adopted 8% of gross receipts without bringing comparable material on record to support that rate. The appellate authority reduced the rate to 6% after accepting that the transportation and hire charges formed part of the contract receipts and after relying on a coordinate bench view that 6% was a justified profit rate. On the facts, no infirmity was found in adopting 6%.

Conclusion: The estimation of income at 6% of gross receipts was upheld and the assessee's challenge to the addition failed.

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