Best judgment business income estimation reduced from 8% to 5% of turnover after rejection of books and records.

Business income assessed under best judgment can be estimated on a reasonable basis where the assessee fails to respond to notices or produce books, vouchers and stock records. Although the turnover exceeded the section 44AD threshold, the 8% estimate of gross turnover was found excessive on the totality of facts and circumstances. The addition was therefore reduced and income was directed to be estimated at 5% of gross turnover, giving partial relief to the assessee.

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Issues: Whether the income from the assessee's business, assessed on best judgment basis, could be estimated at 8% of gross turnover by invoking section 44AD, or whether the estimate should be reduced to 5%.

Analysis: The assessment was completed under section 144 of the Income-tax Act, 1961 because the assessee did not respond to notices and did not produce the requisite details, books, or vouchers. The turnover for the year was above the threshold for section 44AD, and the estimate of 8% was also based on the absence of stock register and supporting records. Considering the totality of facts and circumstances, the estimate was found excessive.

Conclusion: The addition based on 8% of gross turnover was reduced, and income was directed to be estimated at 5% of gross turnover. The issue was decided in favour of the assessee to that extent.

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