TaxTMI 
TaxTMI 
2018 (8) TMI 972
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.... 3. The brief facts of the case are that the assessee derives income from execution of contract work and filed the return of income showing total income at Rs. 41, 33, 380/-. The net profit as shown as per profit and loss account was @ 5. 07%, which was considered by the Assessing Officer as abnormally low. The Assessing Officer observed that the assessee expressed inability to furnish all supporting bills for purchase of materials and complete address and details of sundry creditors and also assessee failed to furnish supporting bills and vouchers in respect of transportation charges and wages. Therefore, the Assessing Officer concluded that the books of account maintained by the assessee are not correct and complete. He, therefore, rej....
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....ability to furnish all supporting bills for purchase of materials and complete address and details of sundry creditors and also assessee failed to furnish supporting bills and vouchers in respect of transportation charges and wages. Therefore, the Assessing Officer concluded that the books of account maintained by the assessee are not correct and complete and, therefore, rejected the books of account by invoking the provisions of section 145(3) of the Act and estimated the income at 8% of the total turnover of Rs. 8, 35, 72, 219/-, which worked out to Rs. 66, 85, 780/-. 8. On appeal the CIT(A) confirmed the action of the Assessing Officer on the ground that the net profit shown by the assessee at 5. 07% was low. 9. The only submission....
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....ee Chowdhury. v. CIT (1932) 5 ITC 352 (Rang). In this decision rendered, it was observed that "he (the assessing authority) must not act dishonestly or vindictively or capriciously because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment and for this purpose he must, their Lordship think, be able to take into consideration local knowledge and repute in regard to the assessee's circumstances, and his own knowledge of previous returns by and assessments of the assessee and all other materials which he think will assist him in arriving at a fair and proper estimate: and though there must necessarily be guess-work in the matter, it must be honest guess-w....
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....f Orissa v. Maharaja Shri B. P. Singh Deo (1970) 76 ITR 690 (SC) that "the mere fact that the material placed by the assessee before the assessing authorities is unreliable does not empower those authorities to make an arbitrary order. 4. The power of levy assessment on the basis of best judgment is not an arbitrary power; it is an assessment on the basis of best judgment. In other words, that assessment must be based on some relevant material. It is not a power that can be exercised under the sweet will and pleasure of concerned authorities. " 5. The basis of estimate or the basis of computation should be disclosed by the assessing authority, or otherwise the best judgment assessment may be quashed. In Anand Rice & Oil Mi....
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.... @ 2. 64%. In my considered view, after rejecting of book results of the assessee, the income of the assessee has to be estimated by the Assessing Officer but while doing so, he cannot make a wild guess of the same. The past accepted results are a guide to the estimation of the income of the assessee. Considering the past accepted results of the assessee, I am of the considered view that estimation of income of the assessee by applying the net profit rate of 4% will meet the ends of justice. I, therefore, modify the order of the CIT(A) accordingly and partly allow the ground of the appeal of the assessee. " In the present case, it is observed that the reasonable basis is the past accepted results of the assessee. We also observe that the....