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2013 (10) TMI 75 - HC - Income TaxAddition on account of suspicion - disallowance of expenditure on estimation basis - adhoc disallowance - Held that:- It is accepted principle that where the books of account are rejected or true profits are not disclosed in the books of account, some element of guess work while framing the assessment is inevitable. The guess work should not be a wild one, but should have a reasonable nexus to the available material and the circumstances of each case. There has to be some basis for arriving at the estimate and it should not be on mere suspicion. The assessment order does not depend upon the arbitrary caprice of the Assessing Officer, but on settled principles of justice. The authority concerned has to make an honest and fair estimate of income. Reliance has been placed on the judgment of Hon’ble Supreme Court of India in the case of Dhakeswari Cotton Mills Ltd [1954 (10) TMI 12 - SUPREME Court], wherein it has been held that in making an assessment under Section 23(3) of the Indian Income-tax Act, the Income-tax Officer is not fettered by technical rules of evidence and pleadings and he is entitled to act on material which may not be accepted as evidence in a court of law, but the Income-tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under Section 23(3). Revenue authorities had acted on surmises and guess work while sustaining the additions of different amounts. Further, the authorities were required to have some material to come to the conclusion that the addition was required in the case and not just because the case was selected for scrutiny that the addition was to be made – Decided in favor of Assessee.
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