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2017 (8) TMI 119 - HC - Income TaxEstimation of turnover of sales-net profit-addition of 5 per cent - Best judgment assessment - Held that:- The assessing authority while making the "best judgment" assessment no doubt should conclude rationally and unbiased. If the Assessing Officer's estimate is bona fide and rational, that there is no good proof to support that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation ; it is his "best judgment" and not of anyone else's. No court could substitute its "best judgment" for that of the assessing authority. The courts should first see, Abdulali asserts, whether the accounts maintained by the assessee were rightly rejected as unreliable. If they conclude that they were rightly rejected, the next question is whether the basis adopted in estimating the turnover has a reasonable nexus with the estimate made. If the basis adopted is held to be relevant, even though the courts may think that it is not the most appropriate basis, the assessing authority's estimate cannot be disturbed. Assessee could not establish that bill-books accord with the statements of account he submitted to the authorities. Nor has he sustained his defence that the bill-books contained commission transactions, given the tax difference between the State of Kerala and the Union Territory of Pondicherry. Further, important is that any accommodation by way of issuing bills at Mahe to the traders of Kerala for the transactions held only in Kerala is against public policy. The authorities-even if they were to believe the assessee's version-have rightly refused to recognise those illegal transactions. Indeed, emphatic is the judicial dictum of Abdulali [1973 (4) TMI 49 - SUPREME Court] that the Assessing Officer's best judgment did carry an element of speculation and approximation. As against the initial turnover of ₹ 2.31 crores, the Tribunal has found it to be ₹ 1,95,49,077 based on the Assessing Officer's remand report. As a result, the Tribunal has sustained the net profit rate at 5 per cent. of the turnover. We reckon that the method of calculation and the procedure adopted by the authorities arriving at the undisclosed income has accorded with the statutory mandate under sections 68 to 69C of the Act. We, therefore, find no reason to interfere with the Tribunal's confirming the Assessing Officer's adopting the undisclosed income at 5 per cent. on the revised suppressed turnover.
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