When the assessee fails to explain the doubtful circumstances, AO is entitled to draw inferences from the circumstances of the case

Last updated: 16 August 2021
Quick Summary
The Kerala High Court ruled that if an assessee cannot adequately explain doubtful circumstances, the Assessing Officer (AO) is permitted to draw inferences based on the facts of the case. This judgement involved an assessee who failed to produce account books, leading to re-assessment. The court affirmed the AO's ability to make additions to income based on undisclosed sources when explanations are lacking, even if some disallowances were initially overturned by lower appellate authorities.

Court :
Kerala High Court

Brief :
The assessee is engaged in the business of manufacture and sale of coir mats and mattings. For the assessment year 2007-08, the return filed by the assessee was accepted and a refund was also granted. The assessee was called upon to produce the balance sheet and the profit and loss account for the assessment year 2007-08.  After finding that the assessee failed to furnish the books of account fearing detection of escapement of income, the assessee was re-assessed on the basis of the audited accounts furnished before the bank.

Citation :
ITA No. 70 of 2017

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1 Year PLAN
1999
(Excl. of GST ₹359)

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2 Years PLAN
3499
(Excl. of GST ₹629)

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