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Issues: Assessment under Section 23(4) of the Income-tax Act for non-submission of return, inclusion of partnership income from a rice mill in the assessee's total income, sufficiency of evidence for adding the partnership income to the assessee's income.
Analysis: The judgment by the High Court of Calcutta involved the case of an assessee who was a dealer in paddy and rice. The assessee had two places of business, one at Diamond Harbour and another at Falta. For the assessment year 1946-47, the Income-tax Officer served a notice under Section 22(2) of the Income-tax Act, which the assessee failed to respond to, citing closure of one business and winding up of another. Subsequently, a notice under Section 22(4) was served, and although there was a profit and loss account submitted, a best judgment assessment was made under Section 23(4) due to non-submission of the return. The issue arose when the Income-tax Officer included a sum of Rs. 7,629 as income from a rice mill, attributed to the assessee, despite the mill being ostensibly run by the assessee's adult son. The question referred to the Court was whether this sum should rightly be added to the assessee's income. The Tribunal's decision was based on the assessee's failure to provide sufficient cause against the inclusion of the partnership income. However, the Court found that there was a lack of proper evidence to support the addition of this income to the assessee's total income. The Court emphasized the importance of proper evidence and procedural fairness in such cases. It noted that the Income-tax Officer did not provide the assessee with sufficient information or material regarding the inclusion of the partnership income in the assessment. The Court highlighted the principles outlined by the Judicial Committee in a previous case regarding best judgment assessments. It was observed that even in cases where the assessee fails to provide information, the Income-tax Officer must base the assessment on concrete material and inform the assessee of the grounds for such inclusion. In this case, the Court found a lack of substantial evidence or disclosure of material by the Income-tax Officer to justify adding the partnership income to the assessee's total income. The Court held that without proper evidence and procedural fairness, the addition of the partnership income to the assessee's income was not justified. In conclusion, the Court ruled in favor of the assessee, stating that the addition of Rs. 7,629 as partnership income from the rice mill to the assessee's income was not supported by proper evidence. The Court highlighted the importance of following procedural fairness and providing concrete material before attributing additional income to an assessee, especially in cases of best judgment assessments. The judgment was delivered by Chakravarti and Das Gupta, JJ., with Das Gupta, J., concurring with the decision.
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