1987 (1) TMI 41 - HC - Income Tax

Summary

Issues: Assessment based on best judgment, failure to provide balance-sheet or trial balance, application to reopen assessment under section 146, Appellate Assistant Commissioner's decision, Tribunal's decision on departmental practice and injustice caused to the assessee.

Analysis:
The judgment pertains to a reference under section 256(1) of the Income-tax Act, 1961, initiated by the assessee for the assessment year 1966-67. The assessee filed a return without a balance-sheet or trial balance, prompting the Income-tax Officer to issue a notice under section 142(1) for the missing documents. Subsequently, a best judgment assessment was made under section 144 when the assessee failed to comply with the notice. The Appellate Assistant Commissioner upheld this assessment in July 1971.

In the interim, the assessee applied to reopen the assessment on the grounds of physical impossibility to provide the required documents. The Income-tax Officer rejected the application under section 146, leading to an appeal by the assessee to the Appellate Assistant Commissioner. In February 1972, the Appellate Assistant Commissioner allowed the appeal, prompting the Revenue to appeal to the Income-tax Appellate Tribunal.

The Tribunal, in its judgment, highlighted the departmental practice of deferring the quantum appeal until the fate of an application under section 146 is determined. It criticized the Appellate Assistant Commissioner for not following this practice and reversed the decision in favor of the Revenue, causing injustice to the assessee. The Tribunal acknowledged the doctrine of merger but emphasized the need to grant justice to the assessee in this particular case.

Ultimately, the Tribunal answered the second question in the negative and in favor of the assessee, indicating that the application to set aside the best judgment assessment should have been allowed. The judgment concluded without any order as to costs, emphasizing the unique circumstances of the case and the necessity to rectify the injustice caused to the assessee.