1972 (11) TMI 16 - HC - Income Tax

Whether best judgment assessment under section 144 can be made when notice under section 148 has been issued? - When assessment is made under section 144, whether the assessee should be given an opportunity to explain the materials gathered by the Income-tax Officer appeal is dismissed

Summary

Issues Involved:
1. Validity of the assessment order for the year 1962-63 after the expiry of four years.
2. Compliance with principles of natural justice regarding the material used for assessment.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order for the Year 1962-63 After the Expiry of Four Years:

The appellant contended that the assessment order for the year 1962-63 could not be passed after the expiry of four years from the close of the assessment year, as stipulated under section 153(1)(a) of the Income-tax Act, 1961. The department argued that the case fell under section 147, which deals with income escaping assessment, and thus the limitation period should be governed by section 153(2).

The court examined the relevant sections, noting that section 153(1) applies to assessments made under sections 143 or 144, which are for current assessment years. In contrast, section 153(2) applies to assessments made under section 147, which deals with income escaping assessment. The court clarified that section 153(1) does not apply to assessments under section 147 initiated by a notice under section 148. It was concluded that the assessment made by the Income-tax Officer in respect of the assessment year 1962-63 was valid and within time as per section 153(2).

The court further reasoned that if the appellant's argument were accepted, it would lead to an absurd result where any assessment made beyond four years of the end of the assessment year, even if initiated by a valid notice under section 148, would be barred by time. This would contradict the provisions allowing a notice under section 148 to be issued within eight years of the end of the relevant assessment year.

2. Compliance with Principles of Natural Justice Regarding the Material Used for Assessment:

The appellant argued that the assessment order did not disclose the material on which it was based, and no opportunity was given to rebut that material, violating the principles of natural justice. The court noted that the appellant had refused to take delivery of multiple notices and failed to produce his account books despite several opportunities.

The court referred to section 142(3), which mandates that an assessee be given an opportunity to be heard regarding any material gathered during inquiries. However, this provision does not apply to assessments made under section 144, which deals with best judgment assessments when the assessee does not cooperate. Given the appellant's non-cooperative attitude, the court held that the Income-tax Officer was justified in proceeding with the assessment under section 144 without providing further opportunities to the appellant.

In conclusion, the court found no merit in either of the appellant's contentions and dismissed the appeal with costs.