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TMI Blog1971 (11) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act to be Rs. 57,275.39. Its turnover was determined by the assessing authority to be of Rs. 1,00,000 and the tax assessed was Rs. 4,446.62 and a penalty of Rs. 15 was imposed under section 17(3) of the Act for filing the return late. The assessee contended that there was no justification for resorting to the best judgment assessment under section 18 of the Act and in any case the assessment of tax made was very high. This contention was rejected by the first appellate authority on the ground that the assessee did not maintain day to day quantitative manufacturing account. However, the Tribunal on appeal found that the assessee had maintained a quantitative manufacturing account, but it was held that the best judgment assessment was justified as there was discrepancy in the figures as per accounts and those shown in the return. In the return the sales were shown to be worth Rs. 57,275.39 and the accounts show the sales to be worth Rs. 64,513.85. It was further held that the assessee had failed to explain this discrepancy before the lower authorities as also before the Tribunal even though an opportunity had been given to the assessee to explain the discrepancy. The Tribunal, how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rried on by the dealer, the surrounding circumstances and all other matters which may be of assistance in arriving at a fair and proper estimate of the taxable turnover of the dealer." 4.. It would be helpful to discuss some decided cases before we come to the question which is required to be answered by us. The expression "to the best of his judgment" occurs in section 23(4) of the Income-tax Act, 1922. This expression came up for judicial scrutiny before the Privy Council in Commissioner of Income-tax, Central and United Provinces v. Laxminarain Badridas[1937] 5 I.T.R. 170 (P.C.). Their Lordships observed: "He (the assessing authority) must not act dishonestly, or vindictively or capriciously because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for this purpose he must, their Lordships think, be able to take into consideration local knowledge and repute in regard to the assessee's circumstances, and his own knowledge of previous returns by, and assessments of, the assessee, and all other matters which he thinks will assist him in arriving at a fair and proper estimate; and though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king into account material from comparable cases of other assessees. It was held that the material on which the officer intended to found his estimate must be disclosed to the assessee and the assessee must first be extended an opportunity to explain the position. 7.. In Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-tax, West Bengal[1954] 26 I.T.R. 775 (S.C.)., the facts were that the Tribunal did not disclose to the assessee what information had been supplied to it by the departmental representative. It had not given any opportunity to the company to rebut the material furnished to it by him and it declined to take all the materials that the assessee wanted to produce in support of its case. It was held that the assessee had not had a fair hearing. The estimate of the gross rate of profit on sales, both by the Income-tax Officer and the Tribunal, was held to be based on surmises, suspicions and conjectures, and their Lordships came to the conclusion that the assessment levied on the assessee could not be sustained. 8.. In K. Ballah and Another v. Commissioner of Income-tax, Mysore[1965] 56 I.T.R. 182., a Division Bench of the Mysore High Court held that if an assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be required to be fairly done would be to point out the discrepancy on the basis of which the accounts could not be relied on to the assessee and to offer him an opportunity to explain the discrepancy if he could. The next point for consideration would be as to what was the estimate which could be made on the ground of the said discrepancy of the turnover which was liable to be taxed. Due to the discrepancy in the accounts, the assessing authority may have reached the conclusion that the discrepancy represented the figure of profits or that the discrepancy represented the amount of some sales which were not properly accounted for. The assessing authority was required to give an opportunity to explain as to which particular conclusion against him should or should not be drawn. In our opinion, the principle emphasized in the decisions discussed above is that when the assessing authority is required to assess any assessee to its best judgment on the basis of any information, comparable cases, flat average rate or any other material on record, it is only fair and proper that such information, cases, rate or material should be brought to the notice of the assessee to enable him to offer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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