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TMI Blog1989 (8) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... tted for the years ending March 31, 1978, March 31, 1979, March 31, 1980 and March 31, 1981. The years relevant for the present petitions are years ending March 31, 1980 and March 31, 1981. The Superintendent of Taxes did not take any action on the said returns submitted by the petitioner from time to time till August 25, 1981, when he issued notices under section 9(2) of the Act asking the petitioner to appear and produce accounts and documents in support of the returns for all the four years. The date was extended to October 15, 1981. The petitioner produced the accounts and documents which were examined by the Superintendent of Taxes. He, however, wanted the petitioner to furnish certain statements on October 21, 1981, but as the assessments for four years were taken up together and it was difficult to prepare and furnish the same in such a short time, the petitioner prayed for time. The Superintendent of Taxes, did not allow the same, rejected the returns submitted by the petitioner, noted a few defects in the accounts and held that he was not inclined to accept the accounts and the returns as correct and complete. He specifically stated that he could not take any lenient view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified in the notice under sub-section (2) or as soon afterwards as may be, the Commissioner, after hearing such evidence as the Commissioner may require shall, by an order in writing assess the dealer and determine the tax payable by him on such assessment. (4) If a dealer fails to make a return as required by sub-section (1) or sub-section (2) of section 8, as the case may be, or having made the return, fails to comply with all the terms of the notice issued under sub-section (2) of this section, the Commissioner shall, by an order in writing, assess to the best of his judgment the dealer, and determine the tax payable by him on the basis of such assessment: Provided that before making assessment the Commissioner may allow the dealer such further time as he thinks fit to make the return or comply with the terms of the notice issued under sub-section (2) of this section." The above provisions are similar to the provisions contained in section 23 of the Indian Income-tax Act, 1922, section 17 of the Assam Sales Tax Act, 1947 and section 9 of the Assam Finance (Sales Tax) Act, 1956. Corresponding sections in the Income-tax Act, 1961, are sections 143 and 144. 5.. The scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessing officer who makes the best judgment assessment, has to make an intelligible, well-grounded estimate rather than launch on pure surmise. The question that arises for consideration in these cases and has to be answered, however, relates to the powers and duties of the Commissioner or in that matter the Superintendent of Taxes (to whom powers of assessment under section 9 have been delegated), while making the assessment under section 9(3) of the Act and we shall deal with it at length. 6.. We shall first consider what is the nature of assessment proceeding. There was a time when the nature of the enquiry conducted by the assessing officer for the purpose of assessment was subject-matter of long-drawn debates and the decisions of the courts were not very clear and uniform. In some of these, the whole enquiry was considered to be in the nature of judicial enquiry, in others it was emphasised that the proceedings were of a confidential nature. There were some who favoured the middle course and laid stress on the assessing authority conducting himself in accordance with the rules of justice, equity and good conscience. An these decisions with different shades of opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh v. Commissioner of Income-tax, Punjab [1944] 12 ITR 393." The assessment in the aforesaid case was found to be based on the result of private enquiries conducted behind the back of the assessee. The rate of gross profit was estimated at certain figures by the Income-tax Officer and the Tribunal. The Tribunal did not disclose the information supplied to it by the departmental representative. It did not give any opportunity to the assessee to rebut the material furnished to it by him and it declined to take all materials that the assessee wanted to produce in support of its case. It was held that the Tribunal violated fundamental rules of justice in reaching its conclusions. The assessee did not have a fair hearing. The estimate of gross rate of profits on sales both by the Income-tax Officer and the Tribunal was based on surmises, suspicion and conjectures. The Supreme Court, therefore, set aside the order of the Tribunal and remanded the case to it with a direction that "it should give full opportunity to the assessee to place any relevant materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e him, including the assessees' circumstances, knowledge of previous returns and all other matters which the assessing officer thinks will assist him in arriving at a fair and proper estimate. In the case under our consideration, the assessing officer did not do so, and that is where the grievance of the assessee arises". The aforesaid principles laid down by the Supreme Court still hold the field and have been reiterated and followed in a number of subsequent decisions. We do not propose to multiply the authorities. The law in regard to assessment under taxing statutes is well-settled by now. The broad principles which have been well-accepted by the courts in this country and govern the field may be briefly stated as follows. 9.. The assessing officer invested with the power to make assessment of tax discharges quasi-judicial functions and he is bound to observe the principles of natural justice in reaching his conclusions. The fact that he is not fettered by technical rules of evidence of pleadings and is entitled to act on material which may not be accepted as evidence in a court of law, does not absolve him from the obligation to comply with the fundamental rules of jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tness for cross-examination, inasmuch as cross-examination is one of the most efficacious method of establishing truth and exposing falsehood. As in that case the assessing officer refused to summon the said person for cross-examination, the Supreme Court held that the act of the assessing officer in refusing to summon the said person for cross-examination by the assessee clearly constituted infraction of the right conferred on the assessee and that vitiated the orders of assessment made against him. 12.. At this stage, it may be pertinent to emphasise that the opportunity of hearing to the assessee, contemplated above, is not an empty formality or ritual or a pretence. It is a valuable right granted to the assessees and, in fact, is an important safeguard against arbitrary assessments. It cannot be taken lightly by the authorities. The opportunity must be real and reasonable. If an assessee, who is asked to furnish certain particulars or submit explanations within a specified time, prays for further time stating his difficulties and/or reasons, his prayer should be considered judiciously. Sometimes, as in the present case, hearings, for assessment for a number of years are taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering the reasons given by him. Not only that, adverse inference was drawn against him for his so-called failure to furnish informations. The returns were rejected. Certain defects in the accounts were noted in the order of assessment. These were also not brought to the notice of the petitioner to enable him to explain or clarify the same. The petitioner was thus denied reasonable opportunity of hearing and on that score itself the impugned order of assessment cannot be sustained, the same being made in violation of principles of natural justice. However, we find that the assessments cannot be sustained on another ground also, namely, that they are based on pure guess and surmises. The Superintendent of Taxes after noting down the defects in the accounts, rejected the returns and proceeded to estimate the turnover. The relevant portion of the assessment order reads: "Rejecting the returns, I would propose to determine the dealer's turnover to the best of my judgment as under: 4 Q.E. 31.3.1978 Rs. 50,000 at 7% 4 Q.E. 31.3.1979 Rs. 50,000 at 7% 4 Q.E. 31.3.1980 Rs. 25,000 at 7% Rs. 1,75,000 at 8% 4 Q.E. 31.3.1981 Rs. 1,50,000 at 8%." 15.. It is evident that he did n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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