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TMI Blog1958 (3) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... rkhana by engaging coolies and sold the dyed cloth in the market. They also purchased dyed cloth in the market, got them printed and sold them. Besides these, the assessee firm bought and sold readymade dyed and printed cloth, besides selling mill and handloom cloth undyed and unprinted. A return for the account year Vyaya ending with March 22, 1947, was submitted by the assessee which showed an income of ₹ 30,859 from the business, ₹ 840 from the other sources. The assessee was called upon to produce his account books and he produced a day book and a ledger. In the statement enclosed to the return, a sum of ₹ 30,676 was shown as the gross profit on a turnover of ₹ 1,69,728 working out to 18%. The Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the appeal. Thereupon, the assessee applied for a reference by the Tribunal to the High Court of the questions of law arising in the case. The High Court directed, on 13th July, 1955, the Tribunal to state the questions of law arising in the case and hence this reference. The questions that have been referred to us are: 1. Is the assessment made by the income-tax authorities without disclosing to the assessee the materials on which the assessment was made valid? 2. Is the assessee precluded from raising that plea in view of his conduct in the various stages of these proceedings? 3. Whether the assessment made on the basis of a flat rate is legal? and 4. To what extent can the income-tax authorities disclose particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us grounds. The Income-tax Officer cannot be said to make an assessment to the best of his judgment if he is not guided by the dictates of justice and fair-play. Natural justice demands that he should draw the attention of the assessee to the particular cases the authority had in view. The income-tax authority is not competent to make a random assessment based on his private enquiries which may not be revealed to the assessee. Local enquiry and the placing on record a note of the results of such enquiry are essential to sustain an ex parte assessment. If the Income-tax Officer proposes to act upon information collected by him independently on private enquiries, he should disclose to the assessee the nature of that information to rebut it. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot show that any attempt was made by the Income-tax Officer to draw the attention of the assessee to the material collected by him on private enquiry and which formed the basis for his conclusions. He merely rest content on the circumstance that in the year of account the manufacturers of dyed and printed cloth like the assessee made bumper profits shooting up to 50% and over. It was all the more necessary in a business of the kind that the. assessee firm was doing that the information gathered with regard to other manufacturers should have been placed before the assessee, because in a business of this kind there could be no two truly comparable cases. The assessee's business consisted of (a) buying mill cloth (Binny's) and selling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cular variety of business undertaken by the assessee. The result is that we set aside the order of the Tribunal and remand the case to it with the direction that it do disclose the material gathered from private enquiries to the assessee and give full opportunity to the assessee to place any relevant material to meet the substance of the private enquiry. If the Tribunal thinks that for further enquiry the case should go to the Income-tax Officer, it might send it to the Income-tax Officer to act up to the directions of this court. The Department would also be entitled to rebut the evidence that the assessee may place before the authorities. In the view that we have taken we answer the questions of law referred to us as follows: Q. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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