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TMI Blog1958 (9) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... oks he had had been produced and, therefore, he could not comply with the notice. As the assessee failed to comply with the requisition made by the Income-tax Officer, the Income-tax Officer proceeded to assess the assessee under section 23(4) the best judgment assessment. The assessee appealed against this to the Appellate Assistant Commissioner and before the Appellate Assistant Commissioner the assessee attempted to argue the question as to whether the Income-tax Officer was right in the view that he took that the assessee maintained two sets of books of account and also whether the Income-tax Officer was right in assessing the assessee under section 23(4). The Appellate Assistant Commissioner took the view that it was not open to the assessee to argue that question he not having made an application under section 27. The assessee went in appeal to the Tribunal and the Tribunal upheld the decision of the Appellate Assistant Commissioner and the assessee has now come on this reference. Now, turning to the relevant provisions of the Act, the right of appeal to the Appellate Assistant Commissioner is conferred under section 30 and that section provides that any assessee objectin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter decided in appeal by the Appellate Assistant Commissioner with further appeal to the Tribunal and if necessary on a reference to this court. Therefore, what is urged is that, the question whether the assessee had sufficient cause which prevented him from complying with the terms of the notice issued by the Income-tax Officer could only be litigated under section 27 on an application made by the assessee and it could only be litigated before the Appellate Assistant Commissioner and the Tribunal and if necessary on a reference to the High Court in an appeal made against the order of the Income-tax Officer under section 27 refusing to cancel the assessment. It is further urged that the assessee not having availed himself of the machinery provided by section 27, he has accepted the validity of the assessment. He has not challenged the fact that he was contumacious in not complying with the requisition issued by the Income-tax Officer and having accepted the validity of the assessment all that he can challenge in appeal is the quantum of the assessable income and the quantum of the tax that he has to pay on that assessable income. Now, Mr. Samarth's contention is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee refuses to produce books which the Income-tax Officer believes he possesses and which he contends he does not possess. In both the cases, the basis of the Income-tax Officer's order is that the conduct of the assessee is contumacious and being contumacious he proceeds to make a best judgment assessment. Therefore, in our opinion, section 27 is wide enough to cover every kind of cases where the Income-tax Officer proceeds to make a best judgment assessment by reason of the contumacious conduct of the assessee. In this very case, it is difficult to understand why it was not open to the assessee to show sufficient cause which prevented him from complying with the notice issued by the Income-tax Officer. The cause might have been the same which he had shown before the Income-tax Officer or he might have had a better cause or he might have had more materials to satisfy the Income-tax Officer. Even if the cause might be the same, it is difficult to take the view that it is inconceivable that the Income-tax Officer would have ever changed his mind or would admit that he had made a mistake. Therefore, there is no reason to assume that in the case which we are dealing with and whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27 but it also became conclusive with regard to the quantum. Now in the Act of 1939 the proviso was deleted with the result that an important additional right was given to the assessee, namely, to challenge the best judgment assessment with regard to the quantum. But the provision with regard to challenging the assessment with regard to its validity continued to be the same. In other words, an appeal could only lie with regard to the validity of the assessment provided an application has been made under section 27 and the application was refused by the Income-tax Officer. Now, in this connection, a certain provision of the Act may be looked at which is with regard to the cancellation of a certificate of registration. Now, section 23(4) while providing for the best judgment assessment also empowers the Income-tax Officer when the assessee is a firm to refuse to register it or to cancel its registration if it is already registered. Now, it is clear that this provision is penal in character. The result of the contumacy of the assessee is not only that he is liable to be assessed as it were ex parte but if the assessee happens to be a firm, the result of its contumacy may be that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of registration, which, in terms, do not fall under section 27 every other case of contumacious refusal of an assessee of complying with any notice issued by the Income-tax Officer must necessarily fall under section 27 and an order made by the Income-tax Officer that he would proceed to assess under section 23(4) can only be challenged under section 27. In the light of this, let us turn to the authorities which were referred to at the bar. The decision which is very strongly relied upon by Mr. Samarth is a recent judgment of the Madhya Pradesh High Court and that is reported in Suganchand Kanhaiyalal Rathi v. Commissioner of Income-tax [1958] 34 ITR 152. Now, we agree that this is a case which on facts is almost identical with the case that we have before us. That was also a case where the assessee contended that no separate books were maintained at a particular branch where the business was carried on and the Income-tax Officer took the view that the books had been suppressed and the Income-tax Officer proceeded to assess the assessee under section 23(4) as he failed to produce these books, which according to the Income-tax Officer he had suppressed. The assessee appealed ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Judges had been drawn to these decisions, they would have come to the same conclusion which we have come to. The next case to which reference may be made is the judgment of the Calcutta High Court in Naba Kumar Singh Dudhuria v. Commissioner of Income-tax [1944] 12 ITR 327 and the Calcutta High Court took the view that the right of appeal under section 30 should be limited as regards section 23 and section 27 to the quantum of assessment of tax. Section 30 does not entitle the assessee to challenge the assessment under section 23(4) if he has not taken any steps under section 27 to cancel the order. In our opinion with respect this correctly represents the law on the subject. To the same effect are the two judgments of the Allahabad High Court, Chhotelal Gobardhan Das v. Commissioner of Income-tax [1953] 23 ITR 272 and Sir Padampat Singhania v. Commissioner of Income-tax [1953] 24 ITR 141. Now, Mr. Samarth has made an attempt to distinguish these cases and what he contends is that in the case before the Calcutta High Court the facts were that a Hindu undivided family was served with a notice for submitting a return. The return was made by a particular person and that ..... 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