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TMI Blog1982 (8) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and proposed to be utilised for the purpose of assessment and on that view in confirming the order of the Appellate Asst. Commissioner setting aside the assessment made under section 144 ?" The assessment years involved in this reference are 1967-68, 1968-69 and 1969-70. In the assessment year 1967-68, the assessee submitted return under s. 139(2) showing a loss of Rs. 23,550. The ITO issued notice to the assessee under s. 142(1) requiring the assessee to produce the statutory books but the assessee committed default and the ITO made an assessment under s. 144 of the I.T. Act, 1961. The assessee had claimed that it purchased Samabeong Tea Estate in 1963. It did not disclose any income up to 1965 from that tea estate. It also failed to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment under s. 144 of the Act by estimating the assessee's income at Rs. 40,000. The assessee disclosed a loss of Rs. 37,032 in the return for the assessment year 1969-70 and it also failed to comply with the notice under s. 142(1) in this year. The ITO completed the assessment under s. 144 by estimating the assessee's income at Rs. 20,000. The assessee appealed to the AAC. The AAC heard the appeals for the assessment years 1967-68 and 1969-70 together and disposed them by a common order. The assessee in the appeals challenged the finding of the ITO that the assessee-company was owned by Shri Kashiram Agarwal and that he was the sole beneficiary of the assets and business of the assessee. It was urged before him that the ITO was not justif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... next contended that the ITO was under a legal obligation to issue a show cause notice to the assessee and to allow the assessee sufficient opportunity of being heard before arriving at an adverse conclusion and before rejecting the assessee's accounts and estimating the assessee's income. He, further, observed that on one hand the ITO had stated that there was no valid conveyance deed for the above tea estate in favour of the assessee-company while, on the other hand, he estimated the income from the tea estate in the hands of the assessee. According to him, the income in respect of the tea estate could not be assessed in the hands of the assessee. The AAC further observed that from a perusal of the assessee's records he found that no noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nity of being heard and that the ITO must have furnished information gathered by him on the basis of which the adverse conclusions had been drawn. With respect to the estimate of income he also observed that the ITO had not given any opportunity to the assessee before estimating the same. He, therefore, set aside the assessment with the direction to the ITO to give an opportunity to the assessee of being heard and to recompute the income after considering all the facts. He also directed the ITO to give an opportunity to the assessee of hearing before arriving at his conclusion regarding the ownership by the assessee. Aggrieved by the orders of the AAC, the Department came up in appeals before the Tribunal. It was submitted before the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ples of natural justice. He pointed out that the applicability of the principle of natural justice was not excluded even when an assessment was made under s. 144. After referring to the provisions of sub-s. (3) of s. 142, the learned counsel for the assessee pointed out that the provisions of sub-s. (3) did not exclude the applicability of the principle of natural justice in providing such an opportunity to the assessee even if any assessment was made under s. 144. In support of his contention he placed reliance on the decision in the case of Koyammankutty v. Fourth Addl. ITO [1965] 58 ITR 871 (Ker). It was next argued that the AAC had not circumvented the provisions of s. 146 as he had not granted any relief to which the assessee could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the aforesaid question has been referred to us. The Tribunal in its main order has posed the question before it as follows : " The point in controversy in this case was whether before making best judgment assessment u/s. 144 of the Income-tax Act, the assessee should be given under sub-section (3) of section 142 an opportunity of being heard in respect of any material gathered on the basis of any enquiry under sub-section (2) and proposed to be utilised for the purpose of assessment. " On this aspect the Tribunal held that the assessee must be given further opportunity. In view of the clear language used by s. 142(3) read in conjunction with cl. (b) of s. 144 of the I.T. Act, 1961, in Our opinion, the conclusion arrived at by the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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