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TMI Blog1953 (4) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... ult. (2) If the answer to this question is in the affirmative, is there any material on record to warrant the estimate of the profits at the several rates adopted in this case?" These questions arise for the both the years. 2. The assessee, a Hindu undivided family, carrying on business in cloth and yarn, has two shops at Sagar one at Bada Bazar and the other at Katra locality. According to the Income-tax Officer, the method of accounting employed by the assessee is such that, in his opinion, income, profits and gains cannot be properly deduced therefrom. This finding was not disputed. Proviso to Section 13 is therefore applicable. In fact, the profits for the assessment years 1941-42 and onwards were determined under this proviso as stated in the statement of the case. 3. After reproducing certain extracts form the assessment orders for the years 1941-42 to 1945-46, the statement of the case proceeds: "The Income-tax Officer did not inform the assessee how he was going to compute the assessee's income from his business. The fact that no such information was given to the assessee by the Income-tax Officer was not one of the grounds before the Appellate Assistant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ints. The Income-tax Officer may use material not placed before him by the assessee; but in such a case natural justice demands that he should give the assessee an opportunity of showing, if he can, that the material is incorrect, though the officer is not bound to disclose the source of his information. It may be that there is an adequate explanation against the information sought to be used against the assessee or that the Income-tax Officer might be misinformed. Although there is no express provision in the Act to require the Income-tax Officer to make such disclosure, it is necessary on the principles of natural justice. In Sarupchand Hukamchand In re [1945] 13 I.T.R. 245 Kania, Ag. C.J., observed a page 256:- "In fairness and in law, I think, it is the duty of the authority entrusted with the task of recording its finding, to give every opportunity to the other side to meet the case which the authority thought was in existence. Without giving such opportunity to the assessees it is not proper to rely on any evidence or any fact which he ultimately takes into consideration for arriving at his conclusion." See also Commissioner of Income-tax v. Khemchand Ramdas [1940 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 23(3) where the proviso to Section 13 is invoked, and an assessment "to the best of judgment" under Section 23(4). If the Income-tax Officer has made "best judgment assessments" under Section 23(3) in the instant case, they are bad in law. Under Section 23(3) the Income-tax Officer has to determine the income on the evidence before him produced by the assessee or collected by him, while under sub-section (4) he acts in the absence of such evidence because the assessee is in default in supplying information. As their Lordships of the Judicial Committee stated in Commissioner of Income-tax v. Laxminarayan Badridas [1937] 5 I.T.R. 170, 180 in an assessment under sub-section (4):- "He 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 wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the years. This rate was adopted for the preceding assessment year 1944-45 and it was maintained in appeal. The sales are mostly of handloom and other fabrics whose prices were not controlled. Sales were retail to a large extent. The Income-tax Officer has stated that the prices of handloom cloth went higher during the accounting year owing to the control of millmade cloth. There is no record of quantitative and qualitative particulars. It was therefore impossible to deduce the percentage from the trading account. As the Appellate Assistant Commissioner has stated, he had seen higher margin of profits in some cases. The Appellate Tribunal was satisfied that this was a reasonable percentage of profits. 9. As regards the cloth business of the Katra Bazar shop, the sales were both of mill-made and handloom cloth and the nature of sales was wholesale and retail. Although the Appellate Assistant Commissioner specifically asked the assessee to give a classification of such sales, the assessee expressed his inability to provide the necessary information in the absence of the necessary details in the books of account. It would therefore be proper for the Income-tax Officer to determine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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