TMI Blog1966 (11) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... -62 for which the relevant accounting period was Diwali year commencing from November 1, 1959, and ending on October 20, 1960. A notice under section 22(4) calling for the production of accounts was issued on November 29, 1961, and the date of hearing was fixed as December 13, 1961. On that day the assessee did not appear. A second notice under section 22(4) was issued on January 22, 1962, and on the date of hearing, on February 5, 1962, an application for adjournment was filed, but no one appeared. Adjournment was refused and the Income-tax Officer made an ex parte assessment under section 23(4) on February 8, 1962, on a total income of Rs. 80,000 in view of the assessee's default in complying with the notice issued under section 22(4). On the very next day after the assessment, viz., February 9, 1962, the assessee filed a return of income showing his total income as Rs. 32,328. It is stated that no statements such as profit and loss, balance-sheet, etc., were filed along with the return. Subsequently, the assessee filed an application under section 27 for the reopening of the assessment. But this was rejected by the Income-tax Officer. Against the order of rejection, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this cannot be the intention of the legislature. " It appears to us that this conclusion of the Tribunal is based on an erroneous view of the powers of the Appellate Assistant Commissioner under section 31(2) of the Act. The remedy given under section 27 is something apart from the remedy conferred under section 31(2) ; in the former case, it is the ex parte assessment that is sought to be set aside and, in the latter, the merits of the assessment are questioned. Section 23(4) empowers the Income-tax Officer to make a best judgment assessment if the assessee fails to make a return required by any notice given under section 22(2) and has not made a return or a revised return under sub-section (3) of section 22 or fails to comply with all the terms of a notice issued under section 22(4), or having made a return fails to comply with all the terms of a notice issued under sub-section (2) of section 22. This assessment, like any other assessments made under section 23(3), is appealable under section 30. Section 27 deals with cancellation of assessments and it says that if within one month from the service of a notice of demand of assessment made on him under section 23(4), the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In such a case the Appellate Assistant Commissioner can, under sub-section (2) of section 31, before disposing of any appeal, make such further enquiry as he thinks fit, or cause further enquiry to be made by the Income-tax Officer. This provision vests ample power in the Appellate Assistant Commissioner to remand the case to the Income-tax Officer for fresh disposal if he comes to the conclusion that the basis of the assessment is not valid or the assessment itself is not sustainable. In our view, if the Appellate Assistant Commissioner can remand the case or call for a finding, he can also call for evidence and receive it or hold an enquiry which would place materials before him to make a valid best judgment assessment, subject, however, only to this limitation, that neither the remand order nor the acceptance or receipt of additional evidence should be designed to achieve the object for which an appeal against an order under section 27 was provided for, as otherwise it would amount to holding that the legislature has provided two remedies in respect of the same subject matter. It may here be stated that prior to the amendment of the Income-tax Act in 1939, a best judgment as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Such a conclusion, as we have said, is not possible on a reading of sub-section (2) of section 31. We are fortified in this view by judgments of several High Courts. In Brij Mohan Rameshwar Dass v. Commissioner of Income-tax , a case from the Punjab, the assessee preferred an appeal against the assessment under section 23(4) for failure to submit the return and to produce the account books. He had also filed an application under section 27, which was rejected, and against that order filed an appeal before the Appellate Assistant Commissioner which was also dismissed by him. In the appeal against the order under section 23(4) the Appellate Assistant Commissioner, however, called for a further report from the Income-tax Officer, and, after receiving the same, dismissed the appeal and maintained the assessment. On appeal, against that order, the Tribunal on the fresh material which the Appellate Assistant Commissioner had called for and received, reduced the assessment from Rs. 65,000 to Rs. 50,000. In a reference, the High Court considered the following question : " Whether in an order of remand made by an Appellate Assistant Commissioner under section 31(2) of the Act, it is open ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the further enquiry contemplated by section 31(2) must be an enquiry for the purposes of disposing of the appeal, and the question in appeal before the Appellate Assistant Commissioner must be whether the judgment of the Income-tax Officer was properly exercised under section 23(4) and whether the quantum arrived at by the Income-tax Officer was properly and fairly arrived it. But can it be said that under no circumstances is the Appellate Assistant Commissioner permitted to direct the Income-tax Officer to look at the books of account, which books have not been and cannot be produced for the purpose of the ordinary assessment ? We fully appreciate the point of view put forward on behalf of the department that the assessees should not be allowed to sit on the fence, take the chance of a best judgment assessment without producing the books, and if they find that the best judgment assessment is not in their favour and the production of the books of account which they have suppressed may result in an assessment more favourable to them, then ask for the examination of their books. We also appreciate the point of view of the department that the weight to be attached to the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaking for the court, observed at page 1118 : " With respect, we may say that the above passage clearly indicates the scope of the jurisdiction of the Appellate Assistant Commissioner. It certainly does not support the contention of the department that under no circumstances is the Appellate Assistant Commissioner competent to make an order of remand and to direct the scrutiny of the account books though such account books might not have been produced earlier. The learned judges point out that even in cases of best of judgment assessment, it is not improper to look into the books of account of the assessee in order that the judgment of the assessing officer may be properly directed and that a capricious and unjustified assessment should not be made. To that extent the decision is in favour of the assessee." After examining the particular facts of the case in the decision of the Bombay High Court, Srinivasan J. further observed at page 1119 : " It was under these peculiar circumstances that the learned judges of the Bombay High Court had to consider the particular orders made by the Appellate Assistant Commissioner in the two appeals before him. But the general principle they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of residence, it varied according to the circumstances applicable to each year and just because a person was treated as resident and ordinarily resident in earlier years, it did not prevent him from claiming that the status for the accounting period was different." The Income-tax Officer in his remand report, after scrutinizing the evidence produced before him, held that the assessee was resident but not ordinarily resident premising the report with the remark that the enquiry contemplated under section 31(2) should not offend the provisions of section 23(4). He also stated that the assessment made already must stand as a best judgment assessment and not as an assessment computed from accounts and evidence. When the appeal was heard by the Appellate Assistant Commissioner, the assessee questioned the objections of the Income-tax Officer to the letting in of fresh evidence and the point over jurisdiction raised by him. The Appellate Assistant Commissioner confirmed the order of the Income-tax Officer. On appeal to the Income-tax Appellate Tribunal, the Tribunal held that the Appellate Assistant Commissioner had no power to pass a remand order, and that he had every right to refus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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