TMI Blog1943 (3) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... cer served a notice upon them under Sections 22(4) and 23(2) to produce the accounts of their money-lending business for the year 1937-38 and connected documents. The notice was to be complied with by the 20th of that month. The assessees produced for the inspection of the Income- tax Officer certain books of account but when he examined them he considered that the assessees possessed another set of books which they had suppressed. When the notice under Sections 22(4) and 23(2) was served on the assessees Section 28 had not been amended. It was amended with effect from the 1st April 1939. Sub-Section (1)(b) of Section 28 now provides that if the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal in the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e imposed a penalty of ₹ 1,200 in addition to the amount of tax payable under the order of assessment. The assessees challenged the correctness of both the orders of the Income-tax Officer in appeals to the Appellate Assistant Commissioner who agreed with the Income-tax Officer. The assessees accepted the decision of the Appellate Assistant Commissioner so far as it concerned the assessment to income-tax under Section 23(4), but they appealed to the Income-tax Appellate Tribunal against the penalty which had been inflicted on them. The Tribunal allowed the appeal on the ground that in connection with the imposition of a penalty for the non-production of books the existence of the books should be shown in some more tangible materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in framing these questions. The second and third questions as they stand are not intelligible; but we gather what is meant from the order which the Tribunal passed on the assessee's appeal. The first question is whether Section 28(1)(b) can be applied in respect of the failure to comply with the notice issued on the 4th January 1940. It obviously could not be applied to the earlier notice because when that notice was issued the amendment had not been made. When the second notice was issued the amendment had been made and we consider that the section was applicable. When the amendment came into force the Income-tax Officer had not made an assessment for the year 1938-39 and he was entitled to make it when he did, namely, on the 31st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 will assist him in arriving at a fair and proper estimate; and though there must necessarily be guess-work in the matter, it must be honest guess-work. In that sense, too, the assessment must be so some extent arbitrary. The imposition of a penalty under Section 28 is not a matter of guess-work. Before imposing a penalty in such a case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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