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1993 (8) TMI 314

..... failed to submit a return for the assessment year 1945-46 in response to a notice under Section 22(2) of the Income-tax Act. They also failed to produce the account books in answer to a notice under Section 22(4) of the Act. Thereupon the Income-tax Officer made the assessment under Section 23(4) and he estimated the sales effected by the assessees, who are doing business of chemists and druggists, at ₹ 9,00,000 and applied a flat rate of 25 per cent. to compute the gross profits. The assessees then made an application under Section 27 for setting aside the assessment under Section 23(4). That application was dismissed by the Income-tax Officer. The assessees then preferred two appeals to the Appellate Assistant Commissioner, one agai .....

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..... ther inquiry as he thinks fit or cause further inquiry to be made by the Income-tax Officer. It is contended on behalf of the assessees that the Legislature has not thought fit to put any limitation upon the power of the Appellate Assistant Commissioner to make or cause to be made any further inquiry, and if in order to dispose of an appeal against a best judgment assessment the Appellate Assistant Commissioner thinks it necessary to have the books of account of the assessees examined, he has the power to do so and his jurisdiction cannot be challenged. On the other hand, it is contended-and with considerable force-that conferring such power upon the Appellate Assistant Commissioner would really be stultifying the whole scheme of the Act an .....

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..... ld be looked at for an entirely different purpose from the purpose for which he would look at them if he was proceeding to assess the assessees under Section 23(3). Therefore, if the Appellate Assistant Commissioner directed the Income-tax Officer to look at the books of account, it could only be for the purpose of arriving at his best judgment. It is true that the further inquiry contemplated by Section 31(2) must be an inquiry 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 at. But ca .....

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..... gh in practice it may be in extremely rare cases that the Appellate Assistant Commissioner would direct the Income-tax Officer to look into the books of account of the assessee which the assessee has failed to produce, however rare the cases may be, we have got to answer the question of law on the provisions of the statute and not from the point of view of its practical application. In this particular case with which we are dealing, there can be no doubt that the order of the Appellate Assistant Commissioner is entirely erroneous. He points out that the order under Section 27 clearly shows that the default committed by the assessees was clear and complete, and then he expresses the opinion that as the assessees are not habitual defaulters a .....

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..... e might be made, which was referred to at the Bar. That is a decision of the Punjab High Court which is directly in point and where the facts were almost identical with the facts of this case, and the case is reported in Brij Mohan Rameshwar Das v . Commissioner of Income-tax [1953] 23 ITR 31 . There too, two appeals were filed against the order of the Income-tax Officer. One was an order under Section 27 and the other was an order under Section 23(4), and the appeal against the order under Section 27 was dismissed. Then an order for remand was made by the Appellate Assistant Commissioner and the order of remand was to recompute the income on the basis of further inquiry and the Income-tax Officer was asked as well to look into the assessee .....

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..... all practical purposes the question is academic because it is difficult to contemplate a case where the Appellate Assistant Commissioner will direct the Income-tax Officer to look into the books of account of an assessee which books have not been properly produced at the proper time in answer to a notice issued under the Act. But in this particular case it is not even necessary to give the academic answer as had to be done by the Punjab High Court, because if the order made by the Appellate Assistant Commissioner is an erroneous order, as we hold it was, then it is sufficient for us to say that that particular order was not in accordance with law and that order not being in accordance with law, there was no obligation upon the Appellate Tr .....

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