TMI Blog1980 (3) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... nd M/s. Capital Diesel Engineering Works. For the previous year relevant to assessment year 1965-66, he is also a partner in Eagle Theatres which firm is having cinemas at Bombay and in New Delhi. No returns were filed by the assessee for any of these years. They were due by the end of June of every year following the close of corresponding previous year. The WTO, therefore, required the assessee notices to file the returns but there were again defaults. The notices served under s. 17 of the W.T. Act, also remained uncomplied. All that the assessee did was to file statements mentioning his assets and liabilities. Their position was stated as under: -------------------------------------------------------------------------------------------------------------------------------------------------- Assessment year Assets Liabilities Net wealth (1) (2) (3) (4) -------------------------------------------------------------------------------------------------------------------------------------------------- Rs. Rs. Rs. 1962-63 5,34,672 4,48,800 85,872 1963-64 6,86,783 5,39,517 1,47,000 1964-65 11,04,970 10,64,766 (+) 40,204 1965-66 12,84,131 12,13,627 (+) 70,503 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depositors were close relations of the assessee and almost all of them were jointly residing with him. If these liabilities, it was observed, were genuine, the assessee should not have felt any difficulty in adducing satisfactory evidence before the WTO when sufficient opportunity was granted to prove them. He was, therefore, unable to allow the assessee to produce confirmation letters from the at the appellate stage, and after making reference to r. 46A, held that in the circumstances, fresh evidence was not entertainable. At the same time, the AAC was of the opinion that so far as the disclosure made by the Green Finance (India) Pvt. Ltd. under s. 271(4A) of the I.T. Act was concerned, he was unable to ascribe any wealth to the assessee on its basis as the so-called bogus creditors could not be linked with him. According to him, there was no positive evidence brought out to hold that the deposits with the company belonged to the directors. To this extent, therefore, he did not approve of the approach of the WTO. However, in the ultimate analysis he came to the conclusion that considering the other circumstances, the estimate of wealth at rupees 7 lakhs in each year was quit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y his personal absence on the last date of hearing, he could have at least filed the returns as a token of proof of good intention. The statements of assets and liabilities filed by the assessee on plain papers were found to be not authenticated and did not much call for reliance, more so as the liabilities shown therein were not established to be genuine. The appeals were, therefore, rejected. In second appeals, the Appellate Tribunal agreed that the WTO was compelled to act under s. 16(5) of the W.T. Act and make best judgment assessments. However, that by itself, it was observed, did not give him blanket powers to reject the material placed by the assessee before him without allowing another opportunity to show cause why the wealth declared should not be accepted. Reliance in this regard was placed upon the decision of the Kerala High Court in the case of T. C. N. Menon v. ITO [1974] 96 ITR 148, to the effect that the assessee was entitled to have a second opportunity to show cause why on the material gathered by the ITO, his total income should not be assessed in the manner proposed by the ITO. Since the WTO had not done so in the present cases and had straightway treated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very relevant documents were required to be produced. The assessee could have made appearance and explained the position with respect to those documents and produced the rest. The onus of proving the liabilities which the assessee had shown in the statements furnished, and which the assessee claimed were due from him, squarely rested on him. The WTO repeatedly asked him to substantiate them but without result. Even confirmatory letters from the creditors were not furnished. This was in spite of the fact that most of them were close relations of the assessee and were jointly residing with him. When that had been the conduct of the assessee, the AAC was justified to not admit the confirmations tendered for the first time at the appellate stage. In so far as the disclosures made under the Finance (No. 2) Act of 1965 by some creditors, they too had to be first correlated with the liabilities which the assessee was showing in the statements. Even otherwise as per the decisions of the Gujarat and Allahabad High Courts given in the year 1973 and reported as Manilal Gafoorbhai Shah v. CIT [1974] 95 ITR 624 (Guj) and Badri Pd. and Sons v. CIT [1975] 98 ITR 657 (All), those disclosures co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the estimates of wealth computed were at rupees 7 lakhs. With this background of the facts, we do not see what was the other material which the authorities below had collected or relied upon, about which the Appellate Tribunal observed that the assessee should have been provided a second opportunity of being heard. The generalised statement in the order of the Tribunal about the material collected had little bearing when in fact there was no such material collected. Primarily it were the statements furnished by the assessee himself which were made the basis for best judgment assessments in so far as the assets shown in them were concerned. All that was done was to ignore liabilities as the assessee had failed to substantiate them in spite of a large number of opportunities granted. In our opinion, therefore, the ratio of the Kerala High Court decision relied upon by the Tribunal was not, in any manner, attracted. The attitude of the assessee was throughout to sit on the fence and contemptuously ignore the assessment proceedings and the notices issued by the WTO requiring him to furnish returns and other material in support of his wealth-tax statements. After all the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , should arrive at his conclusion without any bias and on a rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation. It is his best judgment and not any one else's. The High Court cannot substitute its best judgment for that of the assessing authority. To use the words of Lord Russell of Killowen, " he must make what he honestly believes to be a fair estimate of the proper figure of assessment " and for this purpose he must take into consideration such materials as the assessing officer has before him, including the assessee's circumstances, knowledge of previous returns and all other matters which the assessing officer thinks will assist him in arriving at a fair and proper estimate. There is at the same time, no gainsaying that even where an assessee suffers a best judgment assessment, he can move an appeal against the same and plead before the appellate authority that the estimate of income or wealth computed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT [1954] 26 ITR 775 (SC) followed and applied in Swamy Bros. v. CIT [1958] 34 ITR 123 (Ker) and K. Baliah v. CIT [1965] 56 ITR 182 (Mys)). The I.T. Act, 1961, introduced a qualification to this rule in s. 142(3). This sub-section provides that the assessee shall, except where the assessment is made under s. 144, be given an opportunity of being heard in respect of any material gathered on the basis of any enquiry or any audit and proposed to be utilised for the purpose of the assessment and this limitation has been emphasised in Miri Mal Mahajan v. CIT [1974] 95 ITR 186 (Punj) and Addl. ITO v. Ponkunnam Traders [1976] 102 ITR 366 (Ker). Kanga and Palkhivala (Law of Income-tax) have suggested (p. 862, 7th Edn., Vol. I) that this provision cannot be construed to enjoin or authorise violation of the principles of natural justice in the case of a best judgment assessment and that an opportunity of being heard in respect of any material gathered by the officer should not be denied except where the assessee's conduct or default is of such a character as to necessitate or warrant dispensing with this fundamental principle of justice. It is, however, not necessary for the purpose of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the shares held by the assessee in Green Finance Pvt. Ltd. in which the assessee was also a director needed enhancement, as that company and its directors had made disclosures to the effect that certain hundi loans shown in its books were not genuine liabilities but were really their undisclosed income. This is of no relevance now because the AAC differed from the WTO and held that these disclosures could not be linked up with the case of the appellant in the absence of positive evidence. For the other assessment years 1965-66 to 1969-70, the WTO disturbed the valuation of the assets shown by the assessee in respect of properties held by the firm, Eagle Theatres, New Delhi, of which the assessee was a partner. This was information and material within the assessee's knowledge. So far as the liabilities were concerned, there were two aspects for consideration--one their genuineness and the other the effect of their having been declared under the Finance (No. 2) Act, 1965, by the persons concerned. So far as the former is concerned, the assessee had ample opportunities before the WTO and his attempt to adduce additional evidence before the AAC having been rejected, he cannot be gi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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