Limitation and best judgment assessment upheld where the order was timely made and the income estimate rested on relevant material.

Limitation under the Income-tax Act is met when the assessment order is made within the prescribed time; later service of the order copy or demand notice does not affect validity. The Andhra Pradesh HC therefore upheld the assessment as not time-barred. In a best judgment assessment, the estimate must be a fair one based on relevant material, past conduct and surrounding circumstances, not mere suspicion. The income estimate was supported by the record and was sustained in law.

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Issues: (i) Whether the assessment order made under the Income-tax Act was barred by limitation because the copy of the assessment order and demand notice were served after the date of the order; (ii) Whether the income estimated at Rs. 50,000 in the best judgment assessment was sustainable in law.

Issue (i): Whether the assessment order made under the Income-tax Act was barred by limitation because the copy of the assessment order and demand notice were served after the date of the order.

Analysis: The statutory bar under section 34(3) turned on the making of the assessment order within the prescribed period. The order had in fact been passed before the limitation expired. Service of the copy of the order and the demand notice was not material for computing limitation under that provision.

Conclusion: The assessment was not barred by limitation and the issue was decided against the assessee.

Issue (ii): Whether the income estimated at Rs. 50,000 in the best judgment assessment was sustainable in law.

Analysis: In a best judgment assessment under section 23(4), the assessing authority is entitled to make a fair estimate on the basis of available material, including the assessee's past conduct, surrounding circumstances, and relevant information indicating suppression of income. The estimate was supported by the materials relied upon by the authorities and was not shown to rest merely on suspicion or irrelevant considerations.

Conclusion: The estimate of income was sustainable in law and the issue was decided against the assessee.

Final Conclusion: Both questions were answered in favour of the Revenue, and the Tribunal's estimate and the assessment were sustained.

Ratio Decidendi: Under section 34(3), limitation is satisfied if the assessment order is made within time, irrespective of later service of the order or demand notice; and in a best judgment assessment under section 23(4), the estimate must be a fair one based on relevant material and circumstances.

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