Best judgment assessment upheld where non-production of accounts was unjustified and no sufficient cause was shown for cancellation.

Failure to comply with a notice requiring production of accounts justified an ex parte best judgment assessment under the Indian Income Tax Act, 1922, and the legality of proceeding under section 23(4) did not depend on prior adjudication of the assessee's explanation. Relief under section 27 required proof of a reasonable opportunity or sufficient cause for non-compliance; inability to attend personally was not enough where accounts could have been produced through an agent or messenger, so cancellation was refused. A best judgment assessment did not require a mandatory local inquiry or detailed record of investigations, provided the estimate was honest, fair, and not capricious. The assessment was upheld.

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Issues: (i) Whether the Income-tax Officer was justified in making an ex parte assessment under section 23(4) of the Indian Income Tax Act, 1922 after non-compliance with the notice under section 22(4); (ii) whether the assessee had shown sufficient cause under section 27 for cancellation of the ex parte assessment; and (iii) whether a best judgment assessment under section 23(4) requires a prior local inquiry and recording of its details and results.

Issue (i): Whether the Income-tax Officer was justified in making an ex parte assessment under section 23(4) of the Indian Income Tax Act, 1922 after non-compliance with the notice under section 22(4).

Analysis: Failure to comply with the notice requiring production of accounts attracted the statutory consequence under section 23(4). The officer was therefore bound to make an assessment to the best of his judgment. The legality of the notice and the jurisdiction to proceed under section 23(4) did not depend on a prior adjudication on the merits of the assessee's explanation for non-production.

Conclusion: The ex parte assessment was lawfully made and the finding was in favour of Revenue.

Issue (ii): Whether the assessee had shown sufficient cause under section 27 for cancellation of the ex parte assessment.

Analysis: Relief under section 27 depended upon proof that the assessee had not a reasonable opportunity to comply with the notice under section 22(4), or was prevented by sufficient cause from complying with it. The assessee's inability to attend personally did not excuse non-production of the accounts, since they could have been produced through an agent or messenger. The reasons advanced therefore did not satisfy the statutory test for cancellation.

Conclusion: Sufficient cause was not established and the refusal to cancel the assessment was in favour of Revenue.

Issue (iii): Whether a best judgment assessment under section 23(4) requires a prior local inquiry and recording of its details and results.

Analysis: The statutory language required an honest and fair estimate, not a prescribed form of inquiry or a mandatory record of local investigations. The officer could rely on available local knowledge, repute, prior returns, and other relevant materials, provided the assessment was not dishonest, vindictive, capricious, or a mere sham. The absence of a local inquiry or a detailed note of inquiry did not by itself invalidate the assessment.

Conclusion: No such mandatory requirement existed, and the assessment under section 23(4) stood in favour of Revenue.

Final Conclusion: The assessment was upheld, the reference points were answered against the assessee on the substantive questions, and the appeal succeeded with costs.

Ratio Decidendi: A best judgment assessment under section 23(4) is valid if made on an honest exercise of judgment after default in compliance with statutory notices; it is not invalid merely because no prior local inquiry was held or detailed reasons were recorded, and relief under section 27 lies only on proof of statutory sufficient cause.

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