Best judgment assessment under income-tax law upheld where return lacked verification and signature, with demand notice validly issued.

Failure to file a return in the prescribed manner, including required verification and signature, was treated as a failure to furnish a valid return, justifying best judgment assessment under section 23(4) of the Income-tax Act, 1922. The Court held that section 23(4) does not depend in every case on non-compliance with section 22(4), and that "assessment" under that provision includes determination of tax payable, so a notice of demand under section 29 may validly follow. An unsigned and unverified return was not regarded as merely an incomplete return under section 23(2), because the defect went to the existence of a proper return itself. The reference was answered in favour of the Revenue.

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Issues: (i) Whether an assessment made under section 23(4) of the Income-tax Act, 1922 requires non-compliance with section 22(4), and whether a notice of demand under section 29 can be issued after a best judgment assessment; (ii) Whether a return filed under section 22(2) without signature or verification is an incomplete return within section 23(2), so that assessment could not be made under section 23(4) without a further notice.

Issue (i): Whether an assessment made under section 23(4) of the Income-tax Act, 1922 requires non-compliance with section 22(4), and whether a notice of demand under section 29 can be issued after a best judgment assessment.

Analysis: Section 23(4) applies where there is failure to make a return under section 22(1) or 22(2), or failure to comply with the terms of a notice issued under section 22(4). The existence of section 23(4) does not depend in every case on non-compliance with section 22(4). The word "assessment" in section 23(4) was construed to mean the determination of the total taxable income and the sum payable on that income, having regard to the definition of "assessee" as a person by whom income-tax is payable. On that basis, a notice of demand could validly follow a best judgment assessment.

Conclusion: The issue was answered against the assessee, and the notice of demand under section 29 was held valid after an assessment under section 23(4).

Issue (ii): Whether a return filed under section 22(2) without signature or verification is an incomplete return within section 23(2), so that assessment could not be made under section 23(4) without a further notice.

Analysis: The return required by section 22(2) had to be in the prescribed form and verified in the prescribed manner. Verification and signature were treated as essential statutory ingredients of a valid return, and the omission of both was held to amount to a failure to submit a proper return. The expression "incorrect or incomplete" in section 23(2) was held not to cover the defect of absence of verification and signature, because the notice contemplated by that provision is one requiring evidence, which cannot cure the absence of verification or signature on the return itself. The Court therefore rejected the analogy of a defective plaint in civil procedure.

Conclusion: The issue was answered against the assessee, and the unsigned and unverified return was not treated as an incomplete return under section 23(2).

Final Conclusion: The reference was answered in favour of the Revenue on all points, and the best judgment assessment and consequential demand were upheld.

Ratio Decidendi: Under the Income-tax Act, 1922, failure to furnish a return in the prescribed manner, including verification and signature where required, justifies a best judgment assessment under section 23(4), and such assessment includes determination of the tax payable so that a demand notice may validly issue.

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