Best judgment assessment permits fair estimates despite later firm income revisions when the original assessment was non-arbitrary.

A best judgment assessment under section 23(4) of the Indian Income-tax Act, 1922 requires the assessing officer to make a fair estimate honestly and without arbitrariness, vindictiveness or caprice when the assessee defaults in complying with notices and fails to produce evidence. The later determination of the partnership firm's income at a different figure did not invalidate the assessee's earlier estimated share income, because the individual assessment and the firm assessment are separate proceedings and subsequent events do not automatically affect a valid estimate made on the date of assessment. Any correction to the partner's share income had to be sought through the statutory rectification mechanism, and no material showed the estimates to be unsupported or arbitrary.

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Issues: Whether, in a best judgment assessment under section 23(4) of the Indian Income-tax Act, 1922, the Income-tax Officer and the appellate authorities could sustain an estimate of the assessee's share income from a partnership firm and other estimated income notwithstanding that the firm's income was later ascertained at a different figure.

Analysis: The assessee had repeatedly failed to comply with notices and did not furnish evidence when called upon, so the assessments were made under section 23(4). The power under that provision is mandatory on default, and the officer is required only to make a fair estimate honestly and without arbitrariness, vindictiveness or caprice. The fact that the share income of the partnership firm was later determined at a lower figure did not render the earlier best judgment estimate illegal, because the individual assessment and the firm assessment are separate proceedings. Subsequent events do not automatically invalidate an assessment that was proper on the date it was made. If the assessee considered the partner's share income incorrect after the firm's assessment, the statute provided a rectification mechanism under section 35(5), which the assessee did not invoke. No material was shown to establish that the estimates were arbitrary, capricious or unsupported by any relevant basis.

Conclusion: The estimate made in the best judgment assessment was upheld, and the questions were answered against the assessee.

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