Best judgment assessment needs disclosed material before treating another person's income as the assessee's own

A best judgment assessment still requires the taxing authority to identify the material relied upon before treating an item as the assessee's income. Here, the notice only asked why the son's income should not be assessed as the assessee's own, but it did not disclose any basis for alleging that the son was a mere name-lender or benamidar. The addition order also lacked definite supporting material. The court held that special-knowledge and presumption principles did not justify the addition, because the assessee was not confronted with the material before any adverse inference was drawn. The addition was unsupported by evidence and was disallowed.

---

---

Issues: Whether the addition of Rs. 7,629, treated as partnership income from the rice mill in the name of the assessee's son, was justified on the materials before the taxing authority.

Analysis: The assessment was made on a best judgment basis, but even in such an assessment the authority was required to indicate the material on which it relied before fastening an item of income upon the assessee. The notice issued merely required the assessee to show cause why the son's income should not be treated as the assessee's own, but it did not disclose the basis of the suspicion that the son was a mere name-lender or benamidar. The order of addition also did not disclose any definite material justifying the conclusion. The provisions relating to special knowledge and presumptions did not assist the revenue, because the fact in issue was not shown to be peculiarly within the assessee's knowledge and the assessee had to be confronted with the material relied upon before an adverse inference could properly be drawn.

Conclusion: The addition of Rs. 7,629 was not supported by evidence and the question referred was answered in the negative, in favour of the assessee.

---