Best-judgment assessment fails when the assessee complied with notice and no lawful step compelled further production of books.

An assessment made as a best-judgment assessment under section 23(4) of the Income-tax Act, 1922 was held without jurisdiction where the assessee had complied with the section 23(2) notice by producing the relevant books and accounts, and had not refused to comply with the statutory process. The officer could not treat the later inability to produce books, which were in police custody, as a default under section 23(2) when no notice under section 22(4) had been issued to compel further production. The assessment was quashed and a fresh assessment was directed after facilitating production of the books.

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Issues: Whether an assessment made under section 23(4) of the Income-tax Act, 1922 was without jurisdiction where the assessee had complied with the notice under section 23(2), had produced the books repeatedly, and the Income-tax Officer had not issued a notice under section 22(4) before resorting to best-judgment assessment.

Analysis: A notice under section 23(2) required the assessee to attend or produce evidence in support of the return, but the choice whether to produce evidence lay with the assessee. The assessee had in fact produced its books and accounts on several dates and had not refused compliance. When the books later remained in police custody, the Income-tax Officer could not treat the inability to produce them again as a default under section 23(2), especially when no notice under section 22(4) had been issued to compel further production. The request that the officer should procure the books or use his powers to assist in their production did not justify invocation of section 23(4).

Conclusion: The assessment under section 23(4) was without jurisdiction and liable to be quashed in favour of the assessee.

Final Conclusion: The writ petition succeeded, the impugned assessment was quashed, and the authority was directed to make a fresh assessment in accordance with law after facilitating production of the books.

Ratio Decidendi: Where an assessee has complied with a notice under section 23(2) by producing the evidence relied upon, the Income-tax Officer cannot invoke section 23(4) for default unless the statutory process requiring further production has been lawfully triggered and the assessee has actually failed to comply.

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