1992 (3) TMI 15 - HC - Income Tax

Court rules against assessee, finds Tribunal erred in annulling assessments under Income-tax Act.

The court ruled against the assessee, finding that the Tribunal erred in annulling the assessments made by the Income-tax Officer under section 144 of the ... Appeal To Tribunal, Assessment, Best Judgment Assessment Issues involved:The judgment involves a reference u/s 256(2) of the Income-tax Act, 1961 for the assessment years 1981-82 and 1982-83. The questions of law referred to the court were related to the correctness of the assessment made u/s 144 of the Income-tax Act, 1961 and whether the Tribunal should have directed the Income-tax Officer to redo the assessment.Assessment under section 144:The assessee, a company engaged in the business of electrical engineers and contractors, did not file returns in response to notices u/s 139(2) and 142(1) for the assessment years 1981-82 and 1982-83. The Income-tax Officer determined the total income at Rs. 50,000 for each year without providing a basis for this calculation. The Commissioner of Income-tax (Appeals) upheld the Income-tax Officer's action, leading the assessee to appeal before the Tribunal.Tribunal's Decision:The Tribunal found that the Income-tax Officer did not justify the total income determination of Rs. 50,000 for each year as the turnover was significantly lower. Citing a Supreme Court decision, the Tribunal held that the best judgment assessments made by the Income-tax Officer did not meet the required standards. Consequently, the Tribunal quashed the assessments.Court's Analysis:The court emphasized that a best judgment assessment should be based on intelligent estimates supported by relevant materials. In this case, the Income-tax Officer failed to consider the assessee's previous losses while determining a positive income figure for the relevant years. The court opined that the Tribunal erred in annulling the assessments without directing a proper determination of income or loss.Judgment:The court answered the first question in the negative, favoring the Revenue, indicating that the Tribunal was not justified in annulling the assessments. The second question was answered in the affirmative, also in favor of the Revenue. The court did not award costs in this matter.Separate Judgment:SHYAMAL KUMAR SEN J. concurred with the decision.