Reasonable opportunity before default assessment: short notice cannot defeat a timely filed return and supporting evidence

A return filed before assessment under section 22(3) was treated as timely, and a default assessment under section 23(4) could not be sustained unless the assessee was given a reasonable opportunity to produce the books and supporting evidence. A notice requiring compliance by the next morning, in the context of a business with a head office and branches, was held too short to constitute a reasonable opportunity. Earlier non-compliance with a books notice did not, by itself, justify disregarding a duly filed return or proceeding straight to a default assessment.

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Issues: Whether an assessment in default under section 23(4) could be made where the assessee had filed a return before assessment but was given only a short notice to produce books and other evidence in support of the return.

Analysis: A return filed before assessment under section 22(3) is to be treated as made in due time. Before such a return can be disregarded, the assessee must be afforded a reasonable opportunity to produce the books and any other evidence relied upon in support of the return. A notice served late in the afternoon requiring compliance the next morning, in the circumstances of a business with a head office and several branches, was too short to amount to a reasonable opportunity. Failure to comply with an earlier notice for books could not by itself extinguish the right to have a duly filed return properly inquired into on reasonable notice.

Conclusion: The assessment under section 23(4) was invalid and the question was answered in favour of the assessees.

Final Conclusion: The decision holds that a default assessment cannot be sustained unless the statutory notices afford a reasonable opportunity to comply with the requirements for supporting a return.

Ratio Decidendi: A return filed before assessment must be treated as timely, and a default assessment cannot be founded on non-compliance with statutory notices unless the assessee was given a reasonable opportunity to produce the books and evidence supporting that return.

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