Statutory Discretion must rest on materials and reason; failure to maintain yearly accounts does not excuse non compliance.

The note addresses exercise of the Income-tax Officer's discretion under Section 27 to cancel and remake an assessment. It states the legal principle that statutory discretion must be exercised on proper materials, reason and justice, not private opinion, and that an officer must be satisfied on evidence that default arose from sufficient cause. The practical effect clarified is that mere absence of yearly-maintained accounts does not constitute sufficient cause where the assessee could, with reasonable effort, have produced required information; accordingly a refusal to reopen may be lawful when supported by the record.

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Issues: Whether the discretion vested in the Income Tax Officer under Section 27 of the Income-tax Act to cancel and make a fresh assessment was properly exercised in the present case.

Analysis: The Court examined whether the assessee had shown sufficient cause for failing to file the return in the form required by the statutory rule (note 5 to the prescribed form) and whether the Income Tax Officer's refusal to cancel and remake the assessment under Section 27 was capricious or arbitrary. The Court applied the principle that assessments and discretionary decisions by tax authorities must be made according to the rules of reason and justice and not on private opinion, and that the Officer must be satisfied on proper materials that the default was due to sufficient cause. The assessee's sole explanation was inability to furnish the prescribed statement because accounts were not maintained yearly; the Court found that, on the face of the record, the assessee could, with proper effort, have extracted necessary information to prepare the required statement and therefore had not demonstrated sufficient cause for non-compliance. The Court held that the Income Tax Officer's decision involved lawful discretion exercised on available facts and was not shown to be arbitrary.

Conclusion: The discretion under Section 27 was properly exercised in this case and the Commissioner's position is upheld; the assessment made under Section 23(4) is not shown to be arbitrary on the grounds argued.

Ratio Decidendi: A tax authority's assessment or exercise of statutory discretion must be founded on materials and reason and cannot be arbitrary; absence of yearly-form accounts does not constitute sufficient cause where the assessee could, by reasonable effort, have produced the information required by the statutory return form.

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