1967 (9) TMI 25 - HC - Income Tax

Invalid assessment order for 1963-64 due to non-compliance with disclosure rules.

The High Court of Kerala held that the assessment order under section 143(3) for the assessment year 1963-64 was invalid due to non-compliance with ... Opportunity of being heard - enquiry before assessment - principle of natural justice - non-compliance of section 142(3) - vitiation of assessment under section 143(3)Opportunity of being heard - principle of natural justice - non-compliance of section 142(3) - vitiation of assessment under section 143(3) - Assessment relating to the head office was vitiated for non-compliance with the requirement to give the assessee an opportunity of being heard in respect of material gathered under enquiries before assessment. - HELD THAT: - The Income-tax Officer fixed gross profit rates for the head office by reference to profits disclosed in cases considered comparable and expressly relied upon those cases to estimate and add back profits. No details of the comparable cases or materials so relied upon were furnished to the assessee. Sub-section (3) of section 142 embodies the established principle of natural justice requiring that an assessee be given an opportunity to be heard on material obtained under enquiries. Failure to disclose the sources and material used for making adjustments therefore violated that statutory requirement and the principle of natural justice, thereby vitiating the assessment made under section 143(3) in respect of the head office.Question answered in the affirmative; assessment for the head office set aside for non-compliance with section 142(3).Final Conclusion: The reference is answered affirmatively in favour of the assessee insofar as the head office is concerned; the assessment under section 143(3) is vitiated for failure to afford the opportunity envisaged by section 142(3). A copy of the judgment will be transmitted to the Appellate Tribunal as required by law. The High Court of Kerala ruled in a reference under section 256(1) of the Income-tax Act, 1961 for the assessment year 1963-64 that the assessment order under section 143(3) was vitiated due to non-compliance with the provisions of section 142(3). The Income-tax Officer's reliance on comparable cases without providing details to the assessee was deemed a violation of natural justice principles. The question was answered in favor of the assessee regarding the head office assessment. The judgment will be sent to the Appellate Tribunal as required by the Income-tax Act.