Court mandates assesses' right to be heard in best judgment assessments under Income-tax Act, emphasizing quasi-judicial nature.

The court held that assesses must be given an opportunity to be heard in best judgment assessments under section 144 of the Income-tax Act, 1961. Denying this right only applies at the initial stage, not throughout the assessment process. The court emphasized the quasi-judicial nature of best judgment assessments, requiring assesses to present their case before decisions are made. The court ruled in favor of the petitioner, quashing the assessment order and instructing the respondent to reevaluate the case in compliance with the law, stressing the importance of providing assesses with opportunities to be heard.

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Issues:
1. Validity of assessment under section 144 of the Income-tax Act, 1961 without providing an opportunity for being heard.
2. Interpretation of provisions under section 142 and section 144 of the Income-tax Act, 1961.
3. Application of section 69 of the Income-tax Act, 1961 regarding undisclosed investments.

Detailed Analysis:
The petitioner was assessed by the respondent, the Income-tax Officer, under section 144 of the Income-tax Act, 1961, for the year 1969-70, fixing the total income at Rs. 40,000 without providing an opportunity for being heard. The petitioner challenged the assessment order on the ground that the addition of Rs. 15,000 from other sources was made without giving him a chance to present his case. The respondent justified the assessment under section 144, which allows for best judgment assessment in cases of default by the assessee, contending that there is no right to be heard for defaulting assesses as per the Act.

The court examined the provisions of section 142 and section 144 of the Income-tax Act, 1961. Section 142(3) provides that an assessee must be given an opportunity of being heard in respect of any material gathered for assessment unless it is made under section 144. However, the court disagreed with the revenue's contention that defaulting assesses are denied the right to be heard. It held that the best judgment assessment under section 144 is a quasi-judicial process requiring an opportunity for the assessee to present their case before a decision is made based on gathered materials. The court emphasized that the denial of this opportunity is only at the initial stage and not throughout the assessment process.

Furthermore, the court considered the petitioner's reliance on section 69 of the Act, which mandates that before undisclosed investments are included in an assessee's total income, they must be given an opportunity to explain. The court found that the petitioner's case fell under the purview of section 69, requiring the Income-tax Officer to provide an opportunity for the petitioner to explain the nature and source of the investment before treating it as income.

Consequently, the court quashed the assessment order and remitted the case to the respondent for proper disposal in accordance with the law, emphasizing the importance of providing assesses with opportunities to be heard, especially in quasi-judicial processes like best judgment assessments.

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