TaxTMI 
TaxTMI 
1962 (8) TMI 85
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.... the case there was no material before the Appellate Tribunal to justify the decision that ₹ 30,000 should be added to the assessee's disclosed income on the basis of an estimate under section 23(4) of the Income-tax Act?" The assessee is carrying on business in the distribution of cinematograph films. Between February 12, 1951, and November 25, 1951, he was a partner in a firm styled M.S. Pictures along with one A.L. Srinivasa Chetti. He had a half share in the profits and gains of that firm. For the year of account ended March 31, 1952, the relevant previous year for the assessment year 1952-53, he returned on December 20, 1954, an income of ₹ 16,310 made up of ₹ 2,726 earned in his individual capacity by exploiting a film called Githa Gandhi and a sum of ₹ 13,584 alleged to be his share income from the partnership of M.S. Pictures. For the assessment year 1953-54, relevant to the account year ended 31st March, 1953, the assessee filed a return on December 30, 1954, showing a loss of ₹ 60,000. The Income-tax Officer issued notice under section 23(2) of the Act. In respect of the return for 1952-53, the assessee was called upon to appear bef....
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....ribunal saw no reason to interfere with the best judgment assessments passed by the Income-tax Officer and confirmed by the Appellate Assistant Commissioner. The Tribunal refused to refer any question of law to this court under section 66(1) but this court on applications by the assessee under section 66(2) has directed the above questions to be referred. It seems to us that there is no substance in these reference applications. The assessee has been throughout persistently in default and he gave no option to the department except to pass assessment orders under section 23(4) of the Act. The assessee had certainly no sufficient cause for non-appearance before the Income-tax Officer on the date when the case was posted for final determination. As stated already, his applications under section 27 of the Act were dismissed. Mr. K. Srinivasan, learned counsel for the assessee, however, strenuously contends that, in respect of assessment year 1952-53, there is no warrant for estimating the assessee's income from the partnership of M.S. Pictures in the sum of ₹ 20,000 particularly because in the final assessment of the income of the firm such share income has been determined a....
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.... subsequent assessment on the firm itself. We have been referred to section 16(1)(b) and section 23(5) as supporting this contention. There is nothing in these provisions to derogate from the power of the Income-tax Officer to estimate the share income of an assessee in his capacity as a partner of a firm in dealing with his individual assessment under section 23(4). Section 16(1)(b) lays down that the salary, interest, commission,or other remuneration payable to the partner shall be included in the computation of the income, along with the profit or loss. Section 23(5) provides that in the case of a registered firm the total income of each partner shall be assessed and that in the case of an unregistered firm the officer may instead of determining the sum payable by the firm proceed to assess the total income of each partner of the firm, if it results in greater revenue to the department. The firm as a unit of assessment under the Act has a separate existence from the members of the partnership for purposes of assessment to tax. The assessment proceedings relating to the firm stand separate from the proceedings regarding the individual assessment of the partner. This should not be....
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....ith an assessment under section 23(4) which is based only on the estimate of the assessing officer. The estimate by one may not fall in line with the estimate by another. But the appellate authorities cannot decline to accept the estimate of the officer, on the ground that it is at variance with their estimate. The statute has entrusted the duty of making the "best judgment assessment" primarily to the Income-tax Officer, and the hierarchy of appellate authorities should be slow to substitute their judgments for that of the officer. It is settled law that in matters of discretion, the authority having the discretion has a free scope to exercise it without interference or control by any appellate authority, except on grounds of mala fides, or abuse of power, or arbitrariness. A decision which upholds this principle is Singh Engineering Works v. Commissioner of Income-tax [1953] 24 I.T.R. 93. The assessee had only himself to thank for not having been present before the Income-tax Officer to guide him properly as to the approximate share income of the firm. It must be mentioned that the assessee, after dissolution of the partnership of M.S. Pictures, himself took over the e....