T C N MENON Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) The petitioner was assessed by the respondent, the Income Tax Officer, B Ward, Ernakulam for the year 1969-70 under S.144 of the Income Tax Act, 1961, fixing his total income to the best of judgmental Rs. 40,000/-. Ext P2 dated 30-1-1971 is a copy of the order of assessment S.144 was resorted to, since the petitioner did not file a return of the total income; and he did not also respond to the notices issued to him by the respondent. The order of assessment states, among other things, that during the relevant accounting year the petitioner had constructed a building whose estimated cost came to Rs. 40,000/-. The respondent estimated the petitioner's professional income for the year at Rs. 25,000/-; and he estimated the balance of Rs. 15,000/- to be the income from other source. That is how the assessment was made. This petition has been filed to quash the said order of assessment on the ground that the addition of Rs. 15,000/- from other source was made without giving the petitioner an opportunity for being heard.

(2.) It is necessary to notice some of the provisions of the Act in order to appreciate the rival contentions advanced by counsel on both parties. S.142 of the Income Tax Act, 1961 deals with enquiry before assessment. Sub-s.(3) of that Section alone is relevant for the purpose of this case, which reads:

(3.) On the basis of sub-s.(3) of S.142, counsel for the Revenue contends that an assessee has no right for an opportunity of being heard in respect of any material gathered by the Income Tax Officer, for the purpose of assessment, when it is made under S.144. which is a case of default. Counsel submits that the principle of natural justice, which is embodied in sub-s.(3) of S.142, is confined to a case when the assessee files a return and complies with the notices issued to him; and it is denied by the statute to a defaulting assessee. It is also contended that there is no constitutional objection to such a provision. I decline to express any opinion on the latter submission. But on a reading of S.144, it appears to me that the contention cannot be accepted. What that Section requires the Income Tax Officer to do in the case of a default ting assessee is to make an assessment of his total income to the best of judgment, after taking into account all relevant materials which the Income Tax Officer has gathered. An assessment to the best of judgment is a quasi judicial process, and it has to be based on the materials gathered. Any quasi judicial process requires an opportunity for being heard before decision. The decision can be arrived at best, or as correctly as possible, only if the assessee is given an opportunity to say why on the materials gathered by the Income Tax Officer, the income should not be assessed in the manner proposed to be done by him. There is no express denial of this well established common law right in S.142(3) of the Act. All that is argued is that it is impliedly there It appears to me that sub-s.(3) of S.142 deals with a stage before the Income Tax Officer comes to a tentative decision or proposal to determine the total income at a certain amount on the basis of the materials gathered by the Income Tax Officer Those materials can be used against an assessee only after giving him an opportunity of being heard. The assessee is entitled to have a second opportunity to show cause why the total income should not be determined in the manner proposed to be done by the Income Tax Officer. It is only the first opportunity that is denied by sub-s.(3) of S.142 to a defaulting assessee. He is entitled to show cause why on the materials gathered by the Income Tax Officer, his total income should not be assessed in the manner proposed by the Income Tax Officer. This view has got support in the decision of a learned Single Judge of this Court in Koyammankutty v. Fourth Addl. Income Tax Officer (1965) 58 ITR 871.