KISHAN CHAND Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) THE Amritsar Bench of the Income-tax Appellate Tribunal, Amritsar, had made this reference under Section 256 (1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), at the instance of the assessee. The following question is referred for the consideration of this court : "whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that it is only under Section 146 of the Income-tax Act, 1961, that the assessee could urge that he had complied with the notice under Section 142 (1) of the Act and, therefore, the assessment was rightly made under Section 144 of the Act ?"

(2.) THE factual matrix relevant for the disposal of this reference may be stated thus: The assessee is an individual who was carrying on business as a broker. The controversy pertains to the assessment year 1977-78. The relevant accounting year ended on March 31, 1977. On the basis of some information, the residential premises of the assessee as well as the business premises of the firm in which the assessee was interested were raided under Section 132 of the Act on August 31, 1976. Some books of account and documents found therein were seized. During the assessment proceedings, the Income-tax Officer issued notice to the assessee under Section 142 (1) of the Act for production of the assessee's bank pass books and account books. The assessee did not produce the bank pass books but furnished copies of his bank pass books. The Income-tax Officer observed that the assessee intentionally omitted to produce the bank pass books and account books in response to the notice issued under Section 142 (1) of the Act. Accordingly, the Income-tax Officer completed the best judgment assessment under Section 144 of the Act and estimated the income of the assessee from different sources at Rs. 2,60,990 after examining the assessee under Section 131 of the Act. The assessee did not file any application under Section 146 of the Act before the Income-tax Officer for reopening his assessment. On the other hand, he riled an appeal under Section 246 (1) (c) of the Act against the above, referred assessment order before the Commissioner of Income-tax (Appeals ). The Commissioner felt that there was non-compliance with the notice under Section 142 (1) of the Act, and, therefore, the assessment under Section 144 of the Act was justified. The Commissioner, however, treated the ex parte assessment under Section 144 as one made under Section 143 (3) of the Act and held that, as the addition to the income returned of Rs. 7,442 was more than Rs. 1 lakh when the income was determined at Rs. 2,52,940, the case should have been referred to the Inspecting Assistant Commissioner under Section 144b of the Act. Accordingly, the assessment was set aside. Both the Revenue and the assessee appealed to the Tribunal against the said order of the Commissioner of Income-tax (Appeals ). The Tribunal accepted the Revenue's contentions that the assessment was rightly made by the Income-tax Officer under Section 144 of the Act on the failure of the assessee to produce the bank pass books and bank accounts and that the order of the Commissioner that the assessment falls under Section 143 (3) of the Act was not justifiable. The Tribunal also held that the assessee not having filed any application for reopening the assessment under Section 146 of the Act, the Commissioner could not go into the validity of the notice served under Section 142 (1) of the Act and that he could only determine the quantum of income involved and the quantum of income-tax leviable. The contention of the assessee in the appeal filed by him to the effect that he can challenge the validity of the notice and the merits of the assessment order was rejected. On an application of the assessee, the above-referred question was referred for the decision of this court.

(3.) WE have heard learned counsel for the parties, besides perusing the record.