Law: Income Tax Act, 1922

Section: 66(2),34(1A),22(4)

Law: Income Tax Act, 1922

Section: 66(2),34(1A),22(4)

Section 144 of the Income-tax Act, 1961 [Corresponding to section 23(4) of the Indian Income-tax Act, 1922] - Best assessment - Assessment years 1942-43 to 1947-48 - For relevant assessment years, assessee did not file any return - Subsequently, ITO made best assessment on assessee and made his own estimate of income by taking into account general market condition during relevant period, and admission made by assessee before Investigation Commission and facts found by Commission - Assessee contended that ITO was not justified in referring to report of investigation commission and material collected by it for purpose of making estimate as Act under which Investigation Commission was constituted was declared to be ultra vires by Supreme Court - Whether merely because Act under which Investigation Commission was constituted was declared to be ultra vires by Supreme Court it did not follow as a matter of law that material collected by Investigation Commission could not be relied upon by ITO - Held, yes - Whether further since while making estimate, ITO had taken into consideration a number of other circumstances, estimate as such could not be said to be arbitrary, capricious or conjectural - Held, yes FACTS For the assessment years 1942-43 to 1947-48, the assessee did not file any return and neither did he comply with the notice issued under section 22(4) of the 1922 Act. The ITO, thereafter, proceeded to make an ex parte best assessment and estimated the income of the assessee for the period from 1942-43 to 1947-48, by taking certain facts into consideration: (i) the general market condition during the material period; (ii) the admissions made by the assessee before the Investigation Commission and (iii) the facts found by the Commission. The ITO on these considerations estimated the assessee's concealed income from business at Rs. 37 lakhs. On appeal, the AAC reduced the estimate made by the ITO. In making the reductions, he placed reliance on the estimates made by the Investigation Commission. On second appeal, the Tribunal agreed with the reduction made by the AAC and approved of the reasons given by the appellate authority for making the reduced estimate. It…

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