Law: Income Tax Act, 1922

Section: 26A,23(4),22(4)

Section 144 read with sections 184 to 186 of the Income-tax Act, 1961 section 23(4), read with section 22(4) and 26A, of the Indian Income-tax Act, 1922 - Firm - Best assessment - Whether mere non-production, without proof of existence of thing not produced, would not fall within mischief of section 23(4) of 1922 Act - Held, yes - Assessee - Firm, in compliance with notice under section 22(4) of 1922 Act, produced all account books called for by discrepancy between stock position as disclosed in stock book and sales accounts and assessee's explanation as not convincing - Whether it would not be correct to hold that there had been a suppression of accounts on part of assessees so as to justify penalty of non-registration as contemplated under section 23(4) of 1922 Act - Held, yes - Whether even if assessees were to be treated as defaulters so as to attract assessment on best basis, it would yet be a matter of discretion for officer either to grant or refuse registration - Held, yes - Whether, this aspect was not considered at all, it was to be held that Income-tax Officer had not exercised his discretion lawfully in applying proviso to section 23(4) to reject assessee's renewal application under section 26A - Held, yes FACTS The ITO refused registration to the assessee-firm because it was the assessees were in default in complying with the terms of the notice under section 22(4) of the 1922 Act calling for documents and account books relating to the assessees' business. Taking the view that the assessees failed to comply with the statutory notice under section 22(4), the ITO passed a "best " assessment permissible under section 23(4). On this followed the order of the ITO refusing registration applied for by the assessees. The AAC, before whom the assessees complained that the case was not one for a best assessment and that in any event registration ought not to have been refused, agreed with the assessees and held that really the assessment or the officer was one under section 23(3) of the 1922 Act, and that therefore there was no scope for refusing registration which would be permissible only if section 23(4) of the 1922 Act, were to apply. The AAC went…

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