Law:

Section:

Section 143 of the Income-tax Act, 1961 [Corresponding to section 23(3) of the Indian Income-tax Act, 1922] - Assessment - General - Assessment year 1951-52 - Whether in making assessment under section 23(3) of 1922 Act it is fair and equitable to conclude that assessee will be given an opportunity of showing, if he can, that material or basis upon which ITO proposes to assess his income is incorrect - Held, yes - Whether where it was neither shown that assessee was given such opportunity nor materials on basis of which estimate was made were furnished, assessment could not be justified - Held, yes FACTS The assessee, a moneylender, lent money mainly on pledge of jewellery and promissory notes. He filed his return for the assessment year 1951-52 showing certain income. In the course of an inspection of the premises, the ITO found two receipts indicating loans given on much higher rate of interest than that prescribed by the Pawn Brokers Act and these loans were not taken in cashbook or ledger. The assessee submitted that these loans were given by his daughter but could not establish it. The ITO therefore estimated the assessee's net interest income at Rs. 30,000. The first appellate authority and the Tribunal confirmed the same as the books did not disclose the true state of affairs and were correctly rejected, and as the estimate of income made, did not seem either excessive or arbitrary. On reference : HELD The assessee was unable to show why the Income-tax authorities were not justified in rejecting the accounts, having regard to his inability to support the explanation that the two receipts were in fact obtained on the monies lent by his daughter. In the absence of a satisfactory explanation, the Income-tax authorities were justified in concluding that the assessee was not maintaining his books properly and that though there were only two receipts, it gave an indication as to the manner in which the assessee kept his account. If the monies, in facts belonged to the assessee's daughter and he had lent them for her, it was a reasonable presumption that a businessman like the assessee would, as a matter of ordinary commercial practice, bring those amounts into…

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