Law:

Section:

Section 144 of the Income-tax Act, 1961 [Corresponding to section 23(4) of Indian Income-tax Act, 1922] - Best assessment - Assessee-firm carrying on business in coconut oil declared gross profit at rate of 0.75 per cent of turnover - ITO, however, estimated gross profits at 2.75 per cent of turnover - Commissioner as well as Tribunal upheld order of ITO depending upon comparable cases - Whether since cases on basis of which estimate was made were not put to assessee and firm's explanation, if any, was not obtained thereon, matter was to be referred back to Tribunal under section 66(4) of 1922 Act for disposal afresh - Held, yes FACTS The assessee was an unregistered firm, carrying on business in coconut oil. In the relevant assessment year, assessment was made under section 23(4) on the assessee. However, according to the assessee the business was nothing more than a commission agency business from which the firm derived a commission of 0.75 per cent of the turnover. The ITO declined to accept this contention and held that the firm's business could not be considered as a commission agency business, pure and simple, and estimated the gross profit at 2.75 per cent of the turnover. On appeal, the Commissioner and the Tribunal both upheld the order of the ITO depending upon comparable cases. On reference : HELD The Department disputed the correctness of the proposition in so far as it related to assessments under section 23(4), which were akin to the ex-parte procedure of a civil court. It was also pointed out, and quite correctly, that the contention itself would arise for consideration only if as a matter of fact the opportunity claimed was not afforded to the assessee and that his instructions were insufficient to either admit or deny the correctness of the statement that the cases on the basis of which the estimate was made were not put to the assessee and the firm's explanation, if any, obtained thereon. The statement of the case did not deal with this matter and in view of that the case should be referred back to the ITAT under section 66(4) of the 1922 Act, to make such additions thereto as were necessary to enable to determine the question. In view of the…

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