Income Tax Appellate Tribunal - Nagpur
Commissioner Of Income-Tax, Central ... vs Laxminarain Badridas Agarwal. on 12 April, 1934
Equivalent citations: [1934]2ITR246(NAG)
ORDER
. - This is a reference by the Commissioner of Income Tax, Central Provinces and Berar, under Section 66 (2), Income Tax Act. The facts of the case as admitted before us are shortly these. For the assessment year 1931-32 the non-applicant assessee was served with a notice under Section 22 (2) of the Act, to make a return of his income of the "previous year" by 17th August, 1931. As his accounts were not made up by then, the non-applicant applied for four months time to submit his return, but this was refused. He then submitted a return showing a loss of Rs. 1,700. This return was not accepted as correct and a combined notice under Sections 22 (4) and 23 (2), the former for production of his account books and the latter for production of evidence on 14th October, 1931, was served on the non-applicant. On 12th September, 1931, at the request of the non-applicant the case was adjourned to 19th October, 1931, and a fresh combined notice as before was again served on him.
On 19th October, 1931, the non-applicant, through his Court agent, filed an application, accompanied by a medical certificate, asking for further extension of time to comply with the terms of the notice on the ground that he was unable to attend the Court in person on account of his illness. Mr. Gore, the Income Tax Officer, instead of passing any order, oral or written, on this application and communicating it to the non-applicants agent asked him to wait and when leaving the office at 5 p.m., informed him that the order would be conveyed in due course. In the meantime the officer had proceeded under Section 23 (4) of the Act and written out the assessment order, the last part of which reads as under :-
"In the light of the foregoing facts, I cannot do otherwise than to proceed ex-parte. It is a patent fact that the assessee has got extensive money lending which is being done by him in several ways. In addition to this he purchases the debts of others at a comparatively small cost and reaps huge gains therefrom when the civil Court ultimately passes the decree in his favour. It need hardly be said that he can always command the best legal advice and help by virtue of his finances. Local inquires show that his fluid resources amount to Rs. 1,00,000. He is quite easily the richest man in the District and by dint of shrewd business tactics combined with his mature experience, he has piled up a big fortune. I estimate his income at a reasonable figure of Rs. 1,00,000 and direct that he should pay tax on the same as shown in the assessment form. D.N. to issue. Payable by 19th December, 1931."
The order sheet of that date runs as under :
"The assessee wants another date as he is indisposed and as his munim had not returned. No time can be allowed for such lame excuses. Order passed. D.N. to issue. Payable by 19th December, 1931."
It is conceded before us that the statement underlined (italicised) is incorrect. Notice of demand having been served on the non-applicant on 29th October, 1931, he put in an application on 14th November, 1931, for setting aside the ex-parte assessment on the ground that being ill and unable "to stir out at all" he was prevented from complying with the terms of the notices served upon him under Section 22 (4) and 23 (2) of the Act. Mr. Gore by that time having proceeded on leave the application was heard and disposed of by his successor Mr. Bagadthey. The non-applicant examined seven witnesses including himself in support of his application. While holding that the plea of illness was made out by the non-applicant which incapacitated him from attending the Court personally on the 29th October, 1931, Mr. Bagadthey rejected the applicant which incapacitated him from attending the Court personally on the 29th October, 1931, Mr. Bagadthey rejected the application on the following ground :
"In short, the assessee merely tried to show that he was unable personally to attend the office on the day fixed. This however, cannot be considered to be a sufficient reasons for his non-compliance with the terms of the notice under Section 22 (4) inasmuch as he was never called upon to appear in person. Besides the assessee could, if he had merely intended to do so, send his munim with the books, and could thus have complied with the notice. Under these circumstances I do not think I can re-open the assessment."
After this order was confirmed in appeal, the Commissioner of Income Tax, on the motion of the non-applicant, made the present reference to this Court on the following points :
"(1) Whether the Income Tax Officer was justified in assuming jurisdiction to proceed under Section 23 (4), Income Tax Act, and making ex parte assessment in this case when there is no legal evidence to show that the assessee deliberately failed to comply with the notice issued under Section 22 (4), Income Tax Act ?
(2) Whether the circumstances alleged and proved by the assessee could not in law be deemed to be sufficient cause under Section 27, Income Tax Act ?
(3) In view of the wording of the notice under Section 22 (4) of the Act and the undisputed fact that the assessee was too ill to attend the Court and the further admitted fact that the Income Tax Officer did not pass or communicate to the assessees servant or to the assessee any order for immediate production of account books or any other fair order, could not the assessee under law claim cancellation of the ex parte assessment order dated 19th October, 1931 ?
(4) Whether the procedure adopted by the Income Tax Officer in causing notices to be served under Sections 23 (2) and 22 (4), Income-tax Act, was legal and proper and whether the income Tax Officer could under the circumstances proceed under Section 23 (4) and make ex parte assessment?
(5) Is there evidence to substantiate the Income Tax Officers reasoning in the last paragraph of the order saying that legal inquiries prove that the assessee made in the account year taxable income of a lac of rupees ?
(6) Is not the judgment of the Income Tax Officer vitiated by imaginary assumptions or irregular inquiries and hearsay evidence which the assessee has no meet and which are not borne out by his account books which the Income Tax Officer could have called for ?
(7) Is the order of assessment passed by the Income Tax Officer to the best of his judgment in view of the arbitrary reasons he has given and despite the notorious trade depression and financial strain all along ?"
Points 1 and 4 require to be treated together as both of them impeach the legality of the procedure adopted by Mr. Gore in the disposal of the assessment case. As appears clear from his order Mrs. Gore assumed jurisdiction to pass the summary order of assessment" to under Section 23 (4) of the Act because of the default of the non-applicant : (1) in making a return under Section 22 (2) as "the return made is not a return at all" and (2) in complying with the terms of the notices issued under Sections 22 (4) and 23 (2) of the Act. There is indeed some confusion of ideas underlying this reasoning. If the return made by the non-applicant showing a loss of Rs. 1,700 was no return at all under Section 22 (2) the issue of the combined notice under Sections 22 (4) and 23 (2) was prima facie redundant. The issue of such a notice pre-supposed the existence of a valid return having been made but which could not be accepted as correct without verification. Mr. Gore then must be deemed to have treated the return made by the non-applicant as valid and was clearly wrong in holding it as no return at all at the last stage of the assessment proceedings.
It is difficult for us to accept the contention of the nonapplicants learned counsel as correct that the combined notice issued in this case was illegal. The weight of authorities is decidedly against the contention : Chandra Sen v. Commissioner of Income Tax, U.P.; Harmukhrai Dulichand v. Commissioner of Income Tax, Bengal; Commissioner of Income Tax, Burma v. R. M. P. Chettiar Firm and R. M. P. L. S. Sivaswami Chettiar v. Commissioner of Income tax, Madras. It follows then that there was non-compliance, whether deliberate or otherwise is immaterial for the purpose of Section 23 (4), on the part of the non-applicant with the terms of the notice calling for account books and evidence. Technically therefore, Mr. Gore had jurisdiction to make the summary assessment against the non-applicant under Section 23 (4) of the Act.
This does not however mean that the procedure adopted by Mr. Gore in the present case was either desirable or justifiable. Although the Act does not specifically provide for granting adjournments to comply with the terms of the notices served on the assessees under Sections 22 (4) and 23 (2), it is conceded that, in practice, adjournments are generally allowed for sufficient cause on the principle of justice, equity and good conscience. This practice has also received judicial recognition in Commissioner of Income Tax v. Perianna. It therefore necessarily follows that if, for any reason, a prayer for adjournment has to be refused a definite order, either oral or written, must be passed by the officer and communicated to the assessee or his agent, when he is present, before proceeding with the drastic action of summarily assessing him under Section 23 (4) of the Act.
In the present case if Mr. Gore had even orally communicated to the non-applicants agent his intention of rejecting the application for adjournment and proceeding with summary assessment because the books of account had not been produced - and this is the ground on which Mr. Gore virtually based his ex parte assessment - it is not at all improbable that the agent might have informed the officer that he was going to comply at once with the order for the production of the account books and might have easily produced the books, in whatever state they were, from the non-applicants house which, we are assured, was only a furlong off from the Income Tax Officer and prevented the ex parte assessment. Failure on the part of Mr. Gore in observing the aforesaid elementary principle of judicial procedure does, in our opinion, considerably detract from the technical legality of the summary assessment order recorded by him against the non-applicant.
As points 2 and 3 assail the legality of the orders passed by Mr. Bagadthey, in the first instance, and the Assistant Commissioner, on appeal, in proceedings under Section 27 of the Act it is convenient to consider these two points together. Both the learned Commissioner in his opinion and Rai Bahadur Chaudhari, his counsel, in his arguments contended that what constitutes sufficient cause under Section 27 of the Act being purely a question of fact this Court was incompetent to interfere with the finding that no sufficient cause for setting aside the ex parte assessment was made out by the non-applicant. Sufficiency of cause is certainly a question of fact dependent on the circumstances of each case. But since its determination essentially depends upon the exercised in a sound and reasonable manner in reaching the conclusion invariably involves a question of law : P. K. N. P. R. Chettiar Firm v. Commissioner of Income Tax and Commissioner of Income Tax v. P. K. N. P. R Chettyar Firm.
It was rightly pointed out in P. K. N. P. R. Chettyar Firm v. Commissioner of Income Tax, Burma that the words "satisfies" and "was prevented by sufficient cause" in Section 27, Income Tax Act, being practically identical with similar words occurring in Order 9, Rule 9 and Order 41, Rule 19, Civil Procedure Code, and in Section 5, Limitation Act, they must receive similar interpretation as has been put upon these words in the latter enactments. It was, however, argued by Rai Bahadur Chaudhri that these decisions are expressly overruled in In re Abdul Bari v. Commissioner of Income Tax, Burma. But this statement is not absolutely correct as the following observations, at p. 284 (of I.L.R. 3 Rang. 281) of the report of Abdul Baris case would clearly show that the reference did not invite the opinion of the Full Bench on the correctness or otherwise of those decisions on the point under consideration :
"The first contention is based on a passage in the judgment of this Court in Commissioner of Income Tax v. E. M. Chettyar Firm where it was said : It has, however, been held that the question whether there was any evidence on which an Assistant Commissioner or a Commissioner could come to a finding of fact is a question of law. On the strength of that decision read with the decision in P. K. N. P. R. Chettyars case a question of law will be held to arise out of the Assistant Commissioner order if there was no evidence to support the Income Tax Officers finding that the applicant failed to show that he was prevented by sufficient cause from complying with the notice under Section 23 (4). But in the present case there was at any rate the evidence as to the nature of the business which was contained in the accounts which applicant produced; and I would hold that the question of law, which is subject-matter of the applicants first contention does not arise."
The question referred to the Full Bench for determination in Abdul Bari Chowdhurys case was :
"Whether the fact that an assessment under Section 23 (4), Income Tax Act, was entirely arbitrary involves a question of law out of the Assistant Commissioners order passed in an appeal under the provisions of section 30 (1) relating to appeals against the refusal of the Income tax Officer to make a fresh assessment under section 27, or which the High Court is entitled to regard as ground for an order under section 66 (3)."
The reference was thus confined to the question whether the dictum laid down in S. P. K. A. A. M. Chettyar Firm v. Commissioner of Income Tax which itself was based on Commissioner of Income-tax v. A. R. A. N. Chettyar Firm regarding the power of the High Court to call for a reference from the Commissioner under Section 66 (3) of the Act in a case in which an assessment is made under Section 23 (4), Income Tax Act, was or was not sound, and not whether a finding on the question of the sufficiency or otherwise of the cause shown under Section 27 of the Act did not involve a question of law. It therefore follows that the observations of the learned Chief Justice in the Full Bench decision that no question of law is involved in the decision that sufficient cause has not been made out in a case under Section 27 or in an appeal therefrom under Section 30 (1), Income Tax Act, were, with due respect, quite obiter. But the learned Chief Justice (at p. 300 of the report) as well as Dunkely, J., who delivered a separate opinion (at p. 304), accepted the soundness of the dictum laid down in Commissioner of Income Tax, Burma v. A. K. R. P. L. A. Chettiar Firm at p. 27 (of 9 Rang.) that a question of law referable for the decision of the High Court under Section 66 (2) or (3) would be involved if the finding that no sufficient cause was made out in a case under Section 27 is based upon no materials or evidence.
In Sadaram Puranchand, In re, it was held that the question whether, in making an ex parte assessment under Section 23 (4) the Income Tax Officer, did or did not "give to the assessees such reasonable opportunity as the Act requires to produce their evidence in support of their return," was a question of law which the High Court was entitled, under Section 66 (3) of the Act, to require the Commissioner of Income Tax to refer to it for decision. We therefore accept the law laid down in this Calcutta case and in Commissioner of Income Tax v. P. K. N. P. R. Chettiar Firm and P. K. N. P. R. Chettiar Firm v. The Commissioner of Income Tax, Burma, as correct. We also respectfully adopt the following observations of the learned Chief Justice in Kichilappa Naicker v. Ramanujan Pillai as laying down the test were made with reference to a case under Section 5, Limitation Act :
"The test is, has the discretion been exercised after appreciation and consideration of all the facts which are material for the purpose of enabling the Judge to exercise a judicial discretion and after the application of the right principle to these facts ? If a discretion is exercised under these conditions and a certain conclusion is arrived at, that conclusion, it seems to me, would be an exercise of discretion judicially sound, though an appellate tribunal might be disposed to draw a different inference from the facts."
To the same effect are the observations in Ranchodji v. Lalu and Fatima Begam v. Hansi.
We now proceed to examine how far the findings of Mr. Bagadthey and the Assistant Commissioner that the non-applicant had not shown sufficient cause for re-opening the ex parte assessment, satisfies the test, that it was arrived at after the exercise of judicial discretion, as laid down in the above cases. The orders of both these officers of the income-tax department proceed on the only ground that the non-applicant, even if he was ill, could have sent his account books with his munim who has returned from "Desh" and who could have explained them to Mr. Gore on 19th October, 1930. No finding at all has been recorded on the question if sufficient cause was or was not made out by the non-applicant for non-compliance with the terms of the notice under Section 23 (2). Even in arriving at the finding that sufficient cause for non compliances with the terms of the notice under Section 22 (4) was not made out, these learned officers have obviously left completely out of consideration several relevant facts the more important one being that if Mr. Gore had informed the non-applicants Court agent that no adjournment would be granted, because the account books should have been sent with the munim, it was possible that compliance with the notice for the production of the books might have been forthwith made. They also failed to appreciate how far the failure on the part of Mr. Gore in observing this elementary rule had contributed to the non-compliance of the terms of this notice and seriously prejudiced the non-applicant.
Again these officers appear to have entirely ignored the nonapplicants assertion that in order to comply with the requirement of the notice under Section 23 (2) he himself has intended to go into the witness-box and swear to the accuracy of his account books. On the finding, then, that the nonapplicant was unable to attend the Court on 19th October, 1930, on account of his illness, the only reasonable finding which should have been recorded by these officers was that the non-applicant had shown sufficient cause for non-compliance with the terms of the notice under Section 23 (2). On such a finding, coupled with what is already stated by us in paras. 9 and 10 above, it follows that the non-applicant had clearly made out sufficient cause for having the ex parte assessment reopened under Section 27 of the Act and that in recording a contrary finding the Income Tax Officer and the Assistant Commissioner failed to exercise their discretion on reasonable and proper grounds.
In view of the conclusion reached by us on the first four points it seems unnecessary, in the present case, to decide the last three points of the reference but as they were fully argued and are of vital importance to the assessees of these provinces it is well to record our considered decision thereon. These will be treated together as they appertain to the same matter, viz., the legality or otherwise of the ex parte order of assessment, the material portion of which is already set out in extenso in para. 2. above. In supporting the order of the Income Tax Officer the learned Commissioner makes the following observations :
"No evidence to substantiate the Income Tax Officers reasoning for making an ex parte assessment is necessary, because in this respect, the Income tax Officer is the sole Judge. If he were to state that the assessees total income was Rs. 1,00,000 it was enough and that would have been a correct assessment also : Krishna Kumar v. Commissioner of Income Tax, Bengal. An Income Tax Officer is not required to give any reasoning for estimating income for purposes of assessment under Section 23 (4) : vide the Full Bench ruling of Abdul Bari Chowdhary v. Commissioner of Income Tax, Burma. If reasons are given, as is done in this case, it is only to justify the conclusions at which the Income Tax Officer has, after legal investigation, arrived and this is done to show that the estimate is not arbitrary. Even in the two preceding years the assessee has been assessed on Rs. 46,590 and Rs. 41,885 though his returns showed income of Rs. 7,800 and loss of Rs. 667, respectively."
His learned counsel also adopted the same arguments. On the contrary the learned counsel for the non-applicant cited Muhammad Hayat-Haji Muhammad Sardar v. Commissioner of Income Tax, Punjab, in support of his contention that the assessment order being based on no legal material was arbitrary and opposed to all canons of justice, equity and good conscience. He distinguished the Calcutta case on facts and contended that the law enunciated in Abdul Bari Chowdhurys case was not sound or at any rate not absolutely irreconcilable with the views propounded in the Calcutta and Lahore decisions so far as the interpretation of the words "to the best of his judgment" in Section 27 of the Act was concerned. In our opinion the contentions of the non-applicantss counsel are well-founded. In re Abdul Bari Chowdhury v. Commissioner of Income Tax, Burma, which overrules the previous decisions of the same Court, it was held that if the word "arbitrary" as stated in the referring order only meant that the assessment, "did not purpose to be founded on any materials or reasons beyond the Income Tax Officers private opinion,"
there would be no question of law involved in the case so as to make it referable to the High Court for decision under Section 66 (2) or (3), Income Tax Act. The learned Chief Justice, who delivered the opinion of the Full Bench, makes this perfectly plain by observing at p. 295 of the report that :
"If that is the meaning to be attributed to the word "arbitrary," in the order of reference, I am clearly of opinion, that the answer to the questions propounded should be in the negative."
Before making these observations, however, the learned Chief Justice also made the following very weighty pronouncement at p. 294 of the report :
"Now, I am not satisfied as to the meaning that the learned Judges intended the word "arbitrary" to bear in the question propounded. If the word is taken to mean that the Income Tax Officer, regardless of information in his possession, deliberately, recklessly or fraudulently has made an assessment under Section 23 (4) which he knows that he was not justified in making, in such circumstances, and assuming that the assessee has failed to obtain redress as provided in the Act, I should not be prepared to hold, as at present advised, apart altogether from the provisions of the Income Tax Act, that this Court does not possess jurisdiction in virtue of its inherent prerogative powers to order the Income Tax Officer to do his duty."
The aforesaid observations clearly envisage the possibility of a question of law arising in an ex parte assessment, and its decision by a chartered High Court under its inherent powers. If this view is accepted as correct it would follow that in the provinces in which such a High Court is not established, as here, an unfortunate assessee who has suffered substantial injustice from the vagaries of the income tax authorities will have no remedy of redressing the wrong. Muhammad Hayat-Haji Muhammad Sardar v. Commissioner of Income Tax, Punjab, lays down that in making an "assessment to the best of his judgment" the Income Tax Officer does not possess absolutely arbitrary authority to assess at any figure he likes but that he should be guided by the rules of justice, equity and good conscience, that the assessment should be reasonable and should not proceed purely on his private opinion and that an assessment resting upon the whim and caprice of the officer is not within the purview of the aforesaid section. By way of reinforcing his opinion the learned Chief Justice, at p. 142 of the report, makes the following observations :
"Suppose a person, whose income had not in the past exceeded Rs. 5,000 in any - section, the Income Tax Officer would perpetrate an injustice if he took advantage of the default and assessed the income for the accounting period at a million rupees without any justification. It cannot be seriously claimed that he has made that assessment to the best of his judgment."
Finally it was observed that, "an assessment resting upon the whim and caprice of the Income Tax Officer cannot be elevated to the dignity of an assessment made to the best of his judgment," within the meaning of Section 27, Income Tax Act. To the same effect are the pronouncements in S. P. K. A. A. Chettiar Firm v. The Commissioner of Income Tax and Commissioner of Income Tax, Burma v. P. K. N. P. R. Chettyar Firm. In the latter it was observed that when the statute says that the Income Tax Officer "shall make the assessment to the best of his judgement" it means that he must make it "according to the rules of reason and justice, not according to private opinion; according to law and not humour" and that the assessment must be "not arbitrary, vague and fanciful, but legal and regular."
The same principle seems to have been affirmed in Krishna Kumar and Mahendra Kumar Ghose v. Commissioner of Income Tax, Bengal, at page 302 (of 5 I.T.C.). After the reference was remitted for formulating proper points, the Commissioner of Income Tax, Bengal, referred only the following question for decision of the High Court :
"(b) The Income Tax Officer simply puts Business Rs. 30,000. No basis of details are apparent. Can this be an assessment to the best of ones judgment ?"
The Commissioner stated the case in these words :
"The facts are that the Income Tax Officer made a local inquiry before making this assessment under Section 23 (4). He recorded a note of the details and results of his inquiry. I have seen his note which has been printed in the paper book and see no reason to suppose that the officer did not act to the best of his judgment. His note contains sufficient details to enable me to see that the assessment was according to the rules of reason and justice and not arbitrary, vague and whimsical. In my opinion, therefore, in the facts and circumstances of the case the assessment was to the best of the judgement of the Income Tax Officer, and the question should be answered accordingly."
The High Court simply answered the question in the affirmative without giving any reasons, but it is apparent that the answer would have been in the negative if the Income Tax Officer had made no local inquiry and not placed a detailed note thereof on the record in support of the assessment.
While the aforesaid remarks of the Commissioner of Income Tax, Bengal, impliedly concede that "local inquiry" and the placing on record of a note of the results of such inquiry are essential in law to sustain an ex parte assessment, the learned Commissioner of Income Tax of these provinces thinks otherwise, presumably on certain observations in Abdul Bari Chowdhurys case which go so far as to lay down that an ex parte assessment may as well be made on "mere guess" of the Income Tax Officer who is "the persona designata to make the assessment" and against whose order "no appeal lies." With due deference we hesitate to subscribe to such a widely stated proposition, as it is extremely likely to lead to certain abuse of the powers by the Income Tax Officer in the discharge of their duties which must be performed throughout in conformity with the rules of justice, equity and good conscience.
For the foregoing reasons we accept the law expressly propounded in Muhammad Hayat-Haji Muhammad Sardar v. Commissioner of Income Tax, Punjab, and the earlier Rangoon cases and impliedly accepted in Krishna Kumar v. Commissioner of Income Tax, Bengal, in preference to that laid down in Abdul Bari Chiowdurys case. With the greatest respect we find it difficult to reconcile the view adopted in Abdul Baris case that while a finding that no sufficient cause for setting aside as ex parte assessment was made out, if it is based upon "no materials or evidence" might form the subject of reference to the High Court under Section 66 (2) or (3) of the Act on the ground that it involves a question of law, a finding that an ex parte assessment was made to the best of the income Tax Officers judgment, if based on no material or evidence, though involving a question of law, could not form the subject of such a reference. We therefore hold that a point of law would invariably be involved in an ex parte assessment which is not shown to have been made by the Income Tax Officer "to the best of his judgment," as indicated in the next paragraph, so as to make it the subject of a reference to and decision by the High Court under Section 66 (2) or (3) of the Indian Income Tax Act.
As a result of our careful examination of the several cases noted above we deduce the following rules : (a) That in every case, before an ex parte assessment is made under Section 23 (4), Income Tax Act, the Income Tax Officer must invariably conduct such "local" inquiry to ascertain the income of the proposed assessee for the previous year as the circumstances of the case may warrant; and (b) that the said authority must place on the record a note of the details and results of his inquiry in order that the Commissioner of Income Tax under Section 33 or the High Court under Section 66 (2) or (3) may be in a position to see that the assessment "was according to the rules of reason and justice and not arbitrary."
It is such an assessment alone which would satisfy the requirements of an assessment by the Income Tax Officer made "to the best of his judgment" within the meaning of Section 23 (4), Income Tax Act.
It is clear to us that the ex parte assessment in the present case does not satisfy the aforesaid test. There is undoubtedly an undated note styled as a "report" of the Income Tax Officer on the record, but it entirely fails to indicate the materials necessary for the finding that the non-applicants total assessable income in the "previous year" that is "Diwali 1930", was one lac of rupees.
The learned counsel for the Commissioner of income Tax made no attempt before us to show how the information compiled in the above note could lead to the estimate of the non-applicants assessable income for the year ending Diwali 1930 at Rs. 1,00,000. The remarks, which follow the figures as also those embodied in the ex parte order, are so vague and general in character that they could conveniently be made to fit any case. When it was known that in the preceding two years the non applicants assessable income did not go beyond Rs. 47,000 it was all the more incumbent on the Income Tax Officer to show how it more than doubled itself in the account year which presumably was no better than its predecessors from the point of view of the general depression of trade and industry and the consequent fall in incomes.
Such a casual and undated note cannot possibly take the place of the note of the details and results of a local inquiry which we consider necessary when an ex parte assessment is made under Section 23 (4) of the Act. Under these circumstances we cannot but characterise the assessment in question as one which rested merely upon the caprice of the Income Tax Officer. As such we hold that the same was not made "to the best of his judgment" within the meaning of Section 23 (4), income Tax Act.
Our answer to the first four and the sixth points of the reference are in the affirmative and to the other two in the negative. As in our view the non-applicant is mainly responsible for his troubles in connection with the ex parte assessment because he did not clearly state in his application for adjournment that he himself intended to give evidence in support of his account books, he is disentitled to an award of cost in his favour in spite of the fact that he has succeeded here. We accordingly direct that the costs of this reference be borne by the parties as incurred.
Reference answered accordingly.