Judgment:
JUDGMENT ASSESSMENT--Notice under section 143(2) issued without issuing notice under section 142(1).
Where notice under section 143(2) was issued without issuing notice under section 142(1), assessment could be made under section 144.
There is no force in the submission that order under section 144 could not be passed without issuing notice under section 142(1) in this case.
The assessing officer has ample power to make assessment by issuing notice under section 143(2) without issuing notice under section 142(1). On proper consideration of scheme of assessment it appears reasonable to hold that the assessing officer has ample power to amend notice under section 143(2) in respect of date or points specified in the notice if warranted by the facts of the case.
Assessment--BEST JUDGMENT ASSESSMENT--Notice under section 143(2) without reasonable opportunity of being heard.
Ex parte assessment under s. 144 without giving opportunity to assessee is bad in law.
The assessing officer made an ex parte assessment of income of assessee under section 144. The assessee contended that section 144 was not applicable as no notice under section 142(1) had been issued and that non-compliance with directions of assessing officer was not without sufficient cause as accountant of assessee had fallen sick.
The assessing officer has ample power to make assessment by issuing notice under section 143(2) without issuing notice under section 142(1). The assessing officer has also power to amend the notice under section 143(2) in respect of date or points specified in notice if warranted by facts of case. It cannot be said that in instant case reasonable opportunity of being heard was granted to assessee. The ex parte assessment was, therefore, bad in law. However, there was merit in the submission of the assessee that non-compliance of direction was due to reasonable cause. The assessing officer had not granted reasonable opportunity to the assessee before making the ex parte assessment.
Where subsequent information sought by assessing officer amounts to information required in notice under section 143(2), non-filing of such information is immaterial to section 144.
Restricted view to amend the notice under section 143(2) would go against the interest of the assessee as in several cases information specified is not ready and it is necessary to seek time beyond the date specified. Under the above view, an ex parte assessment must automatically follow for non-compliance of notice, when information is not filed on the date specified. But this would be unreasonable and scheme of assessment envisages grant of time on sufficient ground to comply with the notice. When the assessee is permitted to comply with the notice on a date beyond the specified, the notice is amended qua the date. Similarly, when information beyond the one mentioned in the notice is sought, the notice is amended qua the points specified. It is, therefore, not possible to hold that subsequent information sought by the assessing officer was not information required in notice under section 143(2) and non-filing of such information was immaterial for action under section 144.
1. This appeal by the assessee for the assessment year 1984-85 is directed against the order of CIT(A) confirming ex paste assessment of total income at Rs. 1,30,670 against returned loss of Rs. 1,10,722- The difference between the assessed income and returned loss arose mainly on account of disallowance of Rs. 2,20,250 claimed as commission although two more amounts of Rs. 5,050 and Rs. 16,104 out of mahurat and business expenses were also disallowed and added in the assessment.
2. The assessee challenged the ex parte assessment under Section 144 before CIT(A) but remained unsuccessful. The CIT (A) noted from the order sheet entry, the details and dates of proceedings before the Assessing Officer and concluded that the assessee failed to comply with opportunities of being heard provided to him. He further held that disallowance of expenses was fully justified. The assessee has brought the issuer in appeal before the Appellate Tribunal.
3. Shri C.S. Agarwal, learned counsel for the assessee made the following submissions : (1) That Section 144 was not applicable in this case as no notice under Section 142(1) was admittedly issued. The notice issued under Section 143(2) was merely to attend proceedings before the Assessing Officer. No specified details or information was sought. Ex parte assessment as such is bad in law.
(2) That the Assessing Officer disallowed three out of 17 expenses aggregating to Rs. 4,49,762 claimed under as many heads. If expenses under 14 heads could be allowed without profit or supporting evidence, the expenses under the remaining three heads should also have been allowed as all expenses were claimed in same circumstances. It was further submitted that along with the return the assessee had filed audited balance sheet.
(3) That non-compliance with directions of the Assessing Officer on various dates was not without sufficient ground. Shri Agarwal filed a chart showing how notices/directions were complied with and submitted that ex parte assessment is not justified.
The aforesaid submissions were opposed by the learned Departmental Representative. He submitted that in spite of repeated opportunities, the assessee did not file evidence in support of expenses claimed and, therefore, disallowance made is fully justified. He also supported action of the Assessing Officer in proceedings under Section 144 of the Income-tax Act. In this regard the learned D.R. relied upon the order of CIT (A) which, according to him, was a detailed one and called for no interference.
4. We have heard the parties. We do not find any force in submission of Shri Agarwal that order under Section 144 of the Act could not be passed without issuing notice under Section 142(1) of the Act in this case. The Assessing Officer has ample power to make assessment by issuing notice under Section 143(2) without issuing notice under Section 142(1). Shri Agarwal then submitted that notice under Section 143(2) issued in this case was blank and information sought subsequently cannot be treated as information required in notice under Section 143(2) of the Act. We do not agree. It is an admitted position that notice under Section 143(2) was served on the assessee and the Assessing Officer from time to time called for certain information.
When the above information was not filed, he made ex parte assessment under Section 144 of the Act. It is clear from provisions of Sub-sections (2) and (3) of Section 143 that where a return has been filed under Section 139, the Assessing Officer is to serve a notice on the assessee requiring him to attend Assessing Officer's office on the date specified in the notice. The Assessing Officer is further authorised to require the assessee to produce or cause to be produced any evidence on which the assessee may rely in support of his return.
Under Sub-section (3) the Assessing Officer has power as well as duty to pass an assessment order either on the date specified in the notice under Sub-section (2) or as soon as afterwards as may be after hearing such evidence as assessee may produce and such other evidence as required by the Assessing Officer on specified points. On proper consideration of scheme of assessment it appears reasonable to hold that the Assessing Officer has ample power to amend notice under Section 143(2) in respect of date or points specified in the notice if warranted by the facts of the case. The other view placing restrictions on his power to amend the notice is unmaintainable. In fact, such restricted view would go against the interest of the assessee as in several cases information specified is not ready and it is necessary to seek time beyond the date specified. Under the above view, an ex parte assessment mus automatically follow for non-compliance of notice, when information is not filed on the date specified. But this would be unreasonable and scheme of assessment envisages grant of time on sufficient ground to comply with the notice. When the assessee is permitted to comply with the notice on a date beyond the specified, the notice is amended qua the date. Similarly, when information beyond the one mentioned in the notice is sought, the notice is amended qua the points specified. It is, therefore, not possible to hold that subsequent information sought by the Assessing Officer was not information required in notice under Section 143(2) of the Act and non-filing of such information was immaterial for action under Section 144 of the Act. We, therefore, reject this submission also.
The other contention of Shri Agarwal that all the expenses should have been allowed and the Assessing Officer was not justified in disallowing expenses under the three heads out of 17 claimed by the assessee is also devoid of substance. It is not necessary that the Assessing Officer should doubt each and every item and insist on the assessee to prove it and in case some items are accepted without proof then all items of expenditure should be taken as allowed. The discretion lies with the Assessing Officer to require the assessee to satisfy him on points specified by him. The assessee has no business to question such authority as to why the Assessing Officer is satisfied on certain points and not on others. We, therefore, reject this contention also.
5. Now we proceed to consider the other contention of Shri agarwal that non-compliance of directions was due to reasonable cause. The ex parte order under Section 144 was passed on September 22, 1986. The default committed by the assessee with reference to entries made in the order sheet as recorded by the learned CIT(A) are as follows : 1-9-1986 Sh. S. Narula, CA, attended, no books produced. He was asked to give details of 11-9-1986 Adjournment requested, Adj. to 18-9-1986 18-9-1986 Adjournment requested, Adj. to22-9-1986 22-9-1986 Sh. Jain, Accountant attended, sought adjournment, adjournment refused.
With reference to first four entries, the assessee has contended that either notice was not served on the assessee company or the Assessing Officer did not take assessment proceedings despite the fact that representative of the assessee appeared before him. It is unnecessary to verify above facts as the Assessing Officer can be deemed to have condoned the defaults by issuing fresh notice for 5-8-1986. With reference to aforesaid date the assessee has submitted that in the notice under Section 143(2) nothing was mentioned and books of accounts were neither called for nor produced. Similar was the position on the next day of hearing i.e., 20-8-1986. With reference to the last four dates it is explained that details asked for could not be filed as the accountant of firm fell sick. It is claimed that request was made on a sufficient ground and could not be turned down by the Assessing Officer in quasi-judicial proceedings. This position was brought to the notice of learned CIT(A) as is evident from "statement of facts" filed before him. Ex parte assessment under Section 144 was challenged as improper and violative of all principles of natural justice.
6. The aforesaid submissions of Shri Agarwal, in our opinion are sound and are required to be accepted. It is clear from record that the last four adjournments were granted in the month of September 1986 and in short span of 21 days. It cannot be held that the Assessing Officer granted reasonable opportunity to the assessee before making the ex parte assessment on the 22nd day. The assessee has claimed that adjournments were sought as its accountant was not well and could not prepare the details. Prima facies this request is reasonable and the Assessing Officer or the CIT (A) has not held the request to be frivolous. In fact, no reason has been recorded for refusing adjournment to enable appellate authorities to examine whether refusal was proper. The assessment was to get time barred on 31st of March, 1987 and there was ample time with the Assessing Officer to complete the assessment after accommodating the assessee. In the circumstances, we are unable to hold that request of the assessee to adjourn hearing was not reasonable or that reasonable opportunity was granted to the assessee. In our view, the Assessing Officer could have granted more time to the assessee and avoided the criticism of assessment having been made ex parte without affording sufficient opportunity to the assessee. We are, therefore, inclined to set aside ex parte assessment and restore the matter back to the file of the Assessing Officer for passing a fresh order in accordance with law. We direct accordingly. In above view of the matter, we deem it unnecessary to consider objections of the assessee on merits of the addition.
7. In the result, the assessee's appeal is allowed for statistical purposes.