Index

01.Introduction
02.An analysis of the procedure of best judgment Assessment.
03.When best judgment assessment is made.
04.Object and basis of best judgment assessment
05.Basis of best judgment assessment
06.Appraisal of the procedure
07.Conclusion
08.Bibliography

1
Introduction

Assessment means that appraisal, evaluation, estimation, measure, judgment etc. within the
context income tax law it suggests that then analysis, estimation, or calculation of financial gain.
The term ‘assessment’ in field of taxation law encompasses a definite meaning. This term is
comprehensive and shall embody varied ranges of activities and procedures. The definition of
assessment has not been given the Income Tax Act; however a reading of the term inside the
scope of the Act makes it obvious that it implies an investigation and ascertainment of the
correctness of the returns and accounts filed by the assessee. Primarily the assessment would
apparently mean determination of the quantum of taxable turnover and also the quantum of
taxable amount due by the tax payer

This assessment is created on the idea of returns and accounts provided with by an assessee in
support thereof however on an estimate made by the assessing authority which maybe, of course,
be primarily based inter alia on the accounts and documents provided with by the assessee. The
expression of assessment contains a wide scope inside the aim of the Act whether or not the
aforesaid assessment made is correct or not. thus any assessment made wouldn't primarily mean
an assessment properly or properly however would signify all assessment made or speculated to
purported to created underneath the aforesaid act. Primarily assessment is estimation for a
quantity assessed whereas paying tax. It’s a mandatory contribution that's needed for the support
of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgment i.e. he should not act venally or revengefully or freakishly.

There are two varieties of judgment assessment:

01. Compulsory best judgment assessment created by the assessing officer in cases of non-
co-operation on the a part of the assessee or once the assessee is in default as regards
activity in formation.
02. Discretionary best judgment assessment is finished even in cases wherever the assessing
officer isn't happy concerning the correctness or the completeness of the accounts of the

2
 assessee or wherever no methodology of accounting has been frequently and
systematically utilized by the assessee.

An analysis of The Procedure of Best Judgment Assessment

The expression of assessment encompasses a wide scope inside the needs of the Act whether or
not the aforesaid assessment created is correct or not thus any assessment created wouldn't
basically mean an assessment properly or properly however would signify all assessment created
or presupposed to are created underneath the aforesaid act. primarily assessment is estimation
foran quantity assessed whereas paying tax. it's a mandatory contribution that's needed for the
support of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgement i.e. he should not act venally or revengefully or freakishly. There are two varieties of
judgement assessment:

Compulsory best judgment assessment created by the assessing officer in cases of non-co-
operation on the a part of the assessee or once the assessee is in default as regards activity in
formations.

Discretionary best judgment assessment is finished even in cases wherever the assessing officer
isn't happy concerning the correctness or the completeness of the accounts of the assessee or
wherever no methodology of accounting has been frequently and systematically utilized by the
assessee.

The Best Judgment Assessment could be a procedure underneath the Income Tax Act to
accommodates the principles of natural justice. Vide Section one hundred forty four of the tax
Act, 1961 the Assessing Officer is underneath an obligation to create an assessment of the
overall financial gain or less to the most effective of his judgment within the following cases.

3
If the person fails to create a come back or needed underneath s. 139(1) and he has not created a
come back or a revised come back underneath ss. (4) or (5) of that section.

If somebody fails to accommodates all the terms and conditions stipulated underneath a notice
u/ss. 142 or fails to accommodates the directions requiring him to induce his accounts audited in
terms of section 142(2A).

If somebody, once having filed a come back fails to accommodates the with all the terms of a
notice underneath section 143(2) requiring his presence or production of proof and documents;
or

If the Assessing officer isn't happy concerning the correctness and also the completion of the
accounts of the assessee if no methodology of accounting has been frequently utilized by the
assessee.

In case of best judgment assessment an assessee encompasses a right to file an attractiveness

underneath S. 246A or to create an application for revision underneath S.246 to the tax
Commissioner. the most effective judgment assessment will solely be created once giving the
assessee a chance of being detected.

Such opportunities shall run by supplying of notice by method of a show cause on why the
assessment shouldn't be completed to the most effective of the judgment which chance for
hearing won't be necessary wherever notice u/s 142(1) has been issued.

Under this provision wherever the assessee fails to file a comeback or submit the documents or
fails to accommodates any of the preceding conditions the assessing officer is sceptred u/s one
hundred forty four to assess the overall financial gain consistent with the most effective of his
judgment with an inexpensive chance provided to the tax remunerator of being detected. this is
often but to the exclusion of the availability as provided U/s 142(1) of theIncome Tax Act
wherever the assessee has been given previous notice to the assessment. The assessing officer u/s
one hundred forty four is underneath a obligation to create assessment of the overall financial
gain or the loss to the most effective of his judgment and also the tax collectible once taking all
externalities and conditions under consideration.

4
Judicial Rulings on Scope of Sec. 144

The term ‘best judgment assessment’ isn't a term of art. once the statute prescribes resort to the
most effective judgment assessment in either of the two contingencies, the Court won't be even
in deciphering the expression with relation to the final principle concerning the question on once
assessment is created on the idea of best judgment. In creating best judgment assessment the
officer doesn't possess discretional powers to assess any figure as he like. tho' similar judicial in
nature these assessments are to be supported the principles of justice, equity and smart
conscience. In common formulation the words ‘best judgment’ carry the connotation that what's
being done is so as to create an estimate.

When Best Judgment Assessment is made:

 Ex-parte proceedings – an assessment created underneath S. one hundred forty four will
by no suggests that be equated to ex-parte proceedings during a civil court.
 Mandatory action for defaults – Best judgment assessment is obligatory for anybody of
the defaults underneath S. 144.
 Approximations – wherever the assessee had provided with solely approximate figure in
his come back of financial gain with none more details,Income Tax absolutely was
command that the most effective judgment assessment created by ignoring such a come
back was invalid.
 Signing of come backs – A best judgment assessment is created once the return isn't
signed and verified.
 Production of accounts – wherever, in response to a combined notice for private look in
addition as production of account books, the assessee appeared personally however failed
to manufacture any account books; it absolutely was command that the Income-tax
Officer would be even in creating a best judgment assessment.
 Often instances could arise wherever the assessee maintains false accounts to evade the
payment of tax and in such instances it becomes troublesome on the assessing authority
to exactly notice the quantity of turnover hid. In such cases the judgment is created by the
assessing officer to the most effective of his judgment and then long it's made during a
non-arbitrary method and also the nexus looks apparent the choice is final and there's no

5
 scope for officious with the most effective judgment. Thus, during a method there
remains no scope for difficult a best judgment assessment. this is often as a result ofan
assessee can not be allowed to require advantage of his own black act.

2- Object and Basis of Best Judgment Assessment

The object and also the purpose of the most effective Judgment are to attain a good and correct
estimate of the turnover of the dealer. the most effective judgment doesn't mean sweetening in
turnover of the dealer. The assessee ought to be given adequate chance of meeting the case that is
sought-after to createan assessment order. Even in cases wherever in cases the AO receives data
from outside the establishment or business or individual United Nations agency is being assessed
he should disclose the supply of data to the assessee has got to be discovered. wherever
evidentiary material made by the third party was sought-after to be relied upon for showing the
come back submitted by the assessee was incomplete and dubious, the assessee was entitled to
own such an individual summoned as a witness for cross examination for establishing truth and
exposing falsehood.

Basis of Best Judgment Assessment

Where the quantum of turnovers was supported the assessee’s account books that are accepted
together with different records there is no ground for creating a best judgment assessment, it
being well-known that the most effective judgment assessment has got to get onan estimate. In
different words, a component of guess-work is guaranteed to be gift in best judgment assessment
though it should have an inexpensive nexus to the accessible material and also the circumstance
of every case.

At this juncture it's pertinent to say that correctness of accounts isn't the only real criteria for
acceptive came figures of best assessment judgment. different externalities like volume of
business, conduct of the dealer, past records and similar facts are conditions that are the idea for
a best judgment assessment.

6
It is pertinent to be suggested during this respect that once a come back is filed tho' late the
assessing officer isn't at liberty to ignore it and still applies his best judgment. Thus, wherever
the Assessing Officer feels that it's incomplete and incorrect and he has got to follow the
procedure and provides a chance to the assessee to prove the completeness or correctness of the
come back. Similarly, wherever the assessee wasn't a registered dealer and failed to file his
returns voluntarily notice for best judgment has got to be issued during a prescribed kind inside
the {three} years time to that the assessment proceedings can be completed even once the
termination of three years. once the assessment was created on the idea of not invoking best
assessment penalty for late submission isn't approved. wherever the assessing authority fastened
the turnover that recorded with the turnover recorded by the assessee in his books of accounts it
couldn't be aforesaid that the assessment created by the assessing authority. it's enough if such
assessment had an inexpensive nexus to the accessible material on record.

In case of failure of filing or non-filing of returns the supplying of a notice to the assessee is
elective. so just in case of non-filing of returns the assessing authority could visit the premises of
the dealer and examine the books of accounts at his premises within the presence of the dealer
wherever the supplying of a notice for the aforesaid purpose isn't needed. There can not be a true
basis of basis of rejection of the books of accounts if it looks that the assessing officer rejected
the returns on the idea of unreasonable suspicion and within the absence of any finding relating
to sale and get omission.

3 -Appraisal of the Procedure

When the returns and also the books of account are rejected, the assessing officer should createan
estimate, and to it extent he should create a guess; however the estimate should be associated
with some proof or material and it should be one thing over mere suspicion. He should create
what he honestly believes to be a good estimate of the right figure of assessment and for this
purpose he should take into thought such materials because the assessing officer has before him,
as well as the assessee’s circumstances, data of previous returns and every one different matters
that the assessing officer thinks can assist him in inbound at a good and correct estimate.

In cases that clearly fall on the far side the road of permissible guess work or whimsy, the
assessment should be put aside. In estimating any turnover, it's inevitable that there's some

7
guess- work. The assessing authority whereas creating the most effective judgment assessment
ought to attain its conclusion with none bias and on rational created by the assessing authority
could be a true estimate and relies on a rational basis, the very fact that there's no smart proof in
support of that estimate is immaterial. clear, the assessing authority is that the best choose of
true. it's his best judgment and not of anybody else.

Nexus for Guess-Work

In the estimation, there could also be some overestimate and underestimate. that might not be
decent for questioning the determination of the quantity of tax collectible by the dealer as
determined to the most effective judgment. The term ‘to the most effective of judgment’ of the
assessing officer would create mentally his judgment. wherever the estimate is on account of
whimsy, vengefulness or capriciousness of the assessing officer, it can not be aforesaid to be his
judgment. The estimate supported the name of the dealer within the vicinity, the length of the
amount of his business to boost the come back turnover by five-hitter solely can not be aforesaid
to be with none nexus once that side of the matter isn't challenged. name and also the length of
amount of business would be decent nexus within the peculiar circumstance of a case, though the
assessing authority will take turnovers of the previous years for the aim of estimation.

Penalties

In best judgment assessment, wherever the come back has not been filed, the instant it's found
that the dealer has transacted business and his turnover is dutiable then penalty is obligatory. The
mere reality there's best judgment, significantly once the assessment supported the illation
flowing from the shortcoming of the assessee to ascertain the case pleaded by him, won't be
decent for the aim of imposition of penalty, for the degree of proof needed for the imposition of
penalty is kind of completely different from and is of a far higher order than that needed for the
aim of constructing a best judgment assessment. tho'an estimate created on best judgment basis
could also be legal, for the aim of imposing penalty one thing a lot of concrete is needed which
might change the judicial mind to achieve the conclusion that the dealer truly had the turnover
that was fastened by best judgment. The order imposing penalty cannot sustain if there's no
material accessible to conclude that there was any willful suppression of the dutiable turnover
warranting a penalty.

8
Conclusion

A general understanding of the procedure shows that the most effective judgment assessment
procedure has given wide discretionary powers to the assessing authority to assess within the
instances wherever there has been willful suppression and concealment of financial gain and
turnover by the assessee. the facility thus offered is wide to the extent that the AO has the
authority to assume from the documents thus gift on provide an assessment with an exaggerated
or a ablated turnover supported the documents thus provided. even supposing the belief could
also be shot if it's a valid justification that everyone the turnover so recorded so as to properly
assume the turnover and also thereby the returns just in case of an effort to by design conceal the
tax collectible by not displaying within the books of accounts and the different official
documents.

Tax assessment being a troublesome space of labor it's however imperative that the assessing
authority ought to be given adequate powers for encountering tax evaders. The assessing officers
during this respect are given wide powers therein regarding. It additionally aids in honest tax
disclosures thus on avoid the rising issues of evasion that had panic-stricken the economy of the
country thereby giving rise to a parallel unaccounted economy.

A mandatory best judgment is finished within the event of failure to furnish requisites books of
accounts by the assessee and more the discretionary assessment created wherever the AO is
underneath the firm belief that the records aren't true or identical aren't permissible by him or
rejected of any of the grounds that the assessing officer deems fit the case. but this power isn't
absolute and there's an essential understanding that the actions of the assessing authority are
going to be honestly and diligently performed. more the assessee is given the facility to furnish
reasons for failure to produce adequate reasons for the non revealing or concealment of the fabric
documents and on why an assessment shouldn't be created consistent with the most effective
understanding of the assessing authority. Moreover, an assessee encompasses a right to filean
attractiveness underneath S. 246A or to create an application for revision underneath s. 246 to
the tax Commissioner if he's not happy with the choice created against him. However, it's to be
unbroken in mind the courts cannot but assess or interfere with the choice apart from on
instances on a cloth error on face or record or any mistake of law. it's pertinent to say but, that
the powers apparently are too wide and may be wont to the damage ofan assessee and may be
9
manipulated by a corrupt officer. thus there has got to be checks and balances to the ‘guess work’
worn out case of a best assessment judgment. The AO ought to be asked to produce and furnish
proof for his actions as critical that of the assessee and solely once a deduction of either side of
the documents provided ought to the court come back to a choice. At present, the Income Tax
Act doesn't inflict any strict methodology of assessment however it's submitted there so could be
a got to slim down and systematize the procedural law on this time thus on bring clarity and
vigilance to the operations of the tax officers.

10
Bibliography

Primary Sources

The tax Act, 1961

Cases

Kamala Mills Ltd. V. urban center State, (1965) 16 STC 613 (SC)

Illuri Subbaya Chetty v. State of AP, (1963) 14 STC (SC)

Surya Fertilizers & Chemicals v. State of state, (1977) 40 STC 538 (Mad)

Gem & Co v. State of West Bengal, (1959) 10 STC 537 (Cal)

Bengal Behar Construction Co. Pvt Ltd. V. State of state, (1983) 44 STC 176 (Mad)

State of state v. Maharaja B.P. Singh Deo, (1970)77 ITR 674 (Cal).

State of Madras v. Jayaraj Nadar & Sons, (1971) 28 STC 700 (SC)

Nemi Chand Vimal Chand v. CST, (1974) 34 STC 562 (All)

Bata Shoe Co. Pvt Ltd v. Joint CTO, (1968) 21 STC 135 (Mad)

Motor House v. State of state, (1990) 79 STC 385 (Ori)

Ravi v. State of TN, (1981) 48 STC 274 (Mad).

Babulal Agarwal v. CST, (1987) 66 STC 164 (MP)

Bhaskar Rao v. State of AP, (1986) 63 STC 297 (AP)

Secondary Sources(Books)

MRV. Rao et al’, ideas in Taxation, The Law Publishers, Madras.

N. A. Palkhivala and B.A. Palkhivala, Kanga and Palkhivala’s The Law and observe of tax,
N.M.Tripathi Pvt. Ltd., Bombay, 7th Ed. 1977, Vol.1.

11
Narayan Jainist & Deepak Loyalka, a way to Handle tax Problems? Book Corporation
Publishers, 1997-1998.

Rakesh Bhargava(ed), Taxmann’s Master Guide to tax Act, Taxmann Publication, New Delhi,
2003.

Dr. Vinod K. Singhania and Monica S-inghania; Students’ Guide to financial gain Tax; Taxmann
Publications Pvt. Ltd.; latest edition.

Mahesh Chandra & D.C. Shukla; Income-tax Law and Practice; Pragati Publications

H.C. Mehrotra; Income-tax Law and Accounts; Sahitya Bhawanedition.

Girish Ahuja and Ravi Gupta;an Elementary Approach to tax & Sales Tax; Bharat Publications;

Dinkar Pagare; Law and observe of financial gain Tax; ruler Chand & Sons;

Index

09.Introduction
10.An analysis of the procedure of best judgment Assessment.
11.When best judgment assessment is made.
12.Object and basis of best judgment assessment
13.Basis of best judgment assessment
14.Appraisal of the procedure
15.Conclusion
16.Bibliography

12
Introduction

Assessment means that appraisal, evaluation, estimation, measure, judgment etc. within the
context income tax law it suggests that then analysis, estimation, or calculation of financial gain.
The term ‘assessment’ in field of taxation law encompasses a definite meaning. This term is
comprehensive and shall embody varied ranges of activities and procedures. The definition of
assessment has not been given the Income Tax Act; however a reading of the term inside the
scope of the Act makes it obvious that it implies an investigation and ascertainment of the
correctness of the returns and accounts filed by the assessee. Primarily the assessment would
apparently mean determination of the quantum of taxable turnover and also the quantum of
taxable amount due by the tax payer

This assessment is created on the idea of returns and accounts provided with by an assessee in
support thereof however on an estimate made by the assessing authority which maybe, of course,
be primarily based inter alia on the accounts and documents provided with by the assessee. The
expression of assessment contains a wide scope inside the aim of the Act whether or not the
aforesaid assessment made is correct or not. thus any assessment made wouldn't primarily mean
an assessment properly or properly however would signify all assessment made or speculated to
purported to created underneath the aforesaid act. Primarily assessment is estimation for a

13
quantity assessed whereas paying tax. It’s a mandatory contribution that's needed for the support
of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgment i.e. he should not act venally or revengefully or freakishly.

There are two varieties of judgment assessment:

03. Compulsory best judgment assessment created by the assessing officer in cases of non-
co-operation on the a part of the assessee or once the assessee is in default as regards
activity in formation.
04. Discretionary best judgment assessment is finished even in cases wherever the assessing
officer isn't happy concerning the correctness or the completeness of the accounts of the
assessee or wherever no methodology of accounting has been frequently and
systematically utilized by the assessee.

An analysis of The Procedure of Best Judgment Assessment

The expression of assessment encompasses a wide scope inside the needs of the Act whether or
not the aforesaid assessment created is correct or not thus any assessment created wouldn't
basically mean an assessment properly or properly however would signify all assessment created
or presupposed to are created underneath the aforesaid act. primarily assessment is estimation
foran quantity assessed whereas paying tax. it's a mandatory contribution that's needed for the
support of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgement i.e. he should not act venally or revengefully or freakishly. There are two varieties of
judgement assessment:

14
Compulsory best judgment assessment created by the assessing officer in cases of non-co-
operation on the a part of the assessee or once the assessee is in default as regards activity in
formations.

Discretionary best judgment assessment is finished even in cases wherever the assessing officer
isn't happy concerning the correctness or the completeness of the accounts of the assessee or
wherever no methodology of accounting has been frequently and systematically utilized by the
assessee.

The Best Judgment Assessment could be a procedure underneath the Income Tax Act to
accommodates the principles of natural justice. Vide Section one hundred forty four of the tax
Act, 1961 the Assessing Officer is underneath an obligation to create an assessment of the
overall financial gain or less to the most effective of his judgment within the following cases.

If the person fails to create a come back or needed underneath s. 139(1) and he has not created a
come back or a revised come back underneath ss. (4) or (5) of that section.

If somebody fails to accommodates all the terms and conditions stipulated underneath a notice
u/ss. 142 or fails to accommodates the directions requiring him to induce his accounts audited in
terms of section 142(2A).

If somebody, once having filed a come back fails to accommodates the with all the terms of a
notice underneath section 143(2) requiring his presence or production of proof and documents;
or

If the Assessing officer isn't happy concerning the correctness and also the completion of the
accounts of the assessee if no methodology of accounting has been frequently utilized by the
assessee.

In case of best judgment assessment an assessee encompasses a right to file an attractiveness

underneath S. 246A or to create an application for revision underneath S.246 to the tax
Commissioner. the most effective judgment assessment will solely be created once giving the
assessee a chance of being detected.

15
Such opportunities shall run by supplying of notice by method of a show cause on why the
assessment shouldn't be completed to the most effective of the judgment which chance for
hearing won't be necessary wherever notice u/s 142(1) has been issued.

Under this provision wherever the assessee fails to file a comeback or submit the documents or
fails to accommodates any of the preceding conditions the assessing officer is sceptred u/s one
hundred forty four to assess the overall financial gain consistent with the most effective of his
judgment with an inexpensive chance provided to the tax remunerator of being detected. this is
often but to the exclusion of the availability as provided U/s 142(1) of theIncome Tax Act
wherever the assessee has been given previous notice to the assessment. The assessing officer u/s
one hundred forty four is underneath a obligation to create assessment of the overall financial
gain or the loss to the most effective of his judgment and also the tax collectible once taking all
externalities and conditions under consideration.

Judicial Rulings on Scope of Sec. 144

The term ‘best judgment assessment’ isn't a term of art. once the statute prescribes resort to the
most effective judgment assessment in either of the two contingencies, the Court won't be even
in deciphering the expression with relation to the final principle concerning the question on once
assessment is created on the idea of best judgment. In creating best judgment assessment the
officer doesn't possess discretional powers to assess any figure as he like. tho' similar judicial in
nature these assessments are to be supported the principles of justice, equity and smart
conscience. In common formulation the words ‘best judgment’ carry the connotation that what's
being done is so as to create an estimate.

When Best Judgment Assessment is made:

 Ex-parte proceedings – an assessment created underneath S. one hundred forty four will
by no suggests that be equated to ex-parte proceedings during a civil court.
 Mandatory action for defaults – Best judgment assessment is obligatory for anybody of
the defaults underneath S. 144.

16
  Approximations – wherever the assessee had provided with solely approximate figure in
his come back of financial gain with none more details,Income Tax absolutely was
command that the most effective judgment assessment created by ignoring such a come
back was invalid.
 Signing of come backs – A best judgment assessment is created once the return isn't
signed and verified.
 Production of accounts – wherever, in response to a combined notice for private look in
addition as production of account books, the assessee appeared personally however failed
to manufacture any account books; it absolutely was command that the Income-tax
Officer would be even in creating a best judgment assessment.
 Often instances could arise wherever the assessee maintains false accounts to evade the
payment of tax and in such instances it becomes troublesome on the assessing authority
to exactly notice the quantity of turnover hid. In such cases the judgment is created by the
assessing officer to the most effective of his judgment and then long it's made during a
non-arbitrary method and also the nexus looks apparent the choice is final and there's no
scope for officious with the most effective judgment. Thus, during a method there
remains no scope for difficult a best judgment assessment. this is often as a result ofan
assessee can not be allowed to require advantage of his own black act.

2- Object and Basis of Best Judgment Assessment

The object and also the purpose of the most effective Judgment are to attain a good and correct
estimate of the turnover of the dealer. the most effective judgment doesn't mean sweetening in
turnover of the dealer. The assessee ought to be given adequate chance of meeting the case that is
sought-after to createan assessment order. Even in cases wherever in cases the AO receives data
from outside the establishment or business or individual United Nations agency is being assessed
he should disclose the supply of data to the assessee has got to be discovered. wherever
evidentiary material made by the third party was sought-after to be relied upon for showing the
come back submitted by the assessee was incomplete and dubious, the assessee was entitled to

17
own such an individual summoned as a witness for cross examination for establishing truth and
exposing falsehood.

Basis of Best Judgment Assessment

Where the quantum of turnovers was supported the assessee’s account books that are accepted
together with different records there is no ground for creating a best judgment assessment, it
being well-known that the most effective judgment assessment has got to get onan estimate. In
different words, a component of guess-work is guaranteed to be gift in best judgment assessment
though it should have an inexpensive nexus to the accessible material and also the circumstance
of every case.

At this juncture it's pertinent to say that correctness of accounts isn't the only real criteria for
acceptive came figures of best assessment judgment. different externalities like volume of
business, conduct of the dealer, past records and similar facts are conditions that are the idea for
a best judgment assessment.

It is pertinent to be suggested during this respect that once a come back is filed tho' late the
assessing officer isn't at liberty to ignore it and still applies his best judgment. Thus, wherever
the Assessing Officer feels that it's incomplete and incorrect and he has got to follow the
procedure and provides a chance to the assessee to prove the completeness or correctness of the
come back. Similarly, wherever the assessee wasn't a registered dealer and failed to file his
returns voluntarily notice for best judgment has got to be issued during a prescribed kind inside
the {three} years time to that the assessment proceedings can be completed even once the
termination of three years. once the assessment was created on the idea of not invoking best
assessment penalty for late submission isn't approved. wherever the assessing authority fastened
the turnover that recorded with the turnover recorded by the assessee in his books of accounts it
couldn't be aforesaid that the assessment created by the assessing authority. it's enough if such
assessment had an inexpensive nexus to the accessible material on record.

In case of failure of filing or non-filing of returns the supplying of a notice to the assessee is
elective. so just in case of non-filing of returns the assessing authority could visit the premises of

18
the dealer and examine the books of accounts at his premises within the presence of the dealer
wherever the supplying of a notice for the aforesaid purpose isn't needed. There can not be a true
basis of basis of rejection of the books of accounts if it looks that the assessing officer rejected
the returns on the idea of unreasonable suspicion and within the absence of any finding relating
to sale and get omission.

3 -Appraisal of the Procedure

When the returns and also the books of account are rejected, the assessing officer should createan
estimate, and to it extent he should create a guess; however the estimate should be associated
with some proof or material and it should be one thing over mere suspicion. He should create
what he honestly believes to be a good estimate of the right figure of assessment and for this
purpose he should take into thought such materials because the assessing officer has before him,
as well as the assessee’s circumstances, data of previous returns and every one different matters
that the assessing officer thinks can assist him in inbound at a good and correct estimate.

In cases that clearly fall on the far side the road of permissible guess work or whimsy, the
assessment should be put aside. In estimating any turnover, it's inevitable that there's some
guess- work. The assessing authority whereas creating the most effective judgment assessment
ought to attain its conclusion with none bias and on rational created by the assessing authority
could be a true estimate and relies on a rational basis, the very fact that there's no smart proof in
support of that estimate is immaterial. clear, the assessing authority is that the best choose of
true. it's his best judgment and not of anybody else.

Nexus for Guess-Work

In the estimation, there could also be some overestimate and underestimate. that might not be
decent for questioning the determination of the quantity of tax collectible by the dealer as
determined to the most effective judgment. The term ‘to the most effective of judgment’ of the
assessing officer would create mentally his judgment. wherever the estimate is on account of
whimsy, vengefulness or capriciousness of the assessing officer, it can not be aforesaid to be his
judgment. The estimate supported the name of the dealer within the vicinity, the length of the
amount of his business to boost the come back turnover by five-hitter solely can not be aforesaid
to be with none nexus once that side of the matter isn't challenged. name and also the length of
19
amount of business would be decent nexus within the peculiar circumstance of a case, though the
assessing authority will take turnovers of the previous years for the aim of estimation.

Penalties

In best judgment assessment, wherever the come back has not been filed, the instant it's found
that the dealer has transacted business and his turnover is dutiable then penalty is obligatory. The
mere reality there's best judgment, significantly once the assessment supported the illation
flowing from the shortcoming of the assessee to ascertain the case pleaded by him, won't be
decent for the aim of imposition of penalty, for the degree of proof needed for the imposition of
penalty is kind of completely different from and is of a far higher order than that needed for the
aim of constructing a best judgment assessment. tho'an estimate created on best judgment basis
could also be legal, for the aim of imposing penalty one thing a lot of concrete is needed which
might change the judicial mind to achieve the conclusion that the dealer truly had the turnover
that was fastened by best judgment. The order imposing penalty cannot sustain if there's no
material accessible to conclude that there was any willful suppression of the dutiable turnover
warranting a penalty.

Conclusion

A general understanding of the procedure shows that the most effective judgment assessment
procedure has given wide discretionary powers to the assessing authority to assess within the
instances wherever there has been willful suppression and concealment of financial gain and
turnover by the assessee. the facility thus offered is wide to the extent that the AO has the
authority to assume from the documents thus gift on provide an assessment with an exaggerated
or a ablated turnover supported the documents thus provided. even supposing the belief could
also be shot if it's a valid justification that everyone the turnover so recorded so as to properly
assume the turnover and also thereby the returns just in case of an effort to by design conceal the
tax collectible by not displaying within the books of accounts and the different official
documents.

Tax assessment being a troublesome space of labor it's however imperative that the assessing
authority ought to be given adequate powers for encountering tax evaders. The assessing officers
during this respect are given wide powers therein regarding. It additionally aids in honest tax
20
disclosures thus on avoid the rising issues of evasion that had panic-stricken the economy of the
country thereby giving rise to a parallel unaccounted economy.

A mandatory best judgment is finished within the event of failure to furnish requisites books of
accounts by the assessee and more the discretionary assessment created wherever the AO is
underneath the firm belief that the records aren't true or identical aren't permissible by him or
rejected of any of the grounds that the assessing officer deems fit the case. but this power isn't
absolute and there's an essential understanding that the actions of the assessing authority are
going to be honestly and diligently performed. more the assessee is given the facility to furnish
reasons for failure to produce adequate reasons for the non revealing or concealment of the fabric
documents and on why an assessment shouldn't be created consistent with the most effective
understanding of the assessing authority. Moreover, an assessee encompasses a right to filean
attractiveness underneath S. 246A or to create an application for revision underneath s. 246 to
the tax Commissioner if he's not happy with the choice created against him. However, it's to be
unbroken in mind the courts cannot but assess or interfere with the choice apart from on
instances on a cloth error on face or record or any mistake of law. it's pertinent to say but, that
the powers apparently are too wide and may be wont to the damage ofan assessee and may be
manipulated by a corrupt officer. thus there has got to be checks and balances to the ‘guess work’
worn out case of a best assessment judgment. The AO ought to be asked to produce and furnish
proof for his actions as critical that of the assessee and solely once a deduction of either side of
the documents provided ought to the court come back to a choice. At present, the Income Tax
Act doesn't inflict any strict methodology of assessment however it's submitted there so could be
a got to slim down and systematize the procedural law on this time thus on bring clarity and
vigilance to the operations of the tax officers.

21
Bibliography

Primary Sources

The tax Act, 1961

Cases

Kamala Mills Ltd. V. urban center State, (1965) 16 STC 613 (SC)

Illuri Subbaya Chetty v. State of AP, (1963) 14 STC (SC)

Surya Fertilizers & Chemicals v. State of state, (1977) 40 STC 538 (Mad)

Gem & Co v. State of West Bengal, (1959) 10 STC 537 (Cal)

Bengal Behar Construction Co. Pvt Ltd. V. State of state, (1983) 44 STC 176 (Mad)

State of state v. Maharaja B.P. Singh Deo, (1970)77 ITR 674 (Cal).

22
State of Madras v. Jayaraj Nadar & Sons, (1971) 28 STC 700 (SC)

Nemi Chand Vimal Chand v. CST, (1974) 34 STC 562 (All)

Bata Shoe Co. Pvt Ltd v. Joint CTO, (1968) 21 STC 135 (Mad)

Motor House v. State of state, (1990) 79 STC 385 (Ori)

Ravi v. State of TN, (1981) 48 STC 274 (Mad).

Babulal Agarwal v. CST, (1987) 66 STC 164 (MP)

Bhaskar Rao v. State of AP, (1986) 63 STC 297 (AP)

Secondary Sources(Books)

MRV. Rao et al’, ideas in Taxation, The Law Publishers, Madras.

N. A. Palkhivala and B.A. Palkhivala, Kanga and Palkhivala’s The Law and observe of tax,
N.M.Tripathi Pvt. Ltd., Bombay, 7th Ed. 1977, Vol.1.

Narayan Jainist & Deepak Loyalka, a way to Handle tax Problems? Book Corporation
Publishers, 1997-1998.

Rakesh Bhargava(ed), Taxmann’s Master Guide to tax Act, Taxmann Publication, New Delhi,
2003.

Dr. Vinod K. Singhania and Monica S-inghania; Students’ Guide to financial gain Tax; Taxmann
Publications Pvt. Ltd.; latest edition.

Mahesh Chandra & D.C. Shukla; Income-tax Law and Practice; Pragati Publications

H.C. Mehrotra; Income-tax Law and Accounts; Sahitya Bhawanedition.

Girish Ahuja and Ravi Gupta;an Elementary Approach to tax & Sales Tax; Bharat Publications;

Dinkar Pagare; Law and observe of financial gain Tax; ruler Chand & Sons;

Index

23
 17.Introduction
18.An analysis of the procedure of best judgment Assessment.
19.When best judgment assessment is made.
20.Object and basis of best judgment assessment
21.Basis of best judgment assessment
22.Appraisal of the procedure
23.Conclusion
24.Bibliography

Introduction

24
Assessment means that appraisal, evaluation, estimation, measure, judgment etc. within the
context income tax law it suggests that then analysis, estimation, or calculation of financial gain.
The term ‘assessment’ in field of taxation law encompasses a definite meaning. This term is
comprehensive and shall embody varied ranges of activities and procedures. The definition of
assessment has not been given the Income Tax Act; however a reading of the term inside the
scope of the Act makes it obvious that it implies an investigation and ascertainment of the
correctness of the returns and accounts filed by the assessee. Primarily the assessment would
apparently mean determination of the quantum of taxable turnover and also the quantum of
taxable amount due by the tax payer

This assessment is created on the idea of returns and accounts provided with by an assessee in
support thereof however on an estimate made by the assessing authority which maybe, of course,
be primarily based inter alia on the accounts and documents provided with by the assessee. The
expression of assessment contains a wide scope inside the aim of the Act whether or not the
aforesaid assessment made is correct or not. thus any assessment made wouldn't primarily mean
an assessment properly or properly however would signify all assessment made or speculated to
purported to created underneath the aforesaid act. Primarily assessment is estimation for a
quantity assessed whereas paying tax. It’s a mandatory contribution that's needed for the support
of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgment i.e. he should not act venally or revengefully or freakishly.

There are two varieties of judgment assessment:

05. Compulsory best judgment assessment created by the assessing officer in cases of non-
co-operation on the a part of the assessee or once the assessee is in default as regards
activity in formation.
06. Discretionary best judgment assessment is finished even in cases wherever the assessing
officer isn't happy concerning the correctness or the completeness of the accounts of the
assessee or wherever no methodology of accounting has been frequently and
systematically utilized by the assessee.

25
An analysis of The Procedure of Best Judgment Assessment

The expression of assessment encompasses a wide scope inside the needs of the Act whether or
not the aforesaid assessment created is correct or not thus any assessment created wouldn't
basically mean an assessment properly or properly however would signify all assessment created
or presupposed to are created underneath the aforesaid act. primarily assessment is estimation
foran quantity assessed whereas paying tax. it's a mandatory contribution that's needed for the
support of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgement i.e. he should not act venally or revengefully or freakishly. There are two varieties of
judgement assessment:

Compulsory best judgment assessment created by the assessing officer in cases of non-co-
operation on the a part of the assessee or once the assessee is in default as regards activity in
formations.

Discretionary best judgment assessment is finished even in cases wherever the assessing officer
isn't happy concerning the correctness or the completeness of the accounts of the assessee or
wherever no methodology of accounting has been frequently and systematically utilized by the
assessee.

The Best Judgment Assessment could be a procedure underneath the Income Tax Act to
accommodates the principles of natural justice. Vide Section one hundred forty four of the tax
Act, 1961 the Assessing Officer is underneath an obligation to create an assessment of the
overall financial gain or less to the most effective of his judgment within the following cases.

If the person fails to create a come back or needed underneath s. 139(1) and he has not created a
come back or a revised come back underneath ss. (4) or (5) of that section.

26
If somebody fails to accommodates all the terms and conditions stipulated underneath a notice
u/ss. 142 or fails to accommodates the directions requiring him to induce his accounts audited in
terms of section 142(2A).

If somebody, once having filed a come back fails to accommodates the with all the terms of a
notice underneath section 143(2) requiring his presence or production of proof and documents;
or

If the Assessing officer isn't happy concerning the correctness and also the completion of the
accounts of the assessee if no methodology of accounting has been frequently utilized by the
assessee.

In case of best judgment assessment an assessee encompasses a right to file an attractiveness

underneath S. 246A or to create an application for revision underneath S.246 to the tax
Commissioner. the most effective judgment assessment will solely be created once giving the
assessee a chance of being detected.

Such opportunities shall run by supplying of notice by method of a show cause on why the
assessment shouldn't be completed to the most effective of the judgment which chance for
hearing won't be necessary wherever notice u/s 142(1) has been issued.

Under this provision wherever the assessee fails to file a comeback or submit the documents or
fails to accommodates any of the preceding conditions the assessing officer is sceptred u/s one
hundred forty four to assess the overall financial gain consistent with the most effective of his
judgment with an inexpensive chance provided to the tax remunerator of being detected. this is
often but to the exclusion of the availability as provided U/s 142(1) of theIncome Tax Act
wherever the assessee has been given previous notice to the assessment. The assessing officer u/s
one hundred forty four is underneath a obligation to create assessment of the overall financial
gain or the loss to the most effective of his judgment and also the tax collectible once taking all
externalities and conditions under consideration.

Judicial Rulings on Scope of Sec. 144

27
The term ‘best judgment assessment’ isn't a term of art. once the statute prescribes resort to the
most effective judgment assessment in either of the two contingencies, the Court won't be even
in deciphering the expression with relation to the final principle concerning the question on once
assessment is created on the idea of best judgment. In creating best judgment assessment the
officer doesn't possess discretional powers to assess any figure as he like. tho' similar judicial in
nature these assessments are to be supported the principles of justice, equity and smart
conscience. In common formulation the words ‘best judgment’ carry the connotation that what's
being done is so as to create an estimate.

When Best Judgment Assessment is made:

 Ex-parte proceedings – an assessment created underneath S. one hundred forty four will
by no suggests that be equated to ex-parte proceedings during a civil court.
 Mandatory action for defaults – Best judgment assessment is obligatory for anybody of
the defaults underneath S. 144.
 Approximations – wherever the assessee had provided with solely approximate figure in
his come back of financial gain with none more details,Income Tax absolutely was
command that the most effective judgment assessment created by ignoring such a come
back was invalid.
 Signing of come backs – A best judgment assessment is created once the return isn't
signed and verified.
 Production of accounts – wherever, in response to a combined notice for private look in
addition as production of account books, the assessee appeared personally however failed
to manufacture any account books; it absolutely was command that the Income-tax
Officer would be even in creating a best judgment assessment.
 Often instances could arise wherever the assessee maintains false accounts to evade the
payment of tax and in such instances it becomes troublesome on the assessing authority
to exactly notice the quantity of turnover hid. In such cases the judgment is created by the
assessing officer to the most effective of his judgment and then long it's made during a
non-arbitrary method and also the nexus looks apparent the choice is final and there's no
scope for officious with the most effective judgment. Thus, during a method there

28
 remains no scope for difficult a best judgment assessment. this is often as a result ofan
assessee can not be allowed to require advantage of his own black act.

2- Object and Basis of Best Judgment Assessment

The object and also the purpose of the most effective Judgment are to attain a good and correct
estimate of the turnover of the dealer. the most effective judgment doesn't mean sweetening in
turnover of the dealer. The assessee ought to be given adequate chance of meeting the case that is
sought-after to createan assessment order. Even in cases wherever in cases the AO receives data
from outside the establishment or business or individual United Nations agency is being assessed
he should disclose the supply of data to the assessee has got to be discovered. wherever
evidentiary material made by the third party was sought-after to be relied upon for showing the
come back submitted by the assessee was incomplete and dubious, the assessee was entitled to
own such an individual summoned as a witness for cross examination for establishing truth and
exposing falsehood.

Basis of Best Judgment Assessment

Where the quantum of turnovers was supported the assessee’s account books that are accepted
together with different records there is no ground for creating a best judgment assessment, it
being well-known that the most effective judgment assessment has got to get onan estimate. In
different words, a component of guess-work is guaranteed to be gift in best judgment assessment
though it should have an inexpensive nexus to the accessible material and also the circumstance
of every case.

At this juncture it's pertinent to say that correctness of accounts isn't the only real criteria for
acceptive came figures of best assessment judgment. different externalities like volume of
business, conduct of the dealer, past records and similar facts are conditions that are the idea for
a best judgment assessment.

29
It is pertinent to be suggested during this respect that once a come back is filed tho' late the
assessing officer isn't at liberty to ignore it and still applies his best judgment. Thus, wherever
the Assessing Officer feels that it's incomplete and incorrect and he has got to follow the
procedure and provides a chance to the assessee to prove the completeness or correctness of the
come back. Similarly, wherever the assessee wasn't a registered dealer and failed to file his
returns voluntarily notice for best judgment has got to be issued during a prescribed kind inside
the {three} years time to that the assessment proceedings can be completed even once the
termination of three years. once the assessment was created on the idea of not invoking best
assessment penalty for late submission isn't approved. wherever the assessing authority fastened
the turnover that recorded with the turnover recorded by the assessee in his books of accounts it
couldn't be aforesaid that the assessment created by the assessing authority. it's enough if such
assessment had an inexpensive nexus to the accessible material on record.

In case of failure of filing or non-filing of returns the supplying of a notice to the assessee is
elective. so just in case of non-filing of returns the assessing authority could visit the premises of
the dealer and examine the books of accounts at his premises within the presence of the dealer
wherever the supplying of a notice for the aforesaid purpose isn't needed. There can not be a true
basis of basis of rejection of the books of accounts if it looks that the assessing officer rejected
the returns on the idea of unreasonable suspicion and within the absence of any finding relating
to sale and get omission.

3 -Appraisal of the Procedure

When the returns and also the books of account are rejected, the assessing officer should createan
estimate, and to it extent he should create a guess; however the estimate should be associated
with some proof or material and it should be one thing over mere suspicion. He should create
what he honestly believes to be a good estimate of the right figure of assessment and for this
purpose he should take into thought such materials because the assessing officer has before him,
as well as the assessee’s circumstances, data of previous returns and every one different matters
that the assessing officer thinks can assist him in inbound at a good and correct estimate.

In cases that clearly fall on the far side the road of permissible guess work or whimsy, the
assessment should be put aside. In estimating any turnover, it's inevitable that there's some

30
guess- work. The assessing authority whereas creating the most effective judgment assessment
ought to attain its conclusion with none bias and on rational created by the assessing authority
could be a true estimate and relies on a rational basis, the very fact that there's no smart proof in
support of that estimate is immaterial. clear, the assessing authority is that the best choose of
true. it's his best judgment and not of anybody else.

Nexus for Guess-Work

In the estimation, there could also be some overestimate and underestimate. that might not be
decent for questioning the determination of the quantity of tax collectible by the dealer as
determined to the most effective judgment. The term ‘to the most effective of judgment’ of the
assessing officer would create mentally his judgment. wherever the estimate is on account of
whimsy, vengefulness or capriciousness of the assessing officer, it can not be aforesaid to be his
judgment. The estimate supported the name of the dealer within the vicinity, the length of the
amount of his business to boost the come back turnover by five-hitter solely can not be aforesaid
to be with none nexus once that side of the matter isn't challenged. name and also the length of
amount of business would be decent nexus within the peculiar circumstance of a case, though the
assessing authority will take turnovers of the previous years for the aim of estimation.

Penalties

In best judgment assessment, wherever the come back has not been filed, the instant it's found
that the dealer has transacted business and his turnover is dutiable then penalty is obligatory. The
mere reality there's best judgment, significantly once the assessment supported the illation
flowing from the shortcoming of the assessee to ascertain the case pleaded by him, won't be
decent for the aim of imposition of penalty, for the degree of proof needed for the imposition of
penalty is kind of completely different from and is of a far higher order than that needed for the
aim of constructing a best judgment assessment. tho'an estimate created on best judgment basis
could also be legal, for the aim of imposing penalty one thing a lot of concrete is needed which
might change the judicial mind to achieve the conclusion that the dealer truly had the turnover
that was fastened by best judgment. The order imposing penalty cannot sustain if there's no
material accessible to conclude that there was any willful suppression of the dutiable turnover
warranting a penalty.

31
Conclusion

A general understanding of the procedure shows that the most effective judgment assessment
procedure has given wide discretionary powers to the assessing authority to assess within the
instances wherever there has been willful suppression and concealment of financial gain and
turnover by the assessee. the facility thus offered is wide to the extent that the AO has the
authority to assume from the documents thus gift on provide an assessment with an exaggerated
or a ablated turnover supported the documents thus provided. even supposing the belief could
also be shot if it's a valid justification that everyone the turnover so recorded so as to properly
assume the turnover and also thereby the returns just in case of an effort to by design conceal the
tax collectible by not displaying within the books of accounts and the different official
documents.

Tax assessment being a troublesome space of labor it's however imperative that the assessing
authority ought to be given adequate powers for encountering tax evaders. The assessing officers
during this respect are given wide powers therein regarding. It additionally aids in honest tax
disclosures thus on avoid the rising issues of evasion that had panic-stricken the economy of the
country thereby giving rise to a parallel unaccounted economy.

A mandatory best judgment is finished within the event of failure to furnish requisites books of
accounts by the assessee and more the discretionary assessment created wherever the AO is
underneath the firm belief that the records aren't true or identical aren't permissible by him or
rejected of any of the grounds that the assessing officer deems fit the case. but this power isn't
absolute and there's an essential understanding that the actions of the assessing authority are
going to be honestly and diligently performed. more the assessee is given the facility to furnish
reasons for failure to produce adequate reasons for the non revealing or concealment of the fabric
documents and on why an assessment shouldn't be created consistent with the most effective
understanding of the assessing authority. Moreover, an assessee encompasses a right to filean
attractiveness underneath S. 246A or to create an application for revision underneath s. 246 to
the tax Commissioner if he's not happy with the choice created against him. However, it's to be
unbroken in mind the courts cannot but assess or interfere with the choice apart from on
instances on a cloth error on face or record or any mistake of law. it's pertinent to say but, that
the powers apparently are too wide and may be wont to the damage ofan assessee and may be
32
manipulated by a corrupt officer. thus there has got to be checks and balances to the ‘guess work’
worn out case of a best assessment judgment. The AO ought to be asked to produce and furnish
proof for his actions as critical that of the assessee and solely once a deduction of either side of
the documents provided ought to the court come back to a choice. At present, the Income Tax
Act doesn't inflict any strict methodology of assessment however it's submitted there so could be
a got to slim down and systematize the procedural law on this time thus on bring clarity and
vigilance to the operations of the tax officers.

33
Bibliography

Primary Sources

The tax Act, 1961

Cases

Kamala Mills Ltd. V. urban center State, (1965) 16 STC 613 (SC)

Illuri Subbaya Chetty v. State of AP, (1963) 14 STC (SC)

Surya Fertilizers & Chemicals v. State of state, (1977) 40 STC 538 (Mad)

Gem & Co v. State of West Bengal, (1959) 10 STC 537 (Cal)

Bengal Behar Construction Co. Pvt Ltd. V. State of state, (1983) 44 STC 176 (Mad)

State of state v. Maharaja B.P. Singh Deo, (1970)77 ITR 674 (Cal).

State of Madras v. Jayaraj Nadar & Sons, (1971) 28 STC 700 (SC)

Nemi Chand Vimal Chand v. CST, (1974) 34 STC 562 (All)

Bata Shoe Co. Pvt Ltd v. Joint CTO, (1968) 21 STC 135 (Mad)

Motor House v. State of state, (1990) 79 STC 385 (Ori)

Ravi v. State of TN, (1981) 48 STC 274 (Mad).

Babulal Agarwal v. CST, (1987) 66 STC 164 (MP)

Bhaskar Rao v. State of AP, (1986) 63 STC 297 (AP)

Secondary Sources(Books)

MRV. Rao et al’, ideas in Taxation, The Law Publishers, Madras.

N. A. Palkhivala and B.A. Palkhivala, Kanga and Palkhivala’s The Law and observe of tax,
N.M.Tripathi Pvt. Ltd., Bombay, 7th Ed. 1977, Vol.1.

34
Narayan Jainist & Deepak Loyalka, a way to Handle tax Problems? Book Corporation
Publishers, 1997-1998.

Rakesh Bhargava(ed), Taxmann’s Master Guide to tax Act, Taxmann Publication, New Delhi,
2003.

Dr. Vinod K. Singhania and Monica S-inghania; Students’ Guide to financial gain Tax; Taxmann
Publications Pvt. Ltd.; latest edition.

Mahesh Chandra & D.C. Shukla; Income-tax Law and Practice; Pragati Publications

H.C. Mehrotra; Income-tax Law and Accounts; Sahitya Bhawanedition.

Girish Ahuja and Ravi Gupta;an Elementary Approach to tax & Sales Tax; Bharat Publications;

Dinkar Pagare; Law and observe of financial gain Tax; ruler Chand & Sons;

Index

25.Introduction
26.An analysis of the procedure of best judgment Assessment.
27.When best judgment assessment is made.
28.Object and basis of best judgment assessment
29.Basis of best judgment assessment
30.Appraisal of the procedure
31.Conclusion
32.Bibliography

35
Introduction

Assessment means that appraisal, evaluation, estimation, measure, judgment etc. within the
context income tax law it suggests that then analysis, estimation, or calculation of financial gain.
The term ‘assessment’ in field of taxation law encompasses a definite meaning. This term is
comprehensive and shall embody varied ranges of activities and procedures. The definition of
assessment has not been given the Income Tax Act; however a reading of the term inside the
scope of the Act makes it obvious that it implies an investigation and ascertainment of the
correctness of the returns and accounts filed by the assessee. Primarily the assessment would
apparently mean determination of the quantum of taxable turnover and also the quantum of
taxable amount due by the tax payer

This assessment is created on the idea of returns and accounts provided with by an assessee in
support thereof however on an estimate made by the assessing authority which maybe, of course,
be primarily based inter alia on the accounts and documents provided with by the assessee. The
expression of assessment contains a wide scope inside the aim of the Act whether or not the
aforesaid assessment made is correct or not. thus any assessment made wouldn't primarily mean
an assessment properly or properly however would signify all assessment made or speculated to
purported to created underneath the aforesaid act. Primarily assessment is estimation for a

36
quantity assessed whereas paying tax. It’s a mandatory contribution that's needed for the support
of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgment i.e. he should not act venally or revengefully or freakishly.

There are two varieties of judgment assessment:

07. Compulsory best judgment assessment created by the assessing officer in cases of non-
co-operation on the a part of the assessee or once the assessee is in default as regards
activity in formation.
08. Discretionary best judgment assessment is finished even in cases wherever the assessing
officer isn't happy concerning the correctness or the completeness of the accounts of the
assessee or wherever no methodology of accounting has been frequently and
systematically utilized by the assessee.

An analysis of The Procedure of Best Judgment Assessment

The expression of assessment encompasses a wide scope inside the needs of the Act whether or
not the aforesaid assessment created is correct or not thus any assessment created wouldn't
basically mean an assessment properly or properly however would signify all assessment created
or presupposed to are created underneath the aforesaid act. primarily assessment is estimation
foran quantity assessed whereas paying tax. it's a mandatory contribution that's needed for the
support of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgement i.e. he should not act venally or revengefully or freakishly. There are two varieties of
judgement assessment:

37
Compulsory best judgment assessment created by the assessing officer in cases of non-co-
operation on the a part of the assessee or once the assessee is in default as regards activity in
formations.

Discretionary best judgment assessment is finished even in cases wherever the assessing officer
isn't happy concerning the correctness or the completeness of the accounts of the assessee or
wherever no methodology of accounting has been frequently and systematically utilized by the
assessee.

The Best Judgment Assessment could be a procedure underneath the Income Tax Act to
accommodates the principles of natural justice. Vide Section one hundred forty four of the tax
Act, 1961 the Assessing Officer is underneath an obligation to create an assessment of the
overall financial gain or less to the most effective of his judgment within the following cases.

If the person fails to create a come back or needed underneath s. 139(1) and he has not created a
come back or a revised come back underneath ss. (4) or (5) of that section.

If somebody fails to accommodates all the terms and conditions stipulated underneath a notice
u/ss. 142 or fails to accommodates the directions requiring him to induce his accounts audited in
terms of section 142(2A).

If somebody, once having filed a come back fails to accommodates the with all the terms of a
notice underneath section 143(2) requiring his presence or production of proof and documents;
or

If the Assessing officer isn't happy concerning the correctness and also the completion of the
accounts of the assessee if no methodology of accounting has been frequently utilized by the
assessee.

In case of best judgment assessment an assessee encompasses a right to file an attractiveness

underneath S. 246A or to create an application for revision underneath S.246 to the tax
Commissioner. the most effective judgment assessment will solely be created once giving the
assessee a chance of being detected.

38
Such opportunities shall run by supplying of notice by method of a show cause on why the
assessment shouldn't be completed to the most effective of the judgment which chance for
hearing won't be necessary wherever notice u/s 142(1) has been issued.

Under this provision wherever the assessee fails to file a comeback or submit the documents or
fails to accommodates any of the preceding conditions the assessing officer is sceptred u/s one
hundred forty four to assess the overall financial gain consistent with the most effective of his
judgment with an inexpensive chance provided to the tax remunerator of being detected. this is
often but to the exclusion of the availability as provided U/s 142(1) of theIncome Tax Act
wherever the assessee has been given previous notice to the assessment. The assessing officer u/s
one hundred forty four is underneath a obligation to create assessment of the overall financial
gain or the loss to the most effective of his judgment and also the tax collectible once taking all
externalities and conditions under consideration.

Judicial Rulings on Scope of Sec. 144

The term ‘best judgment assessment’ isn't a term of art. once the statute prescribes resort to the
most effective judgment assessment in either of the two contingencies, the Court won't be even
in deciphering the expression with relation to the final principle concerning the question on once
assessment is created on the idea of best judgment. In creating best judgment assessment the
officer doesn't possess discretional powers to assess any figure as he like. tho' similar judicial in
nature these assessments are to be supported the principles of justice, equity and smart
conscience. In common formulation the words ‘best judgment’ carry the connotation that what's
being done is so as to create an estimate.

When Best Judgment Assessment is made:

 Ex-parte proceedings – an assessment created underneath S. one hundred forty four will
by no suggests that be equated to ex-parte proceedings during a civil court.
 Mandatory action for defaults – Best judgment assessment is obligatory for anybody of
the defaults underneath S. 144.

39
  Approximations – wherever the assessee had provided with solely approximate figure in
his come back of financial gain with none more details,Income Tax absolutely was
command that the most effective judgment assessment created by ignoring such a come
back was invalid.
 Signing of come backs – A best judgment assessment is created once the return isn't
signed and verified.
 Production of accounts – wherever, in response to a combined notice for private look in
addition as production of account books, the assessee appeared personally however failed
to manufacture any account books; it absolutely was command that the Income-tax
Officer would be even in creating a best judgment assessment.
 Often instances could arise wherever the assessee maintains false accounts to evade the
payment of tax and in such instances it becomes troublesome on the assessing authority
to exactly notice the quantity of turnover hid. In such cases the judgment is created by the
assessing officer to the most effective of his judgment and then long it's made during a
non-arbitrary method and also the nexus looks apparent the choice is final and there's no
scope for officious with the most effective judgment. Thus, during a method there
remains no scope for difficult a best judgment assessment. this is often as a result ofan
assessee can not be allowed to require advantage of his own black act.

2- Object and Basis of Best Judgment Assessment

The object and also the purpose of the most effective Judgment are to attain a good and correct
estimate of the turnover of the dealer. the most effective judgment doesn't mean sweetening in
turnover of the dealer. The assessee ought to be given adequate chance of meeting the case that is
sought-after to createan assessment order. Even in cases wherever in cases the AO receives data
from outside the establishment or business or individual United Nations agency is being assessed
he should disclose the supply of data to the assessee has got to be discovered. wherever
evidentiary material made by the third party was sought-after to be relied upon for showing the
come back submitted by the assessee was incomplete and dubious, the assessee was entitled to

40
own such an individual summoned as a witness for cross examination for establishing truth and
exposing falsehood.

Basis of Best Judgment Assessment

Where the quantum of turnovers was supported the assessee’s account books that are accepted
together with different records there is no ground for creating a best judgment assessment, it
being well-known that the most effective judgment assessment has got to get onan estimate. In
different words, a component of guess-work is guaranteed to be gift in best judgment assessment
though it should have an inexpensive nexus to the accessible material and also the circumstance
of every case.

At this juncture it's pertinent to say that correctness of accounts isn't the only real criteria for
acceptive came figures of best assessment judgment. different externalities like volume of
business, conduct of the dealer, past records and similar facts are conditions that are the idea for
a best judgment assessment.

It is pertinent to be suggested during this respect that once a come back is filed tho' late the
assessing officer isn't at liberty to ignore it and still applies his best judgment. Thus, wherever
the Assessing Officer feels that it's incomplete and incorrect and he has got to follow the
procedure and provides a chance to the assessee to prove the completeness or correctness of the
come back. Similarly, wherever the assessee wasn't a registered dealer and failed to file his
returns voluntarily notice for best judgment has got to be issued during a prescribed kind inside
the {three} years time to that the assessment proceedings can be completed even once the
termination of three years. once the assessment was created on the idea of not invoking best
assessment penalty for late submission isn't approved. wherever the assessing authority fastened
the turnover that recorded with the turnover recorded by the assessee in his books of accounts it
couldn't be aforesaid that the assessment created by the assessing authority. it's enough if such
assessment had an inexpensive nexus to the accessible material on record.

In case of failure of filing or non-filing of returns the supplying of a notice to the assessee is
elective. so just in case of non-filing of returns the assessing authority could visit the premises of

41
the dealer and examine the books of accounts at his premises within the presence of the dealer
wherever the supplying of a notice for the aforesaid purpose isn't needed. There can not be a true
basis of basis of rejection of the books of accounts if it looks that the assessing officer rejected
the returns on the idea of unreasonable suspicion and within the absence of any finding relating
to sale and get omission.

3 -Appraisal of the Procedure

When the returns and also the books of account are rejected, the assessing officer should createan
estimate, and to it extent he should create a guess; however the estimate should be associated
with some proof or material and it should be one thing over mere suspicion. He should create
what he honestly believes to be a good estimate of the right figure of assessment and for this
purpose he should take into thought such materials because the assessing officer has before him,
as well as the assessee’s circumstances, data of previous returns and every one different matters
that the assessing officer thinks can assist him in inbound at a good and correct estimate.

In cases that clearly fall on the far side the road of permissible guess work or whimsy, the
assessment should be put aside. In estimating any turnover, it's inevitable that there's some
guess- work. The assessing authority whereas creating the most effective judgment assessment
ought to attain its conclusion with none bias and on rational created by the assessing authority
could be a true estimate and relies on a rational basis, the very fact that there's no smart proof in
support of that estimate is immaterial. clear, the assessing authority is that the best choose of
true. it's his best judgment and not of anybody else.

Nexus for Guess-Work

In the estimation, there could also be some overestimate and underestimate. that might not be
decent for questioning the determination of the quantity of tax collectible by the dealer as
determined to the most effective judgment. The term ‘to the most effective of judgment’ of the
assessing officer would create mentally his judgment. wherever the estimate is on account of
whimsy, vengefulness or capriciousness of the assessing officer, it can not be aforesaid to be his
judgment. The estimate supported the name of the dealer within the vicinity, the length of the
amount of his business to boost the come back turnover by five-hitter solely can not be aforesaid
to be with none nexus once that side of the matter isn't challenged. name and also the length of
42
amount of business would be decent nexus within the peculiar circumstance of a case, though the
assessing authority will take turnovers of the previous years for the aim of estimation.

Penalties

In best judgment assessment, wherever the come back has not been filed, the instant it's found
that the dealer has transacted business and his turnover is dutiable then penalty is obligatory. The
mere reality there's best judgment, significantly once the assessment supported the illation
flowing from the shortcoming of the assessee to ascertain the case pleaded by him, won't be
decent for the aim of imposition of penalty, for the degree of proof needed for the imposition of
penalty is kind of completely different from and is of a far higher order than that needed for the
aim of constructing a best judgment assessment. tho'an estimate created on best judgment basis
could also be legal, for the aim of imposing penalty one thing a lot of concrete is needed which
might change the judicial mind to achieve the conclusion that the dealer truly had the turnover
that was fastened by best judgment. The order imposing penalty cannot sustain if there's no
material accessible to conclude that there was any willful suppression of the dutiable turnover
warranting a penalty.

Conclusion

A general understanding of the procedure shows that the most effective judgment assessment
procedure has given wide discretionary powers to the assessing authority to assess within the
instances wherever there has been willful suppression and concealment of financial gain and
turnover by the assessee. the facility thus offered is wide to the extent that the AO has the
authority to assume from the documents thus gift on provide an assessment with an exaggerated
or a ablated turnover supported the documents thus provided. even supposing the belief could
also be shot if it's a valid justification that everyone the turnover so recorded so as to properly
assume the turnover and also thereby the returns just in case of an effort to by design conceal the
tax collectible by not displaying within the books of accounts and the different official
documents.

Tax assessment being a troublesome space of labor it's however imperative that the assessing
authority ought to be given adequate powers for encountering tax evaders. The assessing officers
during this respect are given wide powers therein regarding. It additionally aids in honest tax
43
disclosures thus on avoid the rising issues of evasion that had panic-stricken the economy of the
country thereby giving rise to a parallel unaccounted economy.

A mandatory best judgment is finished within the event of failure to furnish requisites books of
accounts by the assessee and more the discretionary assessment created wherever the AO is
underneath the firm belief that the records aren't true or identical aren't permissible by him or
rejected of any of the grounds that the assessing officer deems fit the case. but this power isn't
absolute and there's an essential understanding that the actions of the assessing authority are
going to be honestly and diligently performed. more the assessee is given the facility to furnish
reasons for failure to produce adequate reasons for the non revealing or concealment of the fabric
documents and on why an assessment shouldn't be created consistent with the most effective
understanding of the assessing authority. Moreover, an assessee encompasses a right to filean
attractiveness underneath S. 246A or to create an application for revision underneath s. 246 to
the tax Commissioner if he's not happy with the choice created against him. However, it's to be
unbroken in mind the courts cannot but assess or interfere with the choice apart from on
instances on a cloth error on face or record or any mistake of law. it's pertinent to say but, that
the powers apparently are too wide and may be wont to the damage ofan assessee and may be
manipulated by a corrupt officer. thus there has got to be checks and balances to the ‘guess work’
worn out case of a best assessment judgment. The AO ought to be asked to produce and furnish
proof for his actions as critical that of the assessee and solely once a deduction of either side of
the documents provided ought to the court come back to a choice. At present, the Income Tax
Act doesn't inflict any strict methodology of assessment however it's submitted there so could be
a got to slim down and systematize the procedural law on this time thus on bring clarity and
vigilance to the operations of the tax officers.

44
Bibliography

Primary Sources

The tax Act, 1961

Cases

Kamala Mills Ltd. V. urban center State, (1965) 16 STC 613 (SC)

Illuri Subbaya Chetty v. State of AP, (1963) 14 STC (SC)

Surya Fertilizers & Chemicals v. State of state, (1977) 40 STC 538 (Mad)

Gem & Co v. State of West Bengal, (1959) 10 STC 537 (Cal)

Bengal Behar Construction Co. Pvt Ltd. V. State of state, (1983) 44 STC 176 (Mad)

State of state v. Maharaja B.P. Singh Deo, (1970)77 ITR 674 (Cal).

45
State of Madras v. Jayaraj Nadar & Sons, (1971) 28 STC 700 (SC)

Nemi Chand Vimal Chand v. CST, (1974) 34 STC 562 (All)

Bata Shoe Co. Pvt Ltd v. Joint CTO, (1968) 21 STC 135 (Mad)

Motor House v. State of state, (1990) 79 STC 385 (Ori)

Ravi v. State of TN, (1981) 48 STC 274 (Mad).

Babulal Agarwal v. CST, (1987) 66 STC 164 (MP)

Bhaskar Rao v. State of AP, (1986) 63 STC 297 (AP)

Secondary Sources(Books)

MRV. Rao et al’, ideas in Taxation, The Law Publishers, Madras.

N. A. Palkhivala and B.A. Palkhivala, Kanga and Palkhivala’s The Law and observe of tax,
N.M.Tripathi Pvt. Ltd., Bombay, 7th Ed. 1977, Vol.1.

Narayan Jainist & Deepak Loyalka, a way to Handle tax Problems? Book Corporation
Publishers, 1997-1998.

Rakesh Bhargava(ed), Taxmann’s Master Guide to tax Act, Taxmann Publication, New Delhi,
2003.

Dr. Vinod K. Singhania and Monica S-inghania; Students’ Guide to financial gain Tax; Taxmann
Publications Pvt. Ltd.; latest edition.

Mahesh Chandra & D.C. Shukla; Income-tax Law and Practice; Pragati Publications

H.C. Mehrotra; Income-tax Law and Accounts; Sahitya Bhawanedition.

Girish Ahuja and Ravi Gupta;an Elementary Approach to tax & Sales Tax; Bharat Publications;

Dinkar Pagare; Law and observe of financial gain Tax; ruler Chand & Sons;

Index

46
 33.Introduction
34.An analysis of the procedure of best judgment Assessment.
35.When best judgment assessment is made.
36.Object and basis of best judgment assessment
37.Basis of best judgment assessment
38.Appraisal of the procedure
39.Conclusion
40.Bibliography

Introduction

47
Assessment means that appraisal, evaluation, estimation, measure, judgment etc. within the
context income tax law it suggests that then analysis, estimation, or calculation of financial gain.
The term ‘assessment’ in field of taxation law encompasses a definite meaning. This term is
comprehensive and shall embody varied ranges of activities and procedures. The definition of
assessment has not been given the Income Tax Act; however a reading of the term inside the
scope of the Act makes it obvious that it implies an investigation and ascertainment of the
correctness of the returns and accounts filed by the assessee. Primarily the assessment would
apparently mean determination of the quantum of taxable turnover and also the quantum of
taxable amount due by the tax payer

This assessment is created on the idea of returns and accounts provided with by an assessee in
support thereof however on an estimate made by the assessing authority which maybe, of course,
be primarily based inter alia on the accounts and documents provided with by the assessee. The
expression of assessment contains a wide scope inside the aim of the Act whether or not the
aforesaid assessment made is correct or not. thus any assessment made wouldn't primarily mean
an assessment properly or properly however would signify all assessment made or speculated to
purported to created underneath the aforesaid act. Primarily assessment is estimation for a
quantity assessed whereas paying tax. It’s a mandatory contribution that's needed for the support
of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgment i.e. he should not act venally or revengefully or freakishly.

There are two varieties of judgment assessment:

09. Compulsory best judgment assessment created by the assessing officer in cases of non-
co-operation on the a part of the assessee or once the assessee is in default as regards
activity in formation.
10. Discretionary best judgment assessment is finished even in cases wherever the assessing
officer isn't happy concerning the correctness or the completeness of the accounts of the
assessee or wherever no methodology of accounting has been frequently and
systematically utilized by the assessee.

48
An analysis of The Procedure of Best Judgment Assessment

The expression of assessment encompasses a wide scope inside the needs of the Act whether or
not the aforesaid assessment created is correct or not thus any assessment created wouldn't
basically mean an assessment properly or properly however would signify all assessment created
or presupposed to are created underneath the aforesaid act. primarily assessment is estimation
foran quantity assessed whereas paying tax. it's a mandatory contribution that's needed for the
support of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgement i.e. he should not act venally or revengefully or freakishly. There are two varieties of
judgement assessment:

Compulsory best judgment assessment created by the assessing officer in cases of non-co-
operation on the a part of the assessee or once the assessee is in default as regards activity in
formations.

Discretionary best judgment assessment is finished even in cases wherever the assessing officer
isn't happy concerning the correctness or the completeness of the accounts of the assessee or
wherever no methodology of accounting has been frequently and systematically utilized by the
assessee.

The Best Judgment Assessment could be a procedure underneath the Income Tax Act to
accommodates the principles of natural justice. Vide Section one hundred forty four of the tax
Act, 1961 the Assessing Officer is underneath an obligation to create an assessment of the
overall financial gain or less to the most effective of his judgment within the following cases.

If the person fails to create a come back or needed underneath s. 139(1) and he has not created a
come back or a revised come back underneath ss. (4) or (5) of that section.

49
If somebody fails to accommodates all the terms and conditions stipulated underneath a notice
u/ss. 142 or fails to accommodates the directions requiring him to induce his accounts audited in
terms of section 142(2A).

If somebody, once having filed a come back fails to accommodates the with all the terms of a
notice underneath section 143(2) requiring his presence or production of proof and documents;
or

If the Assessing officer isn't happy concerning the correctness and also the completion of the
accounts of the assessee if no methodology of accounting has been frequently utilized by the
assessee.

In case of best judgment assessment an assessee encompasses a right to file an attractiveness

underneath S. 246A or to create an application for revision underneath S.246 to the tax
Commissioner. the most effective judgment assessment will solely be created once giving the
assessee a chance of being detected.

Such opportunities shall run by supplying of notice by method of a show cause on why the
assessment shouldn't be completed to the most effective of the judgment which chance for
hearing won't be necessary wherever notice u/s 142(1) has been issued.

Under this provision wherever the assessee fails to file a comeback or submit the documents or
fails to accommodates any of the preceding conditions the assessing officer is sceptred u/s one
hundred forty four to assess the overall financial gain consistent with the most effective of his
judgment with an inexpensive chance provided to the tax remunerator of being detected. this is
often but to the exclusion of the availability as provided U/s 142(1) of theIncome Tax Act
wherever the assessee has been given previous notice to the assessment. The assessing officer u/s
one hundred forty four is underneath a obligation to create assessment of the overall financial
gain or the loss to the most effective of his judgment and also the tax collectible once taking all
externalities and conditions under consideration.

Judicial Rulings on Scope of Sec. 144

50
The term ‘best judgment assessment’ isn't a term of art. once the statute prescribes resort to the
most effective judgment assessment in either of the two contingencies, the Court won't be even
in deciphering the expression with relation to the final principle concerning the question on once
assessment is created on the idea of best judgment. In creating best judgment assessment the
officer doesn't possess discretional powers to assess any figure as he like. tho' similar judicial in
nature these assessments are to be supported the principles of justice, equity and smart
conscience. In common formulation the words ‘best judgment’ carry the connotation that what's
being done is so as to create an estimate.

When Best Judgment Assessment is made:

 Ex-parte proceedings – an assessment created underneath S. one hundred forty four will
by no suggests that be equated to ex-parte proceedings during a civil court.
 Mandatory action for defaults – Best judgment assessment is obligatory for anybody of
the defaults underneath S. 144.
 Approximations – wherever the assessee had provided with solely approximate figure in
his come back of financial gain with none more details,Income Tax absolutely was
command that the most effective judgment assessment created by ignoring such a come
back was invalid.
 Signing of come backs – A best judgment assessment is created once the return isn't
signed and verified.
 Production of accounts – wherever, in response to a combined notice for private look in
addition as production of account books, the assessee appeared personally however failed
to manufacture any account books; it absolutely was command that the Income-tax
Officer would be even in creating a best judgment assessment.
 Often instances could arise wherever the assessee maintains false accounts to evade the
payment of tax and in such instances it becomes troublesome on the assessing authority
to exactly notice the quantity of turnover hid. In such cases the judgment is created by the
assessing officer to the most effective of his judgment and then long it's made during a
non-arbitrary method and also the nexus looks apparent the choice is final and there's no
scope for officious with the most effective judgment. Thus, during a method there

51
 remains no scope for difficult a best judgment assessment. this is often as a result ofan
assessee can not be allowed to require advantage of his own black act.

2- Object and Basis of Best Judgment Assessment

The object and also the purpose of the most effective Judgment are to attain a good and correct
estimate of the turnover of the dealer. the most effective judgment doesn't mean sweetening in
turnover of the dealer. The assessee ought to be given adequate chance of meeting the case that is
sought-after to createan assessment order. Even in cases wherever in cases the AO receives data
from outside the establishment or business or individual United Nations agency is being assessed
he should disclose the supply of data to the assessee has got to be discovered. wherever
evidentiary material made by the third party was sought-after to be relied upon for showing the
come back submitted by the assessee was incomplete and dubious, the assessee was entitled to
own such an individual summoned as a witness for cross examination for establishing truth and
exposing falsehood.

Basis of Best Judgment Assessment

Where the quantum of turnovers was supported the assessee’s account books that are accepted
together with different records there is no ground for creating a best judgment assessment, it
being well-known that the most effective judgment assessment has got to get onan estimate. In
different words, a component of guess-work is guaranteed to be gift in best judgment assessment
though it should have an inexpensive nexus to the accessible material and also the circumstance
of every case.

At this juncture it's pertinent to say that correctness of accounts isn't the only real criteria for
acceptive came figures of best assessment judgment. different externalities like volume of
business, conduct of the dealer, past records and similar facts are conditions that are the idea for
a best judgment assessment.

52
It is pertinent to be suggested during this respect that once a come back is filed tho' late the
assessing officer isn't at liberty to ignore it and still applies his best judgment. Thus, wherever
the Assessing Officer feels that it's incomplete and incorrect and he has got to follow the
procedure and provides a chance to the assessee to prove the completeness or correctness of the
come back. Similarly, wherever the assessee wasn't a registered dealer and failed to file his
returns voluntarily notice for best judgment has got to be issued during a prescribed kind inside
the {three} years time to that the assessment proceedings can be completed even once the
termination of three years. once the assessment was created on the idea of not invoking best
assessment penalty for late submission isn't approved. wherever the assessing authority fastened
the turnover that recorded with the turnover recorded by the assessee in his books of accounts it
couldn't be aforesaid that the assessment created by the assessing authority. it's enough if such
assessment had an inexpensive nexus to the accessible material on record.

In case of failure of filing or non-filing of returns the supplying of a notice to the assessee is
elective. so just in case of non-filing of returns the assessing authority could visit the premises of
the dealer and examine the books of accounts at his premises within the presence of the dealer
wherever the supplying of a notice for the aforesaid purpose isn't needed. There can not be a true
basis of basis of rejection of the books of accounts if it looks that the assessing officer rejected
the returns on the idea of unreasonable suspicion and within the absence of any finding relating
to sale and get omission.

3 -Appraisal of the Procedure

When the returns and also the books of account are rejected, the assessing officer should createan
estimate, and to it extent he should create a guess; however the estimate should be associated
with some proof or material and it should be one thing over mere suspicion. He should create
what he honestly believes to be a good estimate of the right figure of assessment and for this
purpose he should take into thought such materials because the assessing officer has before him,
as well as the assessee’s circumstances, data of previous returns and every one different matters
that the assessing officer thinks can assist him in inbound at a good and correct estimate.

In cases that clearly fall on the far side the road of permissible guess work or whimsy, the
assessment should be put aside. In estimating any turnover, it's inevitable that there's some

53
guess- work. The assessing authority whereas creating the most effective judgment assessment
ought to attain its conclusion with none bias and on rational created by the assessing authority
could be a true estimate and relies on a rational basis, the very fact that there's no smart proof in
support of that estimate is immaterial. clear, the assessing authority is that the best choose of
true. it's his best judgment and not of anybody else.

Nexus for Guess-Work

In the estimation, there could also be some overestimate and underestimate. that might not be
decent for questioning the determination of the quantity of tax collectible by the dealer as
determined to the most effective judgment. The term ‘to the most effective of judgment’ of the
assessing officer would create mentally his judgment. wherever the estimate is on account of
whimsy, vengefulness or capriciousness of the assessing officer, it can not be aforesaid to be his
judgment. The estimate supported the name of the dealer within the vicinity, the length of the
amount of his business to boost the come back turnover by five-hitter solely can not be aforesaid
to be with none nexus once that side of the matter isn't challenged. name and also the length of
amount of business would be decent nexus within the peculiar circumstance of a case, though the
assessing authority will take turnovers of the previous years for the aim of estimation.

Penalties

In best judgment assessment, wherever the come back has not been filed, the instant it's found
that the dealer has transacted business and his turnover is dutiable then penalty is obligatory. The
mere reality there's best judgment, significantly once the assessment supported the illation
flowing from the shortcoming of the assessee to ascertain the case pleaded by him, won't be
decent for the aim of imposition of penalty, for the degree of proof needed for the imposition of
penalty is kind of completely different from and is of a far higher order than that needed for the
aim of constructing a best judgment assessment. tho'an estimate created on best judgment basis
could also be legal, for the aim of imposing penalty one thing a lot of concrete is needed which
might change the judicial mind to achieve the conclusion that the dealer truly had the turnover
that was fastened by best judgment. The order imposing penalty cannot sustain if there's no
material accessible to conclude that there was any willful suppression of the dutiable turnover
warranting a penalty.

54
Conclusion

A general understanding of the procedure shows that the most effective judgment assessment
procedure has given wide discretionary powers to the assessing authority to assess within the
instances wherever there has been willful suppression and concealment of financial gain and
turnover by the assessee. the facility thus offered is wide to the extent that the AO has the
authority to assume from the documents thus gift on provide an assessment with an exaggerated
or a ablated turnover supported the documents thus provided. even supposing the belief could
also be shot if it's a valid justification that everyone the turnover so recorded so as to properly
assume the turnover and also thereby the returns just in case of an effort to by design conceal the
tax collectible by not displaying within the books of accounts and the different official
documents.

Tax assessment being a troublesome space of labor it's however imperative that the assessing
authority ought to be given adequate powers for encountering tax evaders. The assessing officers
during this respect are given wide powers therein regarding. It additionally aids in honest tax
disclosures thus on avoid the rising issues of evasion that had panic-stricken the economy of the
country thereby giving rise to a parallel unaccounted economy.

A mandatory best judgment is finished within the event of failure to furnish requisites books of
accounts by the assessee and more the discretionary assessment created wherever the AO is
underneath the firm belief that the records aren't true or identical aren't permissible by him or
rejected of any of the grounds that the assessing officer deems fit the case. but this power isn't
absolute and there's an essential understanding that the actions of the assessing authority are
going to be honestly and diligently performed. more the assessee is given the facility to furnish
reasons for failure to produce adequate reasons for the non revealing or concealment of the fabric
documents and on why an assessment shouldn't be created consistent with the most effective
understanding of the assessing authority. Moreover, an assessee encompasses a right to filean
attractiveness underneath S. 246A or to create an application for revision underneath s. 246 to
the tax Commissioner if he's not happy with the choice created against him. However, it's to be
unbroken in mind the courts cannot but assess or interfere with the choice apart from on
instances on a cloth error on face or record or any mistake of law. it's pertinent to say but, that
the powers apparently are too wide and may be wont to the damage ofan assessee and may be
55
manipulated by a corrupt officer. thus there has got to be checks and balances to the ‘guess work’
worn out case of a best assessment judgment. The AO ought to be asked to produce and furnish
proof for his actions as critical that of the assessee and solely once a deduction of either side of
the documents provided ought to the court come back to a choice. At present, the Income Tax
Act doesn't inflict any strict methodology of assessment however it's submitted there so could be
a got to slim down and systematize the procedural law on this time thus on bring clarity and
vigilance to the operations of the tax officers.

56
Bibliography

Primary Sources

The tax Act, 1961

Cases

Kamala Mills Ltd. V. urban center State, (1965) 16 STC 613 (SC)

Illuri Subbaya Chetty v. State of AP, (1963) 14 STC (SC)

Surya Fertilizers & Chemicals v. State of state, (1977) 40 STC 538 (Mad)

Gem & Co v. State of West Bengal, (1959) 10 STC 537 (Cal)

Bengal Behar Construction Co. Pvt Ltd. V. State of state, (1983) 44 STC 176 (Mad)

State of state v. Maharaja B.P. Singh Deo, (1970)77 ITR 674 (Cal).

State of Madras v. Jayaraj Nadar & Sons, (1971) 28 STC 700 (SC)

Nemi Chand Vimal Chand v. CST, (1974) 34 STC 562 (All)

Bata Shoe Co. Pvt Ltd v. Joint CTO, (1968) 21 STC 135 (Mad)

Motor House v. State of state, (1990) 79 STC 385 (Ori)

Ravi v. State of TN, (1981) 48 STC 274 (Mad).

Babulal Agarwal v. CST, (1987) 66 STC 164 (MP)

Bhaskar Rao v. State of AP, (1986) 63 STC 297 (AP)

Secondary Sources(Books)

MRV. Rao et al’, ideas in Taxation, The Law Publishers, Madras.

N. A. Palkhivala and B.A. Palkhivala, Kanga and Palkhivala’s The Law and observe of tax,
N.M.Tripathi Pvt. Ltd., Bombay, 7th Ed. 1977, Vol.1.

57
Narayan Jainist & Deepak Loyalka, a way to Handle tax Problems? Book Corporation
Publishers, 1997-1998.

Rakesh Bhargava(ed), Taxmann’s Master Guide to tax Act, Taxmann Publication, New Delhi,
2003.

Dr. Vinod K. Singhania and Monica S-inghania; Students’ Guide to financial gain Tax; Taxmann
Publications Pvt. Ltd.; latest edition.

Mahesh Chandra & D.C. Shukla; Income-tax Law and Practice; Pragati Publications

H.C. Mehrotra; Income-tax Law and Accounts; Sahitya Bhawanedition.

Girish Ahuja and Ravi Gupta;an Elementary Approach to tax & Sales Tax; Bharat Publications;

Dinkar Pagare; Law and observe of financial gain Tax; ruler Chand & Sons;

Index

41.Introduction
42.An analysis of the procedure of best judgment Assessment.
43.When best judgment assessment is made.
44.Object and basis of best judgment assessment
45.Basis of best judgment assessment
46.Appraisal of the procedure
47.Conclusion
48.Bibliography

58
Introduction

Assessment means that appraisal, evaluation, estimation, measure, judgment etc. within the
context income tax law it suggests that then analysis, estimation, or calculation of financial gain.
The term ‘assessment’ in field of taxation law encompasses a definite meaning. This term is
comprehensive and shall embody varied ranges of activities and procedures. The definition of
assessment has not been given the Income Tax Act; however a reading of the term inside the
scope of the Act makes it obvious that it implies an investigation and ascertainment of the
correctness of the returns and accounts filed by the assessee. Primarily the assessment would
apparently mean determination of the quantum of taxable turnover and also the quantum of
taxable amount due by the tax payer

This assessment is created on the idea of returns and accounts provided with by an assessee in
support thereof however on an estimate made by the assessing authority which maybe, of course,
be primarily based inter alia on the accounts and documents provided with by the assessee. The
expression of assessment contains a wide scope inside the aim of the Act whether or not the
aforesaid assessment made is correct or not. thus any assessment made wouldn't primarily mean
an assessment properly or properly however would signify all assessment made or speculated to
purported to created underneath the aforesaid act. Primarily assessment is estimation for a

59
quantity assessed whereas paying tax. It’s a mandatory contribution that's needed for the support
of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgment i.e. he should not act venally or revengefully or freakishly.

There are two varieties of judgment assessment:

11. Compulsory best judgment assessment created by the assessing officer in cases of non-
co-operation on the a part of the assessee or once the assessee is in default as regards
activity in formation.
12. Discretionary best judgment assessment is finished even in cases wherever the assessing
officer isn't happy concerning the correctness or the completeness of the accounts of the
assessee or wherever no methodology of accounting has been frequently and
systematically utilized by the assessee.

An analysis of The Procedure of Best Judgment Assessment

The expression of assessment encompasses a wide scope inside the needs of the Act whether or
not the aforesaid assessment created is correct or not thus any assessment created wouldn't
basically mean an assessment properly or properly however would signify all assessment created
or presupposed to are created underneath the aforesaid act. primarily assessment is estimation
foran quantity assessed whereas paying tax. it's a mandatory contribution that's needed for the
support of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgement i.e. he should not act venally or revengefully or freakishly. There are two varieties of
judgement assessment:

60
Compulsory best judgment assessment created by the assessing officer in cases of non-co-
operation on the a part of the assessee or once the assessee is in default as regards activity in
formations.

Discretionary best judgment assessment is finished even in cases wherever the assessing officer
isn't happy concerning the correctness or the completeness of the accounts of the assessee or
wherever no methodology of accounting has been frequently and systematically utilized by the
assessee.

The Best Judgment Assessment could be a procedure underneath the Income Tax Act to
accommodates the principles of natural justice. Vide Section one hundred forty four of the tax
Act, 1961 the Assessing Officer is underneath an obligation to create an assessment of the
overall financial gain or less to the most effective of his judgment within the following cases.

If the person fails to create a come back or needed underneath s. 139(1) and he has not created a
come back or a revised come back underneath ss. (4) or (5) of that section.

If somebody fails to accommodates all the terms and conditions stipulated underneath a notice
u/ss. 142 or fails to accommodates the directions requiring him to induce his accounts audited in
terms of section 142(2A).

If somebody, once having filed a come back fails to accommodates the with all the terms of a
notice underneath section 143(2) requiring his presence or production of proof and documents;
or

If the Assessing officer isn't happy concerning the correctness and also the completion of the
accounts of the assessee if no methodology of accounting has been frequently utilized by the
assessee.

In case of best judgment assessment an assessee encompasses a right to file an attractiveness

underneath S. 246A or to create an application for revision underneath S.246 to the tax
Commissioner. the most effective judgment assessment will solely be created once giving the
assessee a chance of being detected.

61
Such opportunities shall run by supplying of notice by method of a show cause on why the
assessment shouldn't be completed to the most effective of the judgment which chance for
hearing won't be necessary wherever notice u/s 142(1) has been issued.

Under this provision wherever the assessee fails to file a comeback or submit the documents or
fails to accommodates any of the preceding conditions the assessing officer is sceptred u/s one
hundred forty four to assess the overall financial gain consistent with the most effective of his
judgment with an inexpensive chance provided to the tax remunerator of being detected. this is
often but to the exclusion of the availability as provided U/s 142(1) of theIncome Tax Act
wherever the assessee has been given previous notice to the assessment. The assessing officer u/s
one hundred forty four is underneath a obligation to create assessment of the overall financial
gain or the loss to the most effective of his judgment and also the tax collectible once taking all
externalities and conditions under consideration.

Judicial Rulings on Scope of Sec. 144

The term ‘best judgment assessment’ isn't a term of art. once the statute prescribes resort to the
most effective judgment assessment in either of the two contingencies, the Court won't be even
in deciphering the expression with relation to the final principle concerning the question on once
assessment is created on the idea of best judgment. In creating best judgment assessment the
officer doesn't possess discretional powers to assess any figure as he like. tho' similar judicial in
nature these assessments are to be supported the principles of justice, equity and smart
conscience. In common formulation the words ‘best judgment’ carry the connotation that what's
being done is so as to create an estimate.

When Best Judgment Assessment is made:

 Ex-parte proceedings – an assessment created underneath S. one hundred forty four will
by no suggests that be equated to ex-parte proceedings during a civil court.
 Mandatory action for defaults – Best judgment assessment is obligatory for anybody of
the defaults underneath S. 144.

62
  Approximations – wherever the assessee had provided with solely approximate figure in
his come back of financial gain with none more details,Income Tax absolutely was
command that the most effective judgment assessment created by ignoring such a come
back was invalid.
 Signing of come backs – A best judgment assessment is created once the return isn't
signed and verified.
 Production of accounts – wherever, in response to a combined notice for private look in
addition as production of account books, the assessee appeared personally however failed
to manufacture any account books; it absolutely was command that the Income-tax
Officer would be even in creating a best judgment assessment.
 Often instances could arise wherever the assessee maintains false accounts to evade the
payment of tax and in such instances it becomes troublesome on the assessing authority
to exactly notice the quantity of turnover hid. In such cases the judgment is created by the
assessing officer to the most effective of his judgment and then long it's made during a
non-arbitrary method and also the nexus looks apparent the choice is final and there's no
scope for officious with the most effective judgment. Thus, during a method there
remains no scope for difficult a best judgment assessment. this is often as a result ofan
assessee can not be allowed to require advantage of his own black act.

2- Object and Basis of Best Judgment Assessment

The object and also the purpose of the most effective Judgment are to attain a good and correct
estimate of the turnover of the dealer. the most effective judgment doesn't mean sweetening in
turnover of the dealer. The assessee ought to be given adequate chance of meeting the case that is
sought-after to createan assessment order. Even in cases wherever in cases the AO receives data
from outside the establishment or business or individual United Nations agency is being assessed
he should disclose the supply of data to the assessee has got to be discovered. wherever
evidentiary material made by the third party was sought-after to be relied upon for showing the
come back submitted by the assessee was incomplete and dubious, the assessee was entitled to

63
own such an individual summoned as a witness for cross examination for establishing truth and
exposing falsehood.

Basis of Best Judgment Assessment

Where the quantum of turnovers was supported the assessee’s account books that are accepted
together with different records there is no ground for creating a best judgment assessment, it
being well-known that the most effective judgment assessment has got to get onan estimate. In
different words, a component of guess-work is guaranteed to be gift in best judgment assessment
though it should have an inexpensive nexus to the accessible material and also the circumstance
of every case.

At this juncture it's pertinent to say that correctness of accounts isn't the only real criteria for
acceptive came figures of best assessment judgment. different externalities like volume of
business, conduct of the dealer, past records and similar facts are conditions that are the idea for
a best judgment assessment.

It is pertinent to be suggested during this respect that once a come back is filed tho' late the
assessing officer isn't at liberty to ignore it and still applies his best judgment. Thus, wherever
the Assessing Officer feels that it's incomplete and incorrect and he has got to follow the
procedure and provides a chance to the assessee to prove the completeness or correctness of the
come back. Similarly, wherever the assessee wasn't a registered dealer and failed to file his
returns voluntarily notice for best judgment has got to be issued during a prescribed kind inside
the {three} years time to that the assessment proceedings can be completed even once the
termination of three years. once the assessment was created on the idea of not invoking best
assessment penalty for late submission isn't approved. wherever the assessing authority fastened
the turnover that recorded with the turnover recorded by the assessee in his books of accounts it
couldn't be aforesaid that the assessment created by the assessing authority. it's enough if such
assessment had an inexpensive nexus to the accessible material on record.

In case of failure of filing or non-filing of returns the supplying of a notice to the assessee is
elective. so just in case of non-filing of returns the assessing authority could visit the premises of

64
the dealer and examine the books of accounts at his premises within the presence of the dealer
wherever the supplying of a notice for the aforesaid purpose isn't needed. There can not be a true
basis of basis of rejection of the books of accounts if it looks that the assessing officer rejected
the returns on the idea of unreasonable suspicion and within the absence of any finding relating
to sale and get omission.

3 -Appraisal of the Procedure

When the returns and also the books of account are rejected, the assessing officer should createan
estimate, and to it extent he should create a guess; however the estimate should be associated
with some proof or material and it should be one thing over mere suspicion. He should create
what he honestly believes to be a good estimate of the right figure of assessment and for this
purpose he should take into thought such materials because the assessing officer has before him,
as well as the assessee’s circumstances, data of previous returns and every one different matters
that the assessing officer thinks can assist him in inbound at a good and correct estimate.

In cases that clearly fall on the far side the road of permissible guess work or whimsy, the
assessment should be put aside. In estimating any turnover, it's inevitable that there's some
guess- work. The assessing authority whereas creating the most effective judgment assessment
ought to attain its conclusion with none bias and on rational created by the assessing authority
could be a true estimate and relies on a rational basis, the very fact that there's no smart proof in
support of that estimate is immaterial. clear, the assessing authority is that the best choose of
true. it's his best judgment and not of anybody else.

Nexus for Guess-Work

In the estimation, there could also be some overestimate and underestimate. that might not be
decent for questioning the determination of the quantity of tax collectible by the dealer as
determined to the most effective judgment. The term ‘to the most effective of judgment’ of the
assessing officer would create mentally his judgment. wherever the estimate is on account of
whimsy, vengefulness or capriciousness of the assessing officer, it can not be aforesaid to be his
judgment. The estimate supported the name of the dealer within the vicinity, the length of the
amount of his business to boost the come back turnover by five-hitter solely can not be aforesaid
to be with none nexus once that side of the matter isn't challenged. name and also the length of
65
amount of business would be decent nexus within the peculiar circumstance of a case, though the
assessing authority will take turnovers of the previous years for the aim of estimation.

Penalties

In best judgment assessment, wherever the come back has not been filed, the instant it's found
that the dealer has transacted business and his turnover is dutiable then penalty is obligatory. The
mere reality there's best judgment, significantly once the assessment supported the illation
flowing from the shortcoming of the assessee to ascertain the case pleaded by him, won't be
decent for the aim of imposition of penalty, for the degree of proof needed for the imposition of
penalty is kind of completely different from and is of a far higher order than that needed for the
aim of constructing a best judgment assessment. tho'an estimate created on best judgment basis
could also be legal, for the aim of imposing penalty one thing a lot of concrete is needed which
might change the judicial mind to achieve the conclusion that the dealer truly had the turnover
that was fastened by best judgment. The order imposing penalty cannot sustain if there's no
material accessible to conclude that there was any willful suppression of the dutiable turnover
warranting a penalty.

Conclusion

A general understanding of the procedure shows that the most effective judgment assessment
procedure has given wide discretionary powers to the assessing authority to assess within the
instances wherever there has been willful suppression and concealment of financial gain and
turnover by the assessee. the facility thus offered is wide to the extent that the AO has the
authority to assume from the documents thus gift on provide an assessment with an exaggerated
or a ablated turnover supported the documents thus provided. even supposing the belief could
also be shot if it's a valid justification that everyone the turnover so recorded so as to properly
assume the turnover and also thereby the returns just in case of an effort to by design conceal the
tax collectible by not displaying within the books of accounts and the different official
documents.

Tax assessment being a troublesome space of labor it's however imperative that the assessing
authority ought to be given adequate powers for encountering tax evaders. The assessing officers
during this respect are given wide powers therein regarding. It additionally aids in honest tax
66
disclosures thus on avoid the rising issues of evasion that had panic-stricken the economy of the
country thereby giving rise to a parallel unaccounted economy.

A mandatory best judgment is finished within the event of failure to furnish requisites books of
accounts by the assessee and more the discretionary assessment created wherever the AO is
underneath the firm belief that the records aren't true or identical aren't permissible by him or
rejected of any of the grounds that the assessing officer deems fit the case. but this power isn't
absolute and there's an essential understanding that the actions of the assessing authority are
going to be honestly and diligently performed. more the assessee is given the facility to furnish
reasons for failure to produce adequate reasons for the non revealing or concealment of the fabric
documents and on why an assessment shouldn't be created consistent with the most effective
understanding of the assessing authority. Moreover, an assessee encompasses a right to filean
attractiveness underneath S. 246A or to create an application for revision underneath s. 246 to
the tax Commissioner if he's not happy with the choice created against him. However, it's to be
unbroken in mind the courts cannot but assess or interfere with the choice apart from on
instances on a cloth error on face or record or any mistake of law. it's pertinent to say but, that
the powers apparently are too wide and may be wont to the damage ofan assessee and may be
manipulated by a corrupt officer. thus there has got to be checks and balances to the ‘guess work’
worn out case of a best assessment judgment. The AO ought to be asked to produce and furnish
proof for his actions as critical that of the assessee and solely once a deduction of either side of
the documents provided ought to the court come back to a choice. At present, the Income Tax
Act doesn't inflict any strict methodology of assessment however it's submitted there so could be
a got to slim down and systematize the procedural law on this time thus on bring clarity and
vigilance to the operations of the tax officers.

67
Bibliography

Primary Sources

The tax Act, 1961

Cases

Kamala Mills Ltd. V. urban center State, (1965) 16 STC 613 (SC)

Illuri Subbaya Chetty v. State of AP, (1963) 14 STC (SC)

Surya Fertilizers & Chemicals v. State of state, (1977) 40 STC 538 (Mad)

Gem & Co v. State of West Bengal, (1959) 10 STC 537 (Cal)

Bengal Behar Construction Co. Pvt Ltd. V. State of state, (1983) 44 STC 176 (Mad)

State of state v. Maharaja B.P. Singh Deo, (1970)77 ITR 674 (Cal).

68
State of Madras v. Jayaraj Nadar & Sons, (1971) 28 STC 700 (SC)

Nemi Chand Vimal Chand v. CST, (1974) 34 STC 562 (All)

Bata Shoe Co. Pvt Ltd v. Joint CTO, (1968) 21 STC 135 (Mad)

Motor House v. State of state, (1990) 79 STC 385 (Ori)

Ravi v. State of TN, (1981) 48 STC 274 (Mad).

Babulal Agarwal v. CST, (1987) 66 STC 164 (MP)

Bhaskar Rao v. State of AP, (1986) 63 STC 297 (AP)

Secondary Sources(Books)

MRV. Rao et al’, ideas in Taxation, The Law Publishers, Madras.

N. A. Palkhivala and B.A. Palkhivala, Kanga and Palkhivala’s The Law and observe of tax,
N.M.Tripathi Pvt. Ltd., Bombay, 7th Ed. 1977, Vol.1.

Narayan Jainist & Deepak Loyalka, a way to Handle tax Problems? Book Corporation
Publishers, 1997-1998.

Rakesh Bhargava(ed), Taxmann’s Master Guide to tax Act, Taxmann Publication, New Delhi,
2003.

Dr. Vinod K. Singhania and Monica S-inghania; Students’ Guide to financial gain Tax; Taxmann
Publications Pvt. Ltd.; latest edition.

Mahesh Chandra & D.C. Shukla; Income-tax Law and Practice; Pragati Publications

H.C. Mehrotra; Income-tax Law and Accounts; Sahitya Bhawanedition.

Girish Ahuja and Ravi Gupta;an Elementary Approach to tax & Sales Tax; Bharat Publications;

Dinkar Pagare; Law and observe of financial gain Tax; ruler Chand & Sons;

Index

69
 49.Introduction
50.An analysis of the procedure of best judgment Assessment.
51.When best judgment assessment is made.
52.Object and basis of best judgment assessment
53.Basis of best judgment assessment
54.Appraisal of the procedure
55.Conclusion
56.Bibliography

Introduction

70
Assessment means that appraisal, evaluation, estimation, measure, judgment etc. within the
context income tax law it suggests that then analysis, estimation, or calculation of financial gain.
The term ‘assessment’ in field of taxation law encompasses a definite meaning. This term is
comprehensive and shall embody varied ranges of activities and procedures. The definition of
assessment has not been given the Income Tax Act; however a reading of the term inside the
scope of the Act makes it obvious that it implies an investigation and ascertainment of the
correctness of the returns and accounts filed by the assessee. Primarily the assessment would
apparently mean determination of the quantum of taxable turnover and also the quantum of
taxable amount due by the tax payer

This assessment is created on the idea of returns and accounts provided with by an assessee in
support thereof however on an estimate made by the assessing authority which maybe, of course,
be primarily based inter alia on the accounts and documents provided with by the assessee. The
expression of assessment contains a wide scope inside the aim of the Act whether or not the
aforesaid assessment made is correct or not. thus any assessment made wouldn't primarily mean
an assessment properly or properly however would signify all assessment made or speculated to
purported to created underneath the aforesaid act. Primarily assessment is estimation for a
quantity assessed whereas paying tax. It’s a mandatory contribution that's needed for the support
of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgment i.e. he should not act venally or revengefully or freakishly.

There are two varieties of judgment assessment:

13. Compulsory best judgment assessment created by the assessing officer in cases of non-
co-operation on the a part of the assessee or once the assessee is in default as regards
activity in formation.
14. Discretionary best judgment assessment is finished even in cases wherever the assessing
officer isn't happy concerning the correctness or the completeness of the accounts of the
assessee or wherever no methodology of accounting has been frequently and
systematically utilized by the assessee.

71
An analysis of The Procedure of Best Judgment Assessment

The expression of assessment encompasses a wide scope inside the needs of the Act whether or
not the aforesaid assessment created is correct or not thus any assessment created wouldn't
basically mean an assessment properly or properly however would signify all assessment created
or presupposed to are created underneath the aforesaid act. primarily assessment is estimation
foran quantity assessed whereas paying tax. it's a mandatory contribution that's needed for the
support of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgement i.e. he should not act venally or revengefully or freakishly. There are two varieties of
judgement assessment:

Compulsory best judgment assessment created by the assessing officer in cases of non-co-
operation on the a part of the assessee or once the assessee is in default as regards activity in
formations.

Discretionary best judgment assessment is finished even in cases wherever the assessing officer
isn't happy concerning the correctness or the completeness of the accounts of the assessee or
wherever no methodology of accounting has been frequently and systematically utilized by the
assessee.

The Best Judgment Assessment could be a procedure underneath the Income Tax Act to
accommodates the principles of natural justice. Vide Section one hundred forty four of the tax
Act, 1961 the Assessing Officer is underneath an obligation to create an assessment of the
overall financial gain or less to the most effective of his judgment within the following cases.

If the person fails to create a come back or needed underneath s. 139(1) and he has not created a
come back or a revised come back underneath ss. (4) or (5) of that section.

72
If somebody fails to accommodates all the terms and conditions stipulated underneath a notice
u/ss. 142 or fails to accommodates the directions requiring him to induce his accounts audited in
terms of section 142(2A).

If somebody, once having filed a come back fails to accommodates the with all the terms of a
notice underneath section 143(2) requiring his presence or production of proof and documents;
or

If the Assessing officer isn't happy concerning the correctness and also the completion of the
accounts of the assessee if no methodology of accounting has been frequently utilized by the
assessee.

In case of best judgment assessment an assessee encompasses a right to file an attractiveness

underneath S. 246A or to create an application for revision underneath S.246 to the tax
Commissioner. the most effective judgment assessment will solely be created once giving the
assessee a chance of being detected.

Such opportunities shall run by supplying of notice by method of a show cause on why the
assessment shouldn't be completed to the most effective of the judgment which chance for
hearing won't be necessary wherever notice u/s 142(1) has been issued.

Under this provision wherever the assessee fails to file a comeback or submit the documents or
fails to accommodates any of the preceding conditions the assessing officer is sceptred u/s one
hundred forty four to assess the overall financial gain consistent with the most effective of his
judgment with an inexpensive chance provided to the tax remunerator of being detected. this is
often but to the exclusion of the availability as provided U/s 142(1) of theIncome Tax Act
wherever the assessee has been given previous notice to the assessment. The assessing officer u/s
one hundred forty four is underneath a obligation to create assessment of the overall financial
gain or the loss to the most effective of his judgment and also the tax collectible once taking all
externalities and conditions under consideration.

Judicial Rulings on Scope of Sec. 144

73
The term ‘best judgment assessment’ isn't a term of art. once the statute prescribes resort to the
most effective judgment assessment in either of the two contingencies, the Court won't be even
in deciphering the expression with relation to the final principle concerning the question on once
assessment is created on the idea of best judgment. In creating best judgment assessment the
officer doesn't possess discretional powers to assess any figure as he like. tho' similar judicial in
nature these assessments are to be supported the principles of justice, equity and smart
conscience. In common formulation the words ‘best judgment’ carry the connotation that what's
being done is so as to create an estimate.

When Best Judgment Assessment is made:

 Ex-parte proceedings – an assessment created underneath S. one hundred forty four will
by no suggests that be equated to ex-parte proceedings during a civil court.
 Mandatory action for defaults – Best judgment assessment is obligatory for anybody of
the defaults underneath S. 144.
 Approximations – wherever the assessee had provided with solely approximate figure in
his come back of financial gain with none more details,Income Tax absolutely was
command that the most effective judgment assessment created by ignoring such a come
back was invalid.
 Signing of come backs – A best judgment assessment is created once the return isn't
signed and verified.
 Production of accounts – wherever, in response to a combined notice for private look in
addition as production of account books, the assessee appeared personally however failed
to manufacture any account books; it absolutely was command that the Income-tax
Officer would be even in creating a best judgment assessment.
 Often instances could arise wherever the assessee maintains false accounts to evade the
payment of tax and in such instances it becomes troublesome on the assessing authority
to exactly notice the quantity of turnover hid. In such cases the judgment is created by the
assessing officer to the most effective of his judgment and then long it's made during a
non-arbitrary method and also the nexus looks apparent the choice is final and there's no
scope for officious with the most effective judgment. Thus, during a method there

74
 remains no scope for difficult a best judgment assessment. this is often as a result ofan
assessee can not be allowed to require advantage of his own black act.

2- Object and Basis of Best Judgment Assessment

The object and also the purpose of the most effective Judgment are to attain a good and correct
estimate of the turnover of the dealer. the most effective judgment doesn't mean sweetening in
turnover of the dealer. The assessee ought to be given adequate chance of meeting the case that is
sought-after to createan assessment order. Even in cases wherever in cases the AO receives data
from outside the establishment or business or individual United Nations agency is being assessed
he should disclose the supply of data to the assessee has got to be discovered. wherever
evidentiary material made by the third party was sought-after to be relied upon for showing the
come back submitted by the assessee was incomplete and dubious, the assessee was entitled to
own such an individual summoned as a witness for cross examination for establishing truth and
exposing falsehood.

Basis of Best Judgment Assessment

Where the quantum of turnovers was supported the assessee’s account books that are accepted
together with different records there is no ground for creating a best judgment assessment, it
being well-known that the most effective judgment assessment has got to get onan estimate. In
different words, a component of guess-work is guaranteed to be gift in best judgment assessment
though it should have an inexpensive nexus to the accessible material and also the circumstance
of every case.

At this juncture it's pertinent to say that correctness of accounts isn't the only real criteria for
acceptive came figures of best assessment judgment. different externalities like volume of
business, conduct of the dealer, past records and similar facts are conditions that are the idea for
a best judgment assessment.

75
It is pertinent to be suggested during this respect that once a come back is filed tho' late the
assessing officer isn't at liberty to ignore it and still applies his best judgment. Thus, wherever
the Assessing Officer feels that it's incomplete and incorrect and he has got to follow the
procedure and provides a chance to the assessee to prove the completeness or correctness of the
come back. Similarly, wherever the assessee wasn't a registered dealer and failed to file his
returns voluntarily notice for best judgment has got to be issued during a prescribed kind inside
the {three} years time to that the assessment proceedings can be completed even once the
termination of three years. once the assessment was created on the idea of not invoking best
assessment penalty for late submission isn't approved. wherever the assessing authority fastened
the turnover that recorded with the turnover recorded by the assessee in his books of accounts it
couldn't be aforesaid that the assessment created by the assessing authority. it's enough if such
assessment had an inexpensive nexus to the accessible material on record.

In case of failure of filing or non-filing of returns the supplying of a notice to the assessee is
elective. so just in case of non-filing of returns the assessing authority could visit the premises of
the dealer and examine the books of accounts at his premises within the presence of the dealer
wherever the supplying of a notice for the aforesaid purpose isn't needed. There can not be a true
basis of basis of rejection of the books of accounts if it looks that the assessing officer rejected
the returns on the idea of unreasonable suspicion and within the absence of any finding relating
to sale and get omission.

3 -Appraisal of the Procedure

When the returns and also the books of account are rejected, the assessing officer should createan
estimate, and to it extent he should create a guess; however the estimate should be associated
with some proof or material and it should be one thing over mere suspicion. He should create
what he honestly believes to be a good estimate of the right figure of assessment and for this
purpose he should take into thought such materials because the assessing officer has before him,
as well as the assessee’s circumstances, data of previous returns and every one different matters
that the assessing officer thinks can assist him in inbound at a good and correct estimate.

In cases that clearly fall on the far side the road of permissible guess work or whimsy, the
assessment should be put aside. In estimating any turnover, it's inevitable that there's some

76
guess- work. The assessing authority whereas creating the most effective judgment assessment
ought to attain its conclusion with none bias and on rational created by the assessing authority
could be a true estimate and relies on a rational basis, the very fact that there's no smart proof in
support of that estimate is immaterial. clear, the assessing authority is that the best choose of
true. it's his best judgment and not of anybody else.

Nexus for Guess-Work

In the estimation, there could also be some overestimate and underestimate. that might not be
decent for questioning the determination of the quantity of tax collectible by the dealer as
determined to the most effective judgment. The term ‘to the most effective of judgment’ of the
assessing officer would create mentally his judgment. wherever the estimate is on account of
whimsy, vengefulness or capriciousness of the assessing officer, it can not be aforesaid to be his
judgment. The estimate supported the name of the dealer within the vicinity, the length of the
amount of his business to boost the come back turnover by five-hitter solely can not be aforesaid
to be with none nexus once that side of the matter isn't challenged. name and also the length of
amount of business would be decent nexus within the peculiar circumstance of a case, though the
assessing authority will take turnovers of the previous years for the aim of estimation.

Penalties

In best judgment assessment, wherever the come back has not been filed, the instant it's found
that the dealer has transacted business and his turnover is dutiable then penalty is obligatory. The
mere reality there's best judgment, significantly once the assessment supported the illation
flowing from the shortcoming of the assessee to ascertain the case pleaded by him, won't be
decent for the aim of imposition of penalty, for the degree of proof needed for the imposition of
penalty is kind of completely different from and is of a far higher order than that needed for the
aim of constructing a best judgment assessment. tho'an estimate created on best judgment basis
could also be legal, for the aim of imposing penalty one thing a lot of concrete is needed which
might change the judicial mind to achieve the conclusion that the dealer truly had the turnover
that was fastened by best judgment. The order imposing penalty cannot sustain if there's no
material accessible to conclude that there was any willful suppression of the dutiable turnover
warranting a penalty.

77
Conclusion

A general understanding of the procedure shows that the most effective judgment assessment
procedure has given wide discretionary powers to the assessing authority to assess within the
instances wherever there has been willful suppression and concealment of financial gain and
turnover by the assessee. the facility thus offered is wide to the extent that the AO has the
authority to assume from the documents thus gift on provide an assessment with an exaggerated
or a ablated turnover supported the documents thus provided. even supposing the belief could
also be shot if it's a valid justification that everyone the turnover so recorded so as to properly
assume the turnover and also thereby the returns just in case of an effort to by design conceal the
tax collectible by not displaying within the books of accounts and the different official
documents.

Tax assessment being a troublesome space of labor it's however imperative that the assessing
authority ought to be given adequate powers for encountering tax evaders. The assessing officers
during this respect are given wide powers therein regarding. It additionally aids in honest tax
disclosures thus on avoid the rising issues of evasion that had panic-stricken the economy of the
country thereby giving rise to a parallel unaccounted economy.

A mandatory best judgment is finished within the event of failure to furnish requisites books of
accounts by the assessee and more the discretionary assessment created wherever the AO is
underneath the firm belief that the records aren't true or identical aren't permissible by him or
rejected of any of the grounds that the assessing officer deems fit the case. but this power isn't
absolute and there's an essential understanding that the actions of the assessing authority are
going to be honestly and diligently performed. more the assessee is given the facility to furnish
reasons for failure to produce adequate reasons for the non revealing or concealment of the fabric
documents and on why an assessment shouldn't be created consistent with the most effective
understanding of the assessing authority. Moreover, an assessee encompasses a right to filean
attractiveness underneath S. 246A or to create an application for revision underneath s. 246 to
the tax Commissioner if he's not happy with the choice created against him. However, it's to be
unbroken in mind the courts cannot but assess or interfere with the choice apart from on
instances on a cloth error on face or record or any mistake of law. it's pertinent to say but, that
the powers apparently are too wide and may be wont to the damage ofan assessee and may be
78
manipulated by a corrupt officer. thus there has got to be checks and balances to the ‘guess work’
worn out case of a best assessment judgment. The AO ought to be asked to produce and furnish
proof for his actions as critical that of the assessee and solely once a deduction of either side of
the documents provided ought to the court come back to a choice. At present, the Income Tax
Act doesn't inflict any strict methodology of assessment however it's submitted there so could be
a got to slim down and systematize the procedural law on this time thus on bring clarity and
vigilance to the operations of the tax officers.

79
Bibliography

Primary Sources

The tax Act, 1961

Cases

Kamala Mills Ltd. V. urban center State, (1965) 16 STC 613 (SC)

Illuri Subbaya Chetty v. State of AP, (1963) 14 STC (SC)

Surya Fertilizers & Chemicals v. State of state, (1977) 40 STC 538 (Mad)

Gem & Co v. State of West Bengal, (1959) 10 STC 537 (Cal)

Bengal Behar Construction Co. Pvt Ltd. V. State of state, (1983) 44 STC 176 (Mad)

State of state v. Maharaja B.P. Singh Deo, (1970)77 ITR 674 (Cal).

State of Madras v. Jayaraj Nadar & Sons, (1971) 28 STC 700 (SC)

Nemi Chand Vimal Chand v. CST, (1974) 34 STC 562 (All)

Bata Shoe Co. Pvt Ltd v. Joint CTO, (1968) 21 STC 135 (Mad)

Motor House v. State of state, (1990) 79 STC 385 (Ori)

Ravi v. State of TN, (1981) 48 STC 274 (Mad).

Babulal Agarwal v. CST, (1987) 66 STC 164 (MP)

Bhaskar Rao v. State of AP, (1986) 63 STC 297 (AP)

Secondary Sources(Books)

MRV. Rao et al’, ideas in Taxation, The Law Publishers, Madras.

N. A. Palkhivala and B.A. Palkhivala, Kanga and Palkhivala’s The Law and observe of tax,
N.M.Tripathi Pvt. Ltd., Bombay, 7th Ed. 1977, Vol.1.

80
Narayan Jainist & Deepak Loyalka, a way to Handle tax Problems? Book Corporation
Publishers, 1997-1998.

Rakesh Bhargava(ed), Taxmann’s Master Guide to tax Act, Taxmann Publication, New Delhi,
2003.

Dr. Vinod K. Singhania and Monica S-inghania; Students’ Guide to financial gain Tax; Taxmann
Publications Pvt. Ltd.; latest edition.

Mahesh Chandra & D.C. Shukla; Income-tax Law and Practice; Pragati Publications

H.C. Mehrotra; Income-tax Law and Accounts; Sahitya Bhawanedition.

Girish Ahuja and Ravi Gupta;an Elementary Approach to tax & Sales Tax; Bharat Publications;

Dinkar Pagare; Law and observe of financial gain Tax; ruler Chand & Sons;

Index

57.Introduction
58.An analysis of the procedure of best judgment Assessment.
59.When best judgment assessment is made.
60.Object and basis of best judgment assessment
61.Basis of best judgment assessment
62.Appraisal of the procedure
63.Conclusion
64.Bibliography

81
Introduction

Assessment means that appraisal, evaluation, estimation, measure, judgment etc. within the
context income tax law it suggests that then analysis, estimation, or calculation of financial gain.
The term ‘assessment’ in field of taxation law encompasses a definite meaning. This term is
comprehensive and shall embody varied ranges of activities and procedures. The definition of
assessment has not been given the Income Tax Act; however a reading of the term inside the
scope of the Act makes it obvious that it implies an investigation and ascertainment of the
correctness of the returns and accounts filed by the assessee. Primarily the assessment would
apparently mean determination of the quantum of taxable turnover and also the quantum of
taxable amount due by the tax payer

This assessment is created on the idea of returns and accounts provided with by an assessee in
support thereof however on an estimate made by the assessing authority which maybe, of course,
be primarily based inter alia on the accounts and documents provided with by the assessee. The
expression of assessment contains a wide scope inside the aim of the Act whether or not the
aforesaid assessment made is correct or not. thus any assessment made wouldn't primarily mean
an assessment properly or properly however would signify all assessment made or speculated to
purported to created underneath the aforesaid act. Primarily assessment is estimation for a

82
quantity assessed whereas paying tax. It’s a mandatory contribution that's needed for the support
of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgment i.e. he should not act venally or revengefully or freakishly.

There are two varieties of judgment assessment:

15. Compulsory best judgment assessment created by the assessing officer in cases of non-
co-operation on the a part of the assessee or once the assessee is in default as regards
activity in formation.
16. Discretionary best judgment assessment is finished even in cases wherever the assessing
officer isn't happy concerning the correctness or the completeness of the accounts of the
assessee or wherever no methodology of accounting has been frequently and
systematically utilized by the assessee.

An analysis of The Procedure of Best Judgment Assessment

The expression of assessment encompasses a wide scope inside the needs of the Act whether or
not the aforesaid assessment created is correct or not thus any assessment created wouldn't
basically mean an assessment properly or properly however would signify all assessment created
or presupposed to are created underneath the aforesaid act. primarily assessment is estimation
foran quantity assessed whereas paying tax. it's a mandatory contribution that's needed for the
support of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgement i.e. he should not act venally or revengefully or freakishly. There are two varieties of
judgement assessment:

83
Compulsory best judgment assessment created by the assessing officer in cases of non-co-
operation on the a part of the assessee or once the assessee is in default as regards activity in
formations.

Discretionary best judgment assessment is finished even in cases wherever the assessing officer
isn't happy concerning the correctness or the completeness of the accounts of the assessee or
wherever no methodology of accounting has been frequently and systematically utilized by the
assessee.

The Best Judgment Assessment could be a procedure underneath the Income Tax Act to
accommodates the principles of natural justice. Vide Section one hundred forty four of the tax
Act, 1961 the Assessing Officer is underneath an obligation to create an assessment of the
overall financial gain or less to the most effective of his judgment within the following cases.

If the person fails to create a come back or needed underneath s. 139(1) and he has not created a
come back or a revised come back underneath ss. (4) or (5) of that section.

If somebody fails to accommodates all the terms and conditions stipulated underneath a notice
u/ss. 142 or fails to accommodates the directions requiring him to induce his accounts audited in
terms of section 142(2A).

If somebody, once having filed a come back fails to accommodates the with all the terms of a
notice underneath section 143(2) requiring his presence or production of proof and documents;
or

If the Assessing officer isn't happy concerning the correctness and also the completion of the
accounts of the assessee if no methodology of accounting has been frequently utilized by the
assessee.

In case of best judgment assessment an assessee encompasses a right to file an attractiveness

underneath S. 246A or to create an application for revision underneath S.246 to the tax
Commissioner. the most effective judgment assessment will solely be created once giving the
assessee a chance of being detected.

84
Such opportunities shall run by supplying of notice by method of a show cause on why the
assessment shouldn't be completed to the most effective of the judgment which chance for
hearing won't be necessary wherever notice u/s 142(1) has been issued.

Under this provision wherever the assessee fails to file a comeback or submit the documents or
fails to accommodates any of the preceding conditions the assessing officer is sceptred u/s one
hundred forty four to assess the overall financial gain consistent with the most effective of his
judgment with an inexpensive chance provided to the tax remunerator of being detected. this is
often but to the exclusion of the availability as provided U/s 142(1) of theIncome Tax Act
wherever the assessee has been given previous notice to the assessment. The assessing officer u/s
one hundred forty four is underneath a obligation to create assessment of the overall financial
gain or the loss to the most effective of his judgment and also the tax collectible once taking all
externalities and conditions under consideration.

Judicial Rulings on Scope of Sec. 144

The term ‘best judgment assessment’ isn't a term of art. once the statute prescribes resort to the
most effective judgment assessment in either of the two contingencies, the Court won't be even
in deciphering the expression with relation to the final principle concerning the question on once
assessment is created on the idea of best judgment. In creating best judgment assessment the
officer doesn't possess discretional powers to assess any figure as he like. tho' similar judicial in
nature these assessments are to be supported the principles of justice, equity and smart
conscience. In common formulation the words ‘best judgment’ carry the connotation that what's
being done is so as to create an estimate.

When Best Judgment Assessment is made:

 Ex-parte proceedings – an assessment created underneath S. one hundred forty four will
by no suggests that be equated to ex-parte proceedings during a civil court.
 Mandatory action for defaults – Best judgment assessment is obligatory for anybody of
the defaults underneath S. 144.

85
  Approximations – wherever the assessee had provided with solely approximate figure in
his come back of financial gain with none more details,Income Tax absolutely was
command that the most effective judgment assessment created by ignoring such a come
back was invalid.
 Signing of come backs – A best judgment assessment is created once the return isn't
signed and verified.
 Production of accounts – wherever, in response to a combined notice for private look in
addition as production of account books, the assessee appeared personally however failed
to manufacture any account books; it absolutely was command that the Income-tax
Officer would be even in creating a best judgment assessment.
 Often instances could arise wherever the assessee maintains false accounts to evade the
payment of tax and in such instances it becomes troublesome on the assessing authority
to exactly notice the quantity of turnover hid. In such cases the judgment is created by the
assessing officer to the most effective of his judgment and then long it's made during a
non-arbitrary method and also the nexus looks apparent the choice is final and there's no
scope for officious with the most effective judgment. Thus, during a method there
remains no scope for difficult a best judgment assessment. this is often as a result ofan
assessee can not be allowed to require advantage of his own black act.

2- Object and Basis of Best Judgment Assessment

The object and also the purpose of the most effective Judgment are to attain a good and correct
estimate of the turnover of the dealer. the most effective judgment doesn't mean sweetening in
turnover of the dealer. The assessee ought to be given adequate chance of meeting the case that is
sought-after to createan assessment order. Even in cases wherever in cases the AO receives data
from outside the establishment or business or individual United Nations agency is being assessed
he should disclose the supply of data to the assessee has got to be discovered. wherever
evidentiary material made by the third party was sought-after to be relied upon for showing the
come back submitted by the assessee was incomplete and dubious, the assessee was entitled to

86
own such an individual summoned as a witness for cross examination for establishing truth and
exposing falsehood.

Basis of Best Judgment Assessment

Where the quantum of turnovers was supported the assessee’s account books that are accepted
together with different records there is no ground for creating a best judgment assessment, it
being well-known that the most effective judgment assessment has got to get onan estimate. In
different words, a component of guess-work is guaranteed to be gift in best judgment assessment
though it should have an inexpensive nexus to the accessible material and also the circumstance
of every case.

At this juncture it's pertinent to say that correctness of accounts isn't the only real criteria for
acceptive came figures of best assessment judgment. different externalities like volume of
business, conduct of the dealer, past records and similar facts are conditions that are the idea for
a best judgment assessment.

It is pertinent to be suggested during this respect that once a come back is filed tho' late the
assessing officer isn't at liberty to ignore it and still applies his best judgment. Thus, wherever
the Assessing Officer feels that it's incomplete and incorrect and he has got to follow the
procedure and provides a chance to the assessee to prove the completeness or correctness of the
come back. Similarly, wherever the assessee wasn't a registered dealer and failed to file his
returns voluntarily notice for best judgment has got to be issued during a prescribed kind inside
the {three} years time to that the assessment proceedings can be completed even once the
termination of three years. once the assessment was created on the idea of not invoking best
assessment penalty for late submission isn't approved. wherever the assessing authority fastened
the turnover that recorded with the turnover recorded by the assessee in his books of accounts it
couldn't be aforesaid that the assessment created by the assessing authority. it's enough if such
assessment had an inexpensive nexus to the accessible material on record.

In case of failure of filing or non-filing of returns the supplying of a notice to the assessee is
elective. so just in case of non-filing of returns the assessing authority could visit the premises of

87
the dealer and examine the books of accounts at his premises within the presence of the dealer
wherever the supplying of a notice for the aforesaid purpose isn't needed. There can not be a true
basis of basis of rejection of the books of accounts if it looks that the assessing officer rejected
the returns on the idea of unreasonable suspicion and within the absence of any finding relating
to sale and get omission.

3 -Appraisal of the Procedure

When the returns and also the books of account are rejected, the assessing officer should createan
estimate, and to it extent he should create a guess; however the estimate should be associated
with some proof or material and it should be one thing over mere suspicion. He should create
what he honestly believes to be a good estimate of the right figure of assessment and for this
purpose he should take into thought such materials because the assessing officer has before him,
as well as the assessee’s circumstances, data of previous returns and every one different matters
that the assessing officer thinks can assist him in inbound at a good and correct estimate.

In cases that clearly fall on the far side the road of permissible guess work or whimsy, the
assessment should be put aside. In estimating any turnover, it's inevitable that there's some
guess- work. The assessing authority whereas creating the most effective judgment assessment
ought to attain its conclusion with none bias and on rational created by the assessing authority
could be a true estimate and relies on a rational basis, the very fact that there's no smart proof in
support of that estimate is immaterial. clear, the assessing authority is that the best choose of
true. it's his best judgment and not of anybody else.

Nexus for Guess-Work

In the estimation, there could also be some overestimate and underestimate. that might not be
decent for questioning the determination of the quantity of tax collectible by the dealer as
determined to the most effective judgment. The term ‘to the most effective of judgment’ of the
assessing officer would create mentally his judgment. wherever the estimate is on account of
whimsy, vengefulness or capriciousness of the assessing officer, it can not be aforesaid to be his
judgment. The estimate supported the name of the dealer within the vicinity, the length of the
amount of his business to boost the come back turnover by five-hitter solely can not be aforesaid
to be with none nexus once that side of the matter isn't challenged. name and also the length of
88
amount of business would be decent nexus within the peculiar circumstance of a case, though the
assessing authority will take turnovers of the previous years for the aim of estimation.

Penalties

In best judgment assessment, wherever the come back has not been filed, the instant it's found
that the dealer has transacted business and his turnover is dutiable then penalty is obligatory. The
mere reality there's best judgment, significantly once the assessment supported the illation
flowing from the shortcoming of the assessee to ascertain the case pleaded by him, won't be
decent for the aim of imposition of penalty, for the degree of proof needed for the imposition of
penalty is kind of completely different from and is of a far higher order than that needed for the
aim of constructing a best judgment assessment. tho'an estimate created on best judgment basis
could also be legal, for the aim of imposing penalty one thing a lot of concrete is needed which
might change the judicial mind to achieve the conclusion that the dealer truly had the turnover
that was fastened by best judgment. The order imposing penalty cannot sustain if there's no
material accessible to conclude that there was any willful suppression of the dutiable turnover
warranting a penalty.

Conclusion

A general understanding of the procedure shows that the most effective judgment assessment
procedure has given wide discretionary powers to the assessing authority to assess within the
instances wherever there has been willful suppression and concealment of financial gain and
turnover by the assessee. the facility thus offered is wide to the extent that the AO has the
authority to assume from the documents thus gift on provide an assessment with an exaggerated
or a ablated turnover supported the documents thus provided. even supposing the belief could
also be shot if it's a valid justification that everyone the turnover so recorded so as to properly
assume the turnover and also thereby the returns just in case of an effort to by design conceal the
tax collectible by not displaying within the books of accounts and the different official
documents.

Tax assessment being a troublesome space of labor it's however imperative that the assessing
authority ought to be given adequate powers for encountering tax evaders. The assessing officers
during this respect are given wide powers therein regarding. It additionally aids in honest tax
89
disclosures thus on avoid the rising issues of evasion that had panic-stricken the economy of the
country thereby giving rise to a parallel unaccounted economy.

A mandatory best judgment is finished within the event of failure to furnish requisites books of
accounts by the assessee and more the discretionary assessment created wherever the AO is
underneath the firm belief that the records aren't true or identical aren't permissible by him or
rejected of any of the grounds that the assessing officer deems fit the case. but this power isn't
absolute and there's an essential understanding that the actions of the assessing authority are
going to be honestly and diligently performed. more the assessee is given the facility to furnish
reasons for failure to produce adequate reasons for the non revealing or concealment of the fabric
documents and on why an assessment shouldn't be created consistent with the most effective
understanding of the assessing authority. Moreover, an assessee encompasses a right to filean
attractiveness underneath S. 246A or to create an application for revision underneath s. 246 to
the tax Commissioner if he's not happy with the choice created against him. However, it's to be
unbroken in mind the courts cannot but assess or interfere with the choice apart from on
instances on a cloth error on face or record or any mistake of law. it's pertinent to say but, that
the powers apparently are too wide and may be wont to the damage ofan assessee and may be
manipulated by a corrupt officer. thus there has got to be checks and balances to the ‘guess work’
worn out case of a best assessment judgment. The AO ought to be asked to produce and furnish
proof for his actions as critical that of the assessee and solely once a deduction of either side of
the documents provided ought to the court come back to a choice. At present, the Income Tax
Act doesn't inflict any strict methodology of assessment however it's submitted there so could be
a got to slim down and systematize the procedural law on this time thus on bring clarity and
vigilance to the operations of the tax officers.

90
Bibliography

Primary Sources

The tax Act, 1961

Cases

Kamala Mills Ltd. V. urban center State, (1965) 16 STC 613 (SC)

Illuri Subbaya Chetty v. State of AP, (1963) 14 STC (SC)

Surya Fertilizers & Chemicals v. State of state, (1977) 40 STC 538 (Mad)

Gem & Co v. State of West Bengal, (1959) 10 STC 537 (Cal)

Bengal Behar Construction Co. Pvt Ltd. V. State of state, (1983) 44 STC 176 (Mad)

State of state v. Maharaja B.P. Singh Deo, (1970)77 ITR 674 (Cal).

91
State of Madras v. Jayaraj Nadar & Sons, (1971) 28 STC 700 (SC)

Nemi Chand Vimal Chand v. CST, (1974) 34 STC 562 (All)

Bata Shoe Co. Pvt Ltd v. Joint CTO, (1968) 21 STC 135 (Mad)

Motor House v. State of state, (1990) 79 STC 385 (Ori)

Ravi v. State of TN, (1981) 48 STC 274 (Mad).

Babulal Agarwal v. CST, (1987) 66 STC 164 (MP)

Bhaskar Rao v. State of AP, (1986) 63 STC 297 (AP)

Secondary Sources(Books)

MRV. Rao et al’, ideas in Taxation, The Law Publishers, Madras.

N. A. Palkhivala and B.A. Palkhivala, Kanga and Palkhivala’s The Law and observe of tax,
N.M.Tripathi Pvt. Ltd., Bombay, 7th Ed. 1977, Vol.1.

Narayan Jainist & Deepak Loyalka, a way to Handle tax Problems? Book Corporation
Publishers, 1997-1998.

Rakesh Bhargava(ed), Taxmann’s Master Guide to tax Act, Taxmann Publication, New Delhi,
2003.

Dr. Vinod K. Singhania and Monica S-inghania; Students’ Guide to financial gain Tax; Taxmann
Publications Pvt. Ltd.; latest edition.

Mahesh Chandra & D.C. Shukla; Income-tax Law and Practice; Pragati Publications

H.C. Mehrotra; Income-tax Law and Accounts; Sahitya Bhawanedition.

Girish Ahuja and Ravi Gupta;an Elementary Approach to tax & Sales Tax; Bharat Publications;

Dinkar Pagare; Law and observe of financial gain Tax; ruler Chand & Sons;

Index

92
 65.Introduction
66.An analysis of the procedure of best judgment Assessment.
67.When best judgment assessment is made.
68.Object and basis of best judgment assessment
69.Basis of best judgment assessment
70.Appraisal of the procedure
71.Conclusion
72.Bibliography

Introduction

93
Assessment means that appraisal, evaluation, estimation, measure, judgment etc. within the
context income tax law it suggests that then analysis, estimation, or calculation of financial gain.
The term ‘assessment’ in field of taxation law encompasses a definite meaning. This term is
comprehensive and shall embody varied ranges of activities and procedures. The definition of
assessment has not been given the Income Tax Act; however a reading of the term inside the
scope of the Act makes it obvious that it implies an investigation and ascertainment of the
correctness of the returns and accounts filed by the assessee. Primarily the assessment would
apparently mean determination of the quantum of taxable turnover and also the quantum of
taxable amount due by the tax payer

This assessment is created on the idea of returns and accounts provided with by an assessee in
support thereof however on an estimate made by the assessing authority which maybe, of course,
be primarily based inter alia on the accounts and documents provided with by the assessee. The
expression of assessment contains a wide scope inside the aim of the Act whether or not the
aforesaid assessment made is correct or not. thus any assessment made wouldn't primarily mean
an assessment properly or properly however would signify all assessment made or speculated to
purported to created underneath the aforesaid act. Primarily assessment is estimation for a
quantity assessed whereas paying tax. It’s a mandatory contribution that's needed for the support
of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgment i.e. he should not act venally or revengefully or freakishly.

There are two varieties of judgment assessment:

17. Compulsory best judgment assessment created by the assessing officer in cases of non-
co-operation on the a part of the assessee or once the assessee is in default as regards
activity in formation.
18. Discretionary best judgment assessment is finished even in cases wherever the assessing
officer isn't happy concerning the correctness or the completeness of the accounts of the
assessee or wherever no methodology of accounting has been frequently and
systematically utilized by the assessee.

94
An analysis of The Procedure of Best Judgment Assessment

The expression of assessment encompasses a wide scope inside the needs of the Act whether or
not the aforesaid assessment created is correct or not thus any assessment created wouldn't
basically mean an assessment properly or properly however would signify all assessment created
or presupposed to are created underneath the aforesaid act. primarily assessment is estimation
foran quantity assessed whereas paying tax. it's a mandatory contribution that's needed for the
support of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgement i.e. he should not act venally or revengefully or freakishly. There are two varieties of
judgement assessment:

Compulsory best judgment assessment created by the assessing officer in cases of non-co-
operation on the a part of the assessee or once the assessee is in default as regards activity in
formations.

Discretionary best judgment assessment is finished even in cases wherever the assessing officer
isn't happy concerning the correctness or the completeness of the accounts of the assessee or
wherever no methodology of accounting has been frequently and systematically utilized by the
assessee.

The Best Judgment Assessment could be a procedure underneath the Income Tax Act to
accommodates the principles of natural justice. Vide Section one hundred forty four of the tax
Act, 1961 the Assessing Officer is underneath an obligation to create an assessment of the
overall financial gain or less to the most effective of his judgment within the following cases.

If the person fails to create a come back or needed underneath s. 139(1) and he has not created a
come back or a revised come back underneath ss. (4) or (5) of that section.

95
If somebody fails to accommodates all the terms and conditions stipulated underneath a notice
u/ss. 142 or fails to accommodates the directions requiring him to induce his accounts audited in
terms of section 142(2A).

If somebody, once having filed a come back fails to accommodates the with all the terms of a
notice underneath section 143(2) requiring his presence or production of proof and documents;
or

If the Assessing officer isn't happy concerning the correctness and also the completion of the
accounts of the assessee if no methodology of accounting has been frequently utilized by the
assessee.

In case of best judgment assessment an assessee encompasses a right to file an attractiveness

underneath S. 246A or to create an application for revision underneath S.246 to the tax
Commissioner. the most effective judgment assessment will solely be created once giving the
assessee a chance of being detected.

Such opportunities shall run by supplying of notice by method of a show cause on why the
assessment shouldn't be completed to the most effective of the judgment which chance for
hearing won't be necessary wherever notice u/s 142(1) has been issued.

Under this provision wherever the assessee fails to file a comeback or submit the documents or
fails to accommodates any of the preceding conditions the assessing officer is sceptred u/s one
hundred forty four to assess the overall financial gain consistent with the most effective of his
judgment with an inexpensive chance provided to the tax remunerator of being detected. this is
often but to the exclusion of the availability as provided U/s 142(1) of theIncome Tax Act
wherever the assessee has been given previous notice to the assessment. The assessing officer u/s
one hundred forty four is underneath a obligation to create assessment of the overall financial
gain or the loss to the most effective of his judgment and also the tax collectible once taking all
externalities and conditions under consideration.

Judicial Rulings on Scope of Sec. 144

96
The term ‘best judgment assessment’ isn't a term of art. once the statute prescribes resort to the
most effective judgment assessment in either of the two contingencies, the Court won't be even
in deciphering the expression with relation to the final principle concerning the question on once
assessment is created on the idea of best judgment. In creating best judgment assessment the
officer doesn't possess discretional powers to assess any figure as he like. tho' similar judicial in
nature these assessments are to be supported the principles of justice, equity and smart
conscience. In common formulation the words ‘best judgment’ carry the connotation that what's
being done is so as to create an estimate.

When Best Judgment Assessment is made:

 Ex-parte proceedings – an assessment created underneath S. one hundred forty four will
by no suggests that be equated to ex-parte proceedings during a civil court.
 Mandatory action for defaults – Best judgment assessment is obligatory for anybody of
the defaults underneath S. 144.
 Approximations – wherever the assessee had provided with solely approximate figure in
his come back of financial gain with none more details,Income Tax absolutely was
command that the most effective judgment assessment created by ignoring such a come
back was invalid.
 Signing of come backs – A best judgment assessment is created once the return isn't
signed and verified.
 Production of accounts – wherever, in response to a combined notice for private look in
addition as production of account books, the assessee appeared personally however failed
to manufacture any account books; it absolutely was command that the Income-tax
Officer would be even in creating a best judgment assessment.
 Often instances could arise wherever the assessee maintains false accounts to evade the
payment of tax and in such instances it becomes troublesome on the assessing authority
to exactly notice the quantity of turnover hid. In such cases the judgment is created by the
assessing officer to the most effective of his judgment and then long it's made during a
non-arbitrary method and also the nexus looks apparent the choice is final and there's no
scope for officious with the most effective judgment. Thus, during a method there

97
 remains no scope for difficult a best judgment assessment. this is often as a result ofan
assessee can not be allowed to require advantage of his own black act.

2- Object and Basis of Best Judgment Assessment

The object and also the purpose of the most effective Judgment are to attain a good and correct
estimate of the turnover of the dealer. the most effective judgment doesn't mean sweetening in
turnover of the dealer. The assessee ought to be given adequate chance of meeting the case that is
sought-after to createan assessment order. Even in cases wherever in cases the AO receives data
from outside the establishment or business or individual United Nations agency is being assessed
he should disclose the supply of data to the assessee has got to be discovered. wherever
evidentiary material made by the third party was sought-after to be relied upon for showing the
come back submitted by the assessee was incomplete and dubious, the assessee was entitled to
own such an individual summoned as a witness for cross examination for establishing truth and
exposing falsehood.

Basis of Best Judgment Assessment

Where the quantum of turnovers was supported the assessee’s account books that are accepted
together with different records there is no ground for creating a best judgment assessment, it
being well-known that the most effective judgment assessment has got to get onan estimate. In
different words, a component of guess-work is guaranteed to be gift in best judgment assessment
though it should have an inexpensive nexus to the accessible material and also the circumstance
of every case.

At this juncture it's pertinent to say that correctness of accounts isn't the only real criteria for
acceptive came figures of best assessment judgment. different externalities like volume of
business, conduct of the dealer, past records and similar facts are conditions that are the idea for
a best judgment assessment.

98
It is pertinent to be suggested during this respect that once a come back is filed tho' late the
assessing officer isn't at liberty to ignore it and still applies his best judgment. Thus, wherever
the Assessing Officer feels that it's incomplete and incorrect and he has got to follow the
procedure and provides a chance to the assessee to prove the completeness or correctness of the
come back. Similarly, wherever the assessee wasn't a registered dealer and failed to file his
returns voluntarily notice for best judgment has got to be issued during a prescribed kind inside
the {three} years time to that the assessment proceedings can be completed even once the
termination of three years. once the assessment was created on the idea of not invoking best
assessment penalty for late submission isn't approved. wherever the assessing authority fastened
the turnover that recorded with the turnover recorded by the assessee in his books of accounts it
couldn't be aforesaid that the assessment created by the assessing authority. it's enough if such
assessment had an inexpensive nexus to the accessible material on record.

In case of failure of filing or non-filing of returns the supplying of a notice to the assessee is
elective. so just in case of non-filing of returns the assessing authority could visit the premises of
the dealer and examine the books of accounts at his premises within the presence of the dealer
wherever the supplying of a notice for the aforesaid purpose isn't needed. There can not be a true
basis of basis of rejection of the books of accounts if it looks that the assessing officer rejected
the returns on the idea of unreasonable suspicion and within the absence of any finding relating
to sale and get omission.

3 -Appraisal of the Procedure

When the returns and also the books of account are rejected, the assessing officer should createan
estimate, and to it extent he should create a guess; however the estimate should be associated
with some proof or material and it should be one thing over mere suspicion. He should create
what he honestly believes to be a good estimate of the right figure of assessment and for this
purpose he should take into thought such materials because the assessing officer has before him,
as well as the assessee’s circumstances, data of previous returns and every one different matters
that the assessing officer thinks can assist him in inbound at a good and correct estimate.

In cases that clearly fall on the far side the road of permissible guess work or whimsy, the
assessment should be put aside. In estimating any turnover, it's inevitable that there's some

99
guess- work. The assessing authority whereas creating the most effective judgment assessment
ought to attain its conclusion with none bias and on rational created by the assessing authority
could be a true estimate and relies on a rational basis, the very fact that there's no smart proof in
support of that estimate is immaterial. clear, the assessing authority is that the best choose of
true. it's his best judgment and not of anybody else.

Nexus for Guess-Work

In the estimation, there could also be some overestimate and underestimate. that might not be
decent for questioning the determination of the quantity of tax collectible by the dealer as
determined to the most effective judgment. The term ‘to the most effective of judgment’ of the
assessing officer would create mentally his judgment. wherever the estimate is on account of
whimsy, vengefulness or capriciousness of the assessing officer, it can not be aforesaid to be his
judgment. The estimate supported the name of the dealer within the vicinity, the length of the
amount of his business to boost the come back turnover by five-hitter solely can not be aforesaid
to be with none nexus once that side of the matter isn't challenged. name and also the length of
amount of business would be decent nexus within the peculiar circumstance of a case, though the
assessing authority will take turnovers of the previous years for the aim of estimation.

Penalties

In best judgment assessment, wherever the come back has not been filed, the instant it's found
that the dealer has transacted business and his turnover is dutiable then penalty is obligatory. The
mere reality there's best judgment, significantly once the assessment supported the illation
flowing from the shortcoming of the assessee to ascertain the case pleaded by him, won't be
decent for the aim of imposition of penalty, for the degree of proof needed for the imposition of
penalty is kind of completely different from and is of a far higher order than that needed for the
aim of constructing a best judgment assessment. tho'an estimate created on best judgment basis
could also be legal, for the aim of imposing penalty one thing a lot of concrete is needed which
might change the judicial mind to achieve the conclusion that the dealer truly had the turnover
that was fastened by best judgment. The order imposing penalty cannot sustain if there's no
material accessible to conclude that there was any willful suppression of the dutiable turnover
warranting a penalty.

100
Conclusion

A general understanding of the procedure shows that the most effective judgment assessment
procedure has given wide discretionary powers to the assessing authority to assess within the
instances wherever there has been willful suppression and concealment of financial gain and
turnover by the assessee. the facility thus offered is wide to the extent that the AO has the
authority to assume from the documents thus gift on provide an assessment with an exaggerated
or a ablated turnover supported the documents thus provided. even supposing the belief could
also be shot if it's a valid justification that everyone the turnover so recorded so as to properly
assume the turnover and also thereby the returns just in case of an effort to by design conceal the
tax collectible by not displaying within the books of accounts and the different official
documents.

Tax assessment being a troublesome space of labor it's however imperative that the assessing
authority ought to be given adequate powers for encountering tax evaders. The assessing officers
during this respect are given wide powers therein regarding. It additionally aids in honest tax
disclosures thus on avoid the rising issues of evasion that had panic-stricken the economy of the
country thereby giving rise to a parallel unaccounted economy.

A mandatory best judgment is finished within the event of failure to furnish requisites books of
accounts by the assessee and more the discretionary assessment created wherever the AO is
underneath the firm belief that the records aren't true or identical aren't permissible by him or
rejected of any of the grounds that the assessing officer deems fit the case. but this power isn't
absolute and there's an essential understanding that the actions of the assessing authority are
going to be honestly and diligently performed. more the assessee is given the facility to furnish
reasons for failure to produce adequate reasons for the non revealing or concealment of the fabric
documents and on why an assessment shouldn't be created consistent with the most effective
understanding of the assessing authority. Moreover, an assessee encompasses a right to filean
attractiveness underneath S. 246A or to create an application for revision underneath s. 246 to
the tax Commissioner if he's not happy with the choice created against him. However, it's to be
unbroken in mind the courts cannot but assess or interfere with the choice apart from on
instances on a cloth error on face or record or any mistake of law. it's pertinent to say but, that
the powers apparently are too wide and may be wont to the damage ofan assessee and may be
101
manipulated by a corrupt officer. thus there has got to be checks and balances to the ‘guess work’
worn out case of a best assessment judgment. The AO ought to be asked to produce and furnish
proof for his actions as critical that of the assessee and solely once a deduction of either side of
the documents provided ought to the court come back to a choice. At present, the Income Tax
Act doesn't inflict any strict methodology of assessment however it's submitted there so could be
a got to slim down and systematize the procedural law on this time thus on bring clarity and
vigilance to the operations of the tax officers.

102
Bibliography

Primary Sources

The tax Act, 1961

Cases

Kamala Mills Ltd. V. urban center State, (1965) 16 STC 613 (SC)

Illuri Subbaya Chetty v. State of AP, (1963) 14 STC (SC)

Surya Fertilizers & Chemicals v. State of state, (1977) 40 STC 538 (Mad)

Gem & Co v. State of West Bengal, (1959) 10 STC 537 (Cal)

Bengal Behar Construction Co. Pvt Ltd. V. State of state, (1983) 44 STC 176 (Mad)

State of state v. Maharaja B.P. Singh Deo, (1970)77 ITR 674 (Cal).

State of Madras v. Jayaraj Nadar & Sons, (1971) 28 STC 700 (SC)

Nemi Chand Vimal Chand v. CST, (1974) 34 STC 562 (All)

Bata Shoe Co. Pvt Ltd v. Joint CTO, (1968) 21 STC 135 (Mad)

Motor House v. State of state, (1990) 79 STC 385 (Ori)

Ravi v. State of TN, (1981) 48 STC 274 (Mad).

Babulal Agarwal v. CST, (1987) 66 STC 164 (MP)

Bhaskar Rao v. State of AP, (1986) 63 STC 297 (AP)

Secondary Sources(Books)

MRV. Rao et al’, ideas in Taxation, The Law Publishers, Madras.

N. A. Palkhivala and B.A. Palkhivala, Kanga and Palkhivala’s The Law and observe of tax,
N.M.Tripathi Pvt. Ltd., Bombay, 7th Ed. 1977, Vol.1.

103
Narayan Jainist & Deepak Loyalka, a way to Handle tax Problems? Book Corporation
Publishers, 1997-1998.

Rakesh Bhargava(ed), Taxmann’s Master Guide to tax Act, Taxmann Publication, New Delhi,
2003.

Dr. Vinod K. Singhania and Monica S-inghania; Students’ Guide to financial gain Tax; Taxmann
Publications Pvt. Ltd.; latest edition.

Mahesh Chandra & D.C. Shukla; Income-tax Law and Practice; Pragati Publications

H.C. Mehrotra; Income-tax Law and Accounts; Sahitya Bhawanedition.

Girish Ahuja and Ravi Gupta;an Elementary Approach to tax & Sales Tax; Bharat Publications;

Dinkar Pagare; Law and observe of financial gain Tax; ruler Chand & Sons;

Index

73.Introduction
74.An analysis of the procedure of best judgment Assessment.
75.When best judgment assessment is made.
76.Object and basis of best judgment assessment
77.Basis of best judgment assessment
78.Appraisal of the procedure
79.Conclusion
80.Bibliography

104
Introduction

Assessment means that appraisal, evaluation, estimation, measure, judgment etc. within the
context income tax law it suggests that then analysis, estimation, or calculation of financial gain.
The term ‘assessment’ in field of taxation law encompasses a definite meaning. This term is
comprehensive and shall embody varied ranges of activities and procedures. The definition of
assessment has not been given the Income Tax Act; however a reading of the term inside the
scope of the Act makes it obvious that it implies an investigation and ascertainment of the
correctness of the returns and accounts filed by the assessee. Primarily the assessment would
apparently mean determination of the quantum of taxable turnover and also the quantum of
taxable amount due by the tax payer

This assessment is created on the idea of returns and accounts provided with by an assessee in
support thereof however on an estimate made by the assessing authority which maybe, of course,
be primarily based inter alia on the accounts and documents provided with by the assessee. The
expression of assessment contains a wide scope inside the aim of the Act whether or not the
aforesaid assessment made is correct or not. thus any assessment made wouldn't primarily mean
an assessment properly or properly however would signify all assessment made or speculated to
purported to created underneath the aforesaid act. Primarily assessment is estimation for a

105
quantity assessed whereas paying tax. It’s a mandatory contribution that's needed for the support
of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgment i.e. he should not act venally or revengefully or freakishly.

There are two varieties of judgment assessment:

19. Compulsory best judgment assessment created by the assessing officer in cases of non-
co-operation on the a part of the assessee or once the assessee is in default as regards
activity in formation.
20. Discretionary best judgment assessment is finished even in cases wherever the assessing
officer isn't happy concerning the correctness or the completeness of the accounts of the
assessee or wherever no methodology of accounting has been frequently and
systematically utilized by the assessee.

An analysis of The Procedure of Best Judgment Assessment

The expression of assessment encompasses a wide scope inside the needs of the Act whether or
not the aforesaid assessment created is correct or not thus any assessment created wouldn't
basically mean an assessment properly or properly however would signify all assessment created
or presupposed to are created underneath the aforesaid act. primarily assessment is estimation
foran quantity assessed whereas paying tax. it's a mandatory contribution that's needed for the
support of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgement i.e. he should not act venally or revengefully or freakishly. There are two varieties of
judgement assessment:

106
Compulsory best judgment assessment created by the assessing officer in cases of non-co-
operation on the a part of the assessee or once the assessee is in default as regards activity in
formations.

Discretionary best judgment assessment is finished even in cases wherever the assessing officer
isn't happy concerning the correctness or the completeness of the accounts of the assessee or
wherever no methodology of accounting has been frequently and systematically utilized by the
assessee.

The Best Judgment Assessment could be a procedure underneath the Income Tax Act to
accommodates the principles of natural justice. Vide Section one hundred forty four of the tax
Act, 1961 the Assessing Officer is underneath an obligation to create an assessment of the
overall financial gain or less to the most effective of his judgment within the following cases.

If the person fails to create a come back or needed underneath s. 139(1) and he has not created a
come back or a revised come back underneath ss. (4) or (5) of that section.

If somebody fails to accommodates all the terms and conditions stipulated underneath a notice
u/ss. 142 or fails to accommodates the directions requiring him to induce his accounts audited in
terms of section 142(2A).

If somebody, once having filed a come back fails to accommodates the with all the terms of a
notice underneath section 143(2) requiring his presence or production of proof and documents;
or

If the Assessing officer isn't happy concerning the correctness and also the completion of the
accounts of the assessee if no methodology of accounting has been frequently utilized by the
assessee.

In case of best judgment assessment an assessee encompasses a right to file an attractiveness

underneath S. 246A or to create an application for revision underneath S.246 to the tax
Commissioner. the most effective judgment assessment will solely be created once giving the
assessee a chance of being detected.

107
Such opportunities shall run by supplying of notice by method of a show cause on why the
assessment shouldn't be completed to the most effective of the judgment which chance for
hearing won't be necessary wherever notice u/s 142(1) has been issued.

Under this provision wherever the assessee fails to file a comeback or submit the documents or
fails to accommodates any of the preceding conditions the assessing officer is sceptred u/s one
hundred forty four to assess the overall financial gain consistent with the most effective of his
judgment with an inexpensive chance provided to the tax remunerator of being detected. this is
often but to the exclusion of the availability as provided U/s 142(1) of theIncome Tax Act
wherever the assessee has been given previous notice to the assessment. The assessing officer u/s
one hundred forty four is underneath a obligation to create assessment of the overall financial
gain or the loss to the most effective of his judgment and also the tax collectible once taking all
externalities and conditions under consideration.

Judicial Rulings on Scope of Sec. 144

The term ‘best judgment assessment’ isn't a term of art. once the statute prescribes resort to the
most effective judgment assessment in either of the two contingencies, the Court won't be even
in deciphering the expression with relation to the final principle concerning the question on once
assessment is created on the idea of best judgment. In creating best judgment assessment the
officer doesn't possess discretional powers to assess any figure as he like. tho' similar judicial in
nature these assessments are to be supported the principles of justice, equity and smart
conscience. In common formulation the words ‘best judgment’ carry the connotation that what's
being done is so as to create an estimate.

When Best Judgment Assessment is made:

 Ex-parte proceedings – an assessment created underneath S. one hundred forty four will
by no suggests that be equated to ex-parte proceedings during a civil court.
 Mandatory action for defaults – Best judgment assessment is obligatory for anybody of
the defaults underneath S. 144.

108
  Approximations – wherever the assessee had provided with solely approximate figure in
his come back of financial gain with none more details,Income Tax absolutely was
command that the most effective judgment assessment created by ignoring such a come
back was invalid.
 Signing of come backs – A best judgment assessment is created once the return isn't
signed and verified.
 Production of accounts – wherever, in response to a combined notice for private look in
addition as production of account books, the assessee appeared personally however failed
to manufacture any account books; it absolutely was command that the Income-tax
Officer would be even in creating a best judgment assessment.
 Often instances could arise wherever the assessee maintains false accounts to evade the
payment of tax and in such instances it becomes troublesome on the assessing authority
to exactly notice the quantity of turnover hid. In such cases the judgment is created by the
assessing officer to the most effective of his judgment and then long it's made during a
non-arbitrary method and also the nexus looks apparent the choice is final and there's no
scope for officious with the most effective judgment. Thus, during a method there
remains no scope for difficult a best judgment assessment. this is often as a result ofan
assessee can not be allowed to require advantage of his own black act.

2- Object and Basis of Best Judgment Assessment

The object and also the purpose of the most effective Judgment are to attain a good and correct
estimate of the turnover of the dealer. the most effective judgment doesn't mean sweetening in
turnover of the dealer. The assessee ought to be given adequate chance of meeting the case that is
sought-after to createan assessment order. Even in cases wherever in cases the AO receives data
from outside the establishment or business or individual United Nations agency is being assessed
he should disclose the supply of data to the assessee has got to be discovered. wherever
evidentiary material made by the third party was sought-after to be relied upon for showing the
come back submitted by the assessee was incomplete and dubious, the assessee was entitled to

109
own such an individual summoned as a witness for cross examination for establishing truth and
exposing falsehood.

Basis of Best Judgment Assessment

Where the quantum of turnovers was supported the assessee’s account books that are accepted
together with different records there is no ground for creating a best judgment assessment, it
being well-known that the most effective judgment assessment has got to get onan estimate. In
different words, a component of guess-work is guaranteed to be gift in best judgment assessment
though it should have an inexpensive nexus to the accessible material and also the circumstance
of every case.

At this juncture it's pertinent to say that correctness of accounts isn't the only real criteria for
acceptive came figures of best assessment judgment. different externalities like volume of
business, conduct of the dealer, past records and similar facts are conditions that are the idea for
a best judgment assessment.

It is pertinent to be suggested during this respect that once a come back is filed tho' late the
assessing officer isn't at liberty to ignore it and still applies his best judgment. Thus, wherever
the Assessing Officer feels that it's incomplete and incorrect and he has got to follow the
procedure and provides a chance to the assessee to prove the completeness or correctness of the
come back. Similarly, wherever the assessee wasn't a registered dealer and failed to file his
returns voluntarily notice for best judgment has got to be issued during a prescribed kind inside
the {three} years time to that the assessment proceedings can be completed even once the
termination of three years. once the assessment was created on the idea of not invoking best
assessment penalty for late submission isn't approved. wherever the assessing authority fastened
the turnover that recorded with the turnover recorded by the assessee in his books of accounts it
couldn't be aforesaid that the assessment created by the assessing authority. it's enough if such
assessment had an inexpensive nexus to the accessible material on record.

In case of failure of filing or non-filing of returns the supplying of a notice to the assessee is
elective. so just in case of non-filing of returns the assessing authority could visit the premises of

110
the dealer and examine the books of accounts at his premises within the presence of the dealer
wherever the supplying of a notice for the aforesaid purpose isn't needed. There can not be a true
basis of basis of rejection of the books of accounts if it looks that the assessing officer rejected
the returns on the idea of unreasonable suspicion and within the absence of any finding relating
to sale and get omission.

3 -Appraisal of the Procedure

When the returns and also the books of account are rejected, the assessing officer should createan
estimate, and to it extent he should create a guess; however the estimate should be associated
with some proof or material and it should be one thing over mere suspicion. He should create
what he honestly believes to be a good estimate of the right figure of assessment and for this
purpose he should take into thought such materials because the assessing officer has before him,
as well as the assessee’s circumstances, data of previous returns and every one different matters
that the assessing officer thinks can assist him in inbound at a good and correct estimate.

In cases that clearly fall on the far side the road of permissible guess work or whimsy, the
assessment should be put aside. In estimating any turnover, it's inevitable that there's some
guess- work. The assessing authority whereas creating the most effective judgment assessment
ought to attain its conclusion with none bias and on rational created by the assessing authority
could be a true estimate and relies on a rational basis, the very fact that there's no smart proof in
support of that estimate is immaterial. clear, the assessing authority is that the best choose of
true. it's his best judgment and not of anybody else.

Nexus for Guess-Work

In the estimation, there could also be some overestimate and underestimate. that might not be
decent for questioning the determination of the quantity of tax collectible by the dealer as
determined to the most effective judgment. The term ‘to the most effective of judgment’ of the
assessing officer would create mentally his judgment. wherever the estimate is on account of
whimsy, vengefulness or capriciousness of the assessing officer, it can not be aforesaid to be his
judgment. The estimate supported the name of the dealer within the vicinity, the length of the
amount of his business to boost the come back turnover by five-hitter solely can not be aforesaid
to be with none nexus once that side of the matter isn't challenged. name and also the length of
111
amount of business would be decent nexus within the peculiar circumstance of a case, though the
assessing authority will take turnovers of the previous years for the aim of estimation.

Penalties

In best judgment assessment, wherever the come back has not been filed, the instant it's found
that the dealer has transacted business and his turnover is dutiable then penalty is obligatory. The
mere reality there's best judgment, significantly once the assessment supported the illation
flowing from the shortcoming of the assessee to ascertain the case pleaded by him, won't be
decent for the aim of imposition of penalty, for the degree of proof needed for the imposition of
penalty is kind of completely different from and is of a far higher order than that needed for the
aim of constructing a best judgment assessment. tho'an estimate created on best judgment basis
could also be legal, for the aim of imposing penalty one thing a lot of concrete is needed which
might change the judicial mind to achieve the conclusion that the dealer truly had the turnover
that was fastened by best judgment. The order imposing penalty cannot sustain if there's no
material accessible to conclude that there was any willful suppression of the dutiable turnover
warranting a penalty.

Conclusion

A general understanding of the procedure shows that the most effective judgment assessment
procedure has given wide discretionary powers to the assessing authority to assess within the
instances wherever there has been willful suppression and concealment of financial gain and
turnover by the assessee. the facility thus offered is wide to the extent that the AO has the
authority to assume from the documents thus gift on provide an assessment with an exaggerated
or a ablated turnover supported the documents thus provided. even supposing the belief could
also be shot if it's a valid justification that everyone the turnover so recorded so as to properly
assume the turnover and also thereby the returns just in case of an effort to by design conceal the
tax collectible by not displaying within the books of accounts and the different official
documents.

Tax assessment being a troublesome space of labor it's however imperative that the assessing
authority ought to be given adequate powers for encountering tax evaders. The assessing officers
during this respect are given wide powers therein regarding. It additionally aids in honest tax
112
disclosures thus on avoid the rising issues of evasion that had panic-stricken the economy of the
country thereby giving rise to a parallel unaccounted economy.

A mandatory best judgment is finished within the event of failure to furnish requisites books of
accounts by the assessee and more the discretionary assessment created wherever the AO is
underneath the firm belief that the records aren't true or identical aren't permissible by him or
rejected of any of the grounds that the assessing officer deems fit the case. but this power isn't
absolute and there's an essential understanding that the actions of the assessing authority are
going to be honestly and diligently performed. more the assessee is given the facility to furnish
reasons for failure to produce adequate reasons for the non revealing or concealment of the fabric
documents and on why an assessment shouldn't be created consistent with the most effective
understanding of the assessing authority. Moreover, an assessee encompasses a right to filean
attractiveness underneath S. 246A or to create an application for revision underneath s. 246 to
the tax Commissioner if he's not happy with the choice created against him. However, it's to be
unbroken in mind the courts cannot but assess or interfere with the choice apart from on
instances on a cloth error on face or record or any mistake of law. it's pertinent to say but, that
the powers apparently are too wide and may be wont to the damage ofan assessee and may be
manipulated by a corrupt officer. thus there has got to be checks and balances to the ‘guess work’
worn out case of a best assessment judgment. The AO ought to be asked to produce and furnish
proof for his actions as critical that of the assessee and solely once a deduction of either side of
the documents provided ought to the court come back to a choice. At present, the Income Tax
Act doesn't inflict any strict methodology of assessment however it's submitted there so could be
a got to slim down and systematize the procedural law on this time thus on bring clarity and
vigilance to the operations of the tax officers.

113
Bibliography

Primary Sources

The tax Act, 1961

Cases

Kamala Mills Ltd. V. urban center State, (1965) 16 STC 613 (SC)

Illuri Subbaya Chetty v. State of AP, (1963) 14 STC (SC)

Surya Fertilizers & Chemicals v. State of state, (1977) 40 STC 538 (Mad)

Gem & Co v. State of West Bengal, (1959) 10 STC 537 (Cal)

Bengal Behar Construction Co. Pvt Ltd. V. State of state, (1983) 44 STC 176 (Mad)

State of state v. Maharaja B.P. Singh Deo, (1970)77 ITR 674 (Cal).

114
State of Madras v. Jayaraj Nadar & Sons, (1971) 28 STC 700 (SC)

Nemi Chand Vimal Chand v. CST, (1974) 34 STC 562 (All)

Bata Shoe Co. Pvt Ltd v. Joint CTO, (1968) 21 STC 135 (Mad)

Motor House v. State of state, (1990) 79 STC 385 (Ori)

Ravi v. State of TN, (1981) 48 STC 274 (Mad).

Babulal Agarwal v. CST, (1987) 66 STC 164 (MP)

Bhaskar Rao v. State of AP, (1986) 63 STC 297 (AP)

Secondary Sources(Books)

MRV. Rao et al’, ideas in Taxation, The Law Publishers, Madras.

N. A. Palkhivala and B.A. Palkhivala, Kanga and Palkhivala’s The Law and observe of tax,
N.M.Tripathi Pvt. Ltd., Bombay, 7th Ed. 1977, Vol.1.

Narayan Jainist & Deepak Loyalka, a way to Handle tax Problems? Book Corporation
Publishers, 1997-1998.

Rakesh Bhargava(ed), Taxmann’s Master Guide to tax Act, Taxmann Publication, New Delhi,
2003.

Dr. Vinod K. Singhania and Monica S-inghania; Students’ Guide to financial gain Tax; Taxmann
Publications Pvt. Ltd.; latest edition.

Mahesh Chandra & D.C. Shukla; Income-tax Law and Practice; Pragati Publications

H.C. Mehrotra; Income-tax Law and Accounts; Sahitya Bhawanedition.

Girish Ahuja and Ravi Gupta;an Elementary Approach to tax & Sales Tax; Bharat Publications;

Dinkar Pagare; Law and observe of financial gain Tax; ruler Chand & Sons;

Index

115
 81.Introduction
82.An analysis of the procedure of best judgment Assessment.
83.When best judgment assessment is made.
84.Object and basis of best judgment assessment
85.Basis of best judgment assessment
86.Appraisal of the procedure
87.Conclusion
88.Bibliography

Introduction

116
Assessment means that appraisal, evaluation, estimation, measure, judgment etc. within the
context income tax law it suggests that then analysis, estimation, or calculation of financial gain.
The term ‘assessment’ in field of taxation law encompasses a definite meaning. This term is
comprehensive and shall embody varied ranges of activities and procedures. The definition of
assessment has not been given the Income Tax Act; however a reading of the term inside the
scope of the Act makes it obvious that it implies an investigation and ascertainment of the
correctness of the returns and accounts filed by the assessee. Primarily the assessment would
apparently mean determination of the quantum of taxable turnover and also the quantum of
taxable amount due by the tax payer

This assessment is created on the idea of returns and accounts provided with by an assessee in
support thereof however on an estimate made by the assessing authority which maybe, of course,
be primarily based inter alia on the accounts and documents provided with by the assessee. The
expression of assessment contains a wide scope inside the aim of the Act whether or not the
aforesaid assessment made is correct or not. thus any assessment made wouldn't primarily mean
an assessment properly or properly however would signify all assessment made or speculated to
purported to created underneath the aforesaid act. Primarily assessment is estimation for a
quantity assessed whereas paying tax. It’s a mandatory contribution that's needed for the support
of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgment i.e. he should not act venally or revengefully or freakishly.

There are two varieties of judgment assessment:

21. Compulsory best judgment assessment created by the assessing officer in cases of non-
co-operation on the a part of the assessee or once the assessee is in default as regards
activity in formation.
22. Discretionary best judgment assessment is finished even in cases wherever the assessing
officer isn't happy concerning the correctness or the completeness of the accounts of the
assessee or wherever no methodology of accounting has been frequently and
systematically utilized by the assessee.

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An analysis of The Procedure of Best Judgment Assessment

The expression of assessment encompasses a wide scope inside the needs of the Act whether or
not the aforesaid assessment created is correct or not thus any assessment created wouldn't
basically mean an assessment properly or properly however would signify all assessment created
or presupposed to are created underneath the aforesaid act. primarily assessment is estimation
foran quantity assessed whereas paying tax. it's a mandatory contribution that's needed for the
support of a government.

In a best judgment assessment the assessing officer ought to very base the assessment on his best
judgement i.e. he should not act venally or revengefully or freakishly. There are two varieties of
judgement assessment:

Compulsory best judgment assessment created by the assessing officer in cases of non-co-
operation on the a part of the assessee or once the assessee is in default as regards activity in
formations.

Discretionary best judgment assessment is finished even in cases wherever the assessing officer
isn't happy concerning the correctness or the completeness of the accounts of the assessee or
wherever no methodology of accounting has been frequently and systematically utilized by the
assessee.

The Best Judgment Assessment could be a procedure underneath the Income Tax Act to
accommodates the principles of natural justice. Vide Section one hundred forty four of the tax
Act, 1961 the Assessing Officer is underneath an obligation to create an assessment of the
overall financial gain or less to the most effective of his judgment within the following cases.

If the person fails to create a come back or needed underneath s. 139(1) and he has not created a
come back or a revised come back underneath ss. (4) or (5) of that section.

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If somebody fails to accommodates all the terms and conditions stipulated underneath a notice
u/ss. 142 or fails to accommodates the directions requiring him to induce his accounts audited in
terms of section 142(2A).

If somebody, once having filed a come back fails to accommodates the with all the terms of a
notice underneath section 143(2) requiring his presence or production of proof and documents;
or

If the Assessing officer isn't happy concerning the correctness and also the completion of the
accounts of the assessee if no methodology of accounting has been frequently utilized by the
assessee.

In case of best judgment assessment an assessee encompasses a right to file an attractiveness

underneath S. 246A or to create an application for revision underneath S.246 to the tax
Commissioner. the most effective judgment assessment will solely be created once giving the
assessee a chance of being detected.

Such opportunities shall run by supplying of notice by method of a show cause on why the
assessment shouldn't be completed to the most effective of the judgment which chance for
hearing won't be necessary wherever notice u/s 142(1) has been issued.

Under this provision wherever the assessee fails to file a comeback or submit the documents or
fails to accommodates any of the preceding conditions the assessing officer is sceptred u/s one
hundred forty four to assess the overall financial gain consistent with the most effective of his
judgment with an inexpensive chance provided to the tax remunerator of being detected. this is
often but to the exclusion of the availability as provided U/s 142(1) of theIncome Tax Act
wherever the assessee has been given previous notice to the assessment. The assessing officer u/s
one hundred forty four is underneath a obligation to create assessment of the overall financial
gain or the loss to the most effective of his judgment and also the tax collectible once taking all
externalities and conditions under consideration.

Judicial Rulings on Scope of Sec. 144

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The term ‘best judgment assessment’ isn't a term of art. once the statute prescribes resort to the
most effective judgment assessment in either of the two contingencies, the Court won't be even
in deciphering the expression with relation to the final principle concerning the question on once
assessment is created on the idea of best judgment. In creating best judgment assessment the
officer doesn't possess discretional powers to assess any figure as he like. tho' similar judicial in
nature these assessments are to be supported the principles of justice, equity and smart
conscience. In common formulation the words ‘best judgment’ carry the connotation that what's
being done is so as to create an estimate.

When Best Judgment Assessment is made:

 Ex-parte proceedings – an assessment created underneath S. one hundred forty four will
by no suggests that be equated to ex-parte proceedings during a civil court.
 Mandatory action for defaults – Best judgment assessment is obligatory for anybody of
the defaults underneath S. 144.
 Approximations – wherever the assessee had provided with solely approximate figure in
his come back of financial gain with none more details,Income Tax absolutely was
command that the most effective judgment assessment created by ignoring such a come
back was invalid.
 Signing of come backs – A best judgment assessment is created once the return isn't
signed and verified.
 Production of accounts – wherever, in response to a combined notice for private look in
addition as production of account books, the assessee appeared personally however failed
to manufacture any account books; it absolutely was command that the Income-tax
Officer would be even in creating a best judgment assessment.
 Often instances could arise wherever the assessee maintains false accounts to evade the
payment of tax and in such instances it becomes troublesome on the assessing authority
to exactly notice the quantity of turnover hid. In such cases the judgment is created by the
assessing officer to the most effective of his judgment and then long it's made during a
non-arbitrary method and also the nexus looks apparent the choice is final and there's no
scope for officious with the most effective judgment. Thus, during a method there

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 remains no scope for difficult a best judgment assessment. this is often as a result ofan
assessee can not be allowed to require advantage of his own black act.

2- Object and Basis of Best Judgment Assessment

The object and also the purpose of the most effective Judgment are to attain a good and correct
estimate of the turnover of the dealer. the most effective judgment doesn't mean sweetening in
turnover of the dealer. The assessee ought to be given adequate chance of meeting the case that is
sought-after to createan assessment order. Even in cases wherever in cases the AO receives data
from outside the establishment or business or individual United Nations agency is being assessed
he should disclose the supply of data to the assessee has got to be discovered. wherever
evidentiary material made by the third party was sought-after to be relied upon for showing the
come back submitted by the assessee was incomplete and dubious, the assessee was entitled to
own such an individual summoned as a witness for cross examination for establishing truth and
exposing falsehood.

Basis of Best Judgment Assessment

Where the quantum of turnovers was supported the assessee’s account books that are accepted
together with different records there is no ground for creating a best judgment assessment, it
being well-known that the most effective judgment assessment has got to get onan estimate. In
different words, a component of guess-work is guaranteed to be gift in best judgment assessment
though it should have an inexpensive nexus to the accessible material and also the circumstance
of every case.

At this juncture it's pertinent to say that correctness of accounts isn't the only real criteria for
acceptive came figures of best assessment judgment. different externalities like volume of
business, conduct of the dealer, past records and similar facts are conditions that are the idea for
a best judgment assessment.

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It is pertinent to be suggested during this respect that once a come back is filed tho' late the
assessing officer isn't at liberty to ignore it and still applies his best judgment. Thus, wherever
the Assessing Officer feels that it's incomplete and incorrect and he has got to follow the
procedure and provides a chance to the assessee to prove the completeness or correctness of the
come back. Similarly, wherever the assessee wasn't a registered dealer and failed to file his
returns voluntarily notice for best judgment has got to be issued during a prescribed kind inside
the {three} years time to that the assessment proceedings can be completed even once the
termination of three years. once the assessment was created on the idea of not invoking best
assessment penalty for late submission isn't approved. wherever the assessing authority fastened
the turnover that recorded with the turnover recorded by the assessee in his books of accounts it
couldn't be aforesaid that the assessment created by the assessing authority. it's enough if such
assessment had an inexpensive nexus to the accessible material on record.

In case of failure of filing or non-filing of returns the supplying of a notice to the assessee is
elective. so just in case of non-filing of returns the assessing authority could visit the premises of
the dealer and examine the books of accounts at his premises within the presence of the dealer
wherever the supplying of a notice for the aforesaid purpose isn't needed. There can not be a true
basis of basis of rejection of the books of accounts if it looks that the assessing officer rejected
the returns on the idea of unreasonable suspicion and within the absence of any finding relating
to sale and get omission.

3 -Appraisal of the Procedure

When the returns and also the books of account are rejected, the assessing officer should createan
estimate, and to it extent he should create a guess; however the estimate should be associated
with some proof or material and it should be one thing over mere suspicion. He should create
what he honestly believes to be a good estimate of the right figure of assessment and for this
purpose he should take into thought such materials because the assessing officer has before him,
as well as the assessee’s circumstances, data of previous returns and every one different matters
that the assessing officer thinks can assist him in inbound at a good and correct estimate.

In cases that clearly fall on the far side the road of permissible guess work or whimsy, the
assessment should be put aside. In estimating any turnover, it's inevitable that there's some

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guess- work. The assessing authority whereas creating the most effective judgment assessment
ought to attain its conclusion with none bias and on rational created by the assessing authority
could be a true estimate and relies on a rational basis, the very fact that there's no smart proof in
support of that estimate is immaterial. clear, the assessing authority is that the best choose of
true. it's his best judgment and not of anybody else.

Nexus for Guess-Work

In the estimation, there could also be some overestimate and underestimate. that might not be
decent for questioning the determination of the quantity of tax collectible by the dealer as
determined to the most effective judgment. The term ‘to the most effective of judgment’ of the
assessing officer would create mentally his judgment. wherever the estimate is on account of
whimsy, vengefulness or capriciousness of the assessing officer, it can not be aforesaid to be his
judgment. The estimate supported the name of the dealer within the vicinity, the length of the
amount of his business to boost the come back turnover by five-hitter solely can not be aforesaid
to be with none nexus once that side of the matter isn't challenged. name and also the length of
amount of business would be decent nexus within the peculiar circumstance of a case, though the
assessing authority will take turnovers of the previous years for the aim of estimation.

Penalties

In best judgment assessment, wherever the come back has not been filed, the instant it's found
that the dealer has transacted business and his turnover is dutiable then penalty is obligatory. The
mere reality there's best judgment, significantly once the assessment supported the illation
flowing from the shortcoming of the assessee to ascertain the case pleaded by him, won't be
decent for the aim of imposition of penalty, for the degree of proof needed for the imposition of
penalty is kind of completely different from and is of a far higher order than that needed for the
aim of constructing a best judgment assessment. tho'an estimate created on best judgment basis
could also be legal, for the aim of imposing penalty one thing a lot of concrete is needed which
might change the judicial mind to achieve the conclusion that the dealer truly had the turnover
that was fastened by best judgment. The order imposing penalty cannot sustain if there's no
material accessible to conclude that there was any willful suppression of the dutiable turnover
warranting a penalty.

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Conclusion

A general understanding of the procedure shows that the most effective judgment assessment
procedure has given wide discretionary powers to the assessing authority to assess within the
instances wherever there has been willful suppression and concealment of financial gain and
turnover by the assessee. the facility thus offered is wide to the extent that the AO has the
authority to assume from the documents thus gift on provide an assessment with an exaggerated
or a ablated turnover supported the documents thus provided. even supposing the belief could
also be shot if it's a valid justification that everyone the turnover so recorded so as to properly
assume the turnover and also thereby the returns just in case of an effort to by design conceal the
tax collectible by not displaying within the books of accounts and the different official
documents.

Tax assessment being a troublesome space of labor it's however imperative that the assessing
authority ought to be given adequate powers for encountering tax evaders. The assessing officers
during this respect are given wide powers therein regarding. It additionally aids in honest tax
disclosures thus on avoid the rising issues of evasion that had panic-stricken the economy of the
country thereby giving rise to a parallel unaccounted economy.

A mandatory best judgment is finished within the event of failure to furnish requisites books of
accounts by the assessee and more the discretionary assessment created wherever the AO is
underneath the firm belief that the records aren't true or identical aren't permissible by him or
rejected of any of the grounds that the assessing officer deems fit the case. but this power isn't
absolute and there's an essential understanding that the actions of the assessing authority are
going to be honestly and diligently performed. more the assessee is given the facility to furnish
reasons for failure to produce adequate reasons for the non revealing or concealment of the fabric
documents and on why an assessment shouldn't be created consistent with the most effective
understanding of the assessing authority. Moreover, an assessee encompasses a right to filean
attractiveness underneath S. 246A or to create an application for revision underneath s. 246 to
the tax Commissioner if he's not happy with the choice created against him. However, it's to be
unbroken in mind the courts cannot but assess or interfere with the choice apart from on
instances on a cloth error on face or record or any mistake of law. it's pertinent to say but, that
the powers apparently are too wide and may be wont to the damage ofan assessee and may be
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manipulated by a corrupt officer. thus there has got to be checks and balances to the ‘guess work’
worn out case of a best assessment judgment. The AO ought to be asked to produce and furnish
proof for his actions as critical that of the assessee and solely once a deduction of either side of
the documents provided ought to the court come back to a choice. At present, the Income Tax
Act doesn't inflict any strict methodology of assessment however it's submitted there so could be
a got to slim down and systematize the procedural law on this time thus on bring clarity and
vigilance to the operations of the tax officers.

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Bibliography

Primary Sources

The tax Act, 1961

Cases

Kamala Mills Ltd. V. urban center State, (1965) 16 STC 613 (SC)

Illuri Subbaya Chetty v. State of AP, (1963) 14 STC (SC)

Surya Fertilizers & Chemicals v. State of state, (1977) 40 STC 538 (Mad)

Gem & Co v. State of West Bengal, (1959) 10 STC 537 (Cal)

Bengal Behar Construction Co. Pvt Ltd. V. State of state, (1983) 44 STC 176 (Mad)

State of state v. Maharaja B.P. Singh Deo, (1970)77 ITR 674 (Cal).

State of Madras v. Jayaraj Nadar & Sons, (1971) 28 STC 700 (SC)

Nemi Chand Vimal Chand v. CST, (1974) 34 STC 562 (All)

Bata Shoe Co. Pvt Ltd v. Joint CTO, (1968) 21 STC 135 (Mad)

Motor House v. State of state, (1990) 79 STC 385 (Ori)

Ravi v. State of TN, (1981) 48 STC 274 (Mad).

Babulal Agarwal v. CST, (1987) 66 STC 164 (MP)

Bhaskar Rao v. State of AP, (1986) 63 STC 297 (AP)

Secondary Sources(Books)

MRV. Rao et al’, ideas in Taxation, The Law Publishers, Madras.

N. A. Palkhivala and B.A. Palkhivala, Kanga and Palkhivala’s The Law and observe of tax,
N.M.Tripathi Pvt. Ltd., Bombay, 7th Ed. 1977, Vol.1.

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Narayan Jainist & Deepak Loyalka, a way to Handle tax Problems? Book Corporation
Publishers, 1997-1998.

Rakesh Bhargava(ed), Taxmann’s Master Guide to tax Act, Taxmann Publication, New Delhi,
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Dr. Vinod K. Singhania and Monica S-inghania; Students’ Guide to financial gain Tax; Taxmann
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H.C. Mehrotra; Income-tax Law and Accounts; Sahitya Bhawanedition.

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Dinkar Pagare; Law and observe of financial gain Tax; ruler Chand & Sons;

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