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Best Judgment Assessment [Section 144]

The Assessing Officer, after taking into account all relevant material which he has gathered, is under an obligation to make an assessment of the total income or loss to the best of his judgment and determine the tax payable by the assessee in the following cases:

(i)         where any person fails to make the return under section 139(1) and has not made a return or a revised return under section 139(4) or section 139(5);

(ii)        where any person:

—         fails to comply with all the terms of a notice issued under section 142(1); or

—         fails to comply with the directions issued under section 142(2A) for getting the account audited.

(iii)       where any person, having made a return, fails to comply with all the terms of a notice issued under section 143(2).

(1)  Opportunity must be given to the Assessee:

The best judgment assessment can only be made after giving the assessee an opportunity of being heard by giving notice to the assessee to show cause why the assessment should not be completed under section 144. However, it will not be necessary to give such notice where a notice under section 142(1) has already been issued prior to making assessment under this section.

1. The Assessing Officer cannot assess income under section 144 for an assessment below the returned income or cannot assess the loss higher than the returned loss.

2. If an assessment under section 144 is made without giving a show cause notice under section 144 [except where a notice has been issued under section 142(1)(i)] then the assessment is void-ab-initio.

3. No refund can be granted under section 144.


(2)  Assessment on Rejection of Accounts:

Section 145(3) empowers the Assessing Officer to reject the account books which are unreliable, false or incorrect or incomplete. The Assessing Officer can reject the books of account on the following grounds and may make the assessment in the manner provided in section 144:

(a)        He is not satisfied about the correctness or completeness of the accounts of the assessee,

(b)        Although the accounts of the assessee are correct and complete to the satisfaction of the Assessing Officer but the method of accounting employed is such that, in the opinion of the Assessing Officer, profits cannot be correctly arrived therefrom.

(c)        Where the method of accounting adopted by the assessee has not been regularly followed by him, or

(d)        Where income has not been computed in accordance with the standards notified under section 145(2).

(3)  Power of Joint Commissioner to issue Directions in certain cases [Section 144A]

A Joint Commissioner may:

(a)        on his own motion; or

(b)        on a reference being made to him by the Assessing Officer; or

(c)        on the application of an assessee

call for and examine the record of any proceeding in which an assessment is pending. Thereafter, if he considers that:

(a)        having regard to the nature of the case; or

(b)        the amount involved; or

(c)        for any other reason,

it is necessary or expedient so to do, he may issue such directions as he thinks fit for the guidance of the Assessing Officer to enable him to complete the assessment.

The powers of the Joint Commissioner are wide and he can issue directions to the Assessing Officer for any reasons that he thinks are necessary. The directions to the Assessing Officer are binding in nature and the assessee has a recourse to agitate in appeal if the Assessing Officer does not follow the directions.

however, no directions which are prejudicial to the assessee shall be issued before an opportunity is given to the assessee to be heard.

Direction as to the lines on which an investigation connected with the assessment should be made, shall not be deemed to be a direction prejudicial to the assessee.

Section 144A is indeed an effective tool for seeking intervention of higher authorities on interpretation and resolution of vexed issues arising during the course of assessment.

Conditions to be satisfied before invoking Section 144A:

The provisions of section 144A can only be evoked if:

(a)        notice under section 143(2) has been issued, and

(b)        the assessment proceedings as a consequence of the notice are pending.

 1.        Assessment includes reassessment and hence direction under section I 44A can be given even when any reassessment is pending.

2.         No appeal can be filed against the directors issued by Joint Commissioner under section 144A The assessee can file an appeal to CIT (Appeal) against the assessment order passed by Assessing Officer on the direction of Joint Commissioner.


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