- (1.) 1. This is an Income tax reference by the Commissioner of Income Tax to this Court. The following three questions have been referred to this Court: (1) Whether the assessment made without issuing a notice under Section 22 (4) is not an assessment to the best of judgment as contemplated by Section 23 (4) and is illegal. (2) Whether the issue of a notice of Demand under Section 39, with respect to an assessment made under Sub -section (4) of Section 23, wherein no power to determine the sum payable by the assessee on the basis of such assessment has been conferred on an Income Tax Officer, is illegal; and (3) Whether a return made under Section 22 (2) on the form supplied to the assessee by the Income Tax Officer with the omission of signatures is an incomplete return contemplated by Section 23(2) and the assessment in such case could not be made without issue of a notice under this section viz., 23 (2).
(2.) THE facts of the case, as stated are that a notice under Section 22(2) of the Income Tax Act was sent to the assessee and time was extended and in compliance with that notice he sent a return which was not signed on any of its pages and was not verified. The Income Tax Officer held that no return at all had been sent, and, therefore, he made a best judgment assessment under Section 23 (4). The first question which has been referred suggests that there is some necessary connection between Section 22(4) and Section 23 (4). Section 23 (4) applies where there is a failure to make a return under Section 22(1) or (2) or where there is failure to comply with all the terms of a notice issued under Sub -section (4) of Section 22. It is not correct, therefore to assume that in every case where Section 23 (4) is to apply there must be a non -compliance with Section 22 (4).
(3.) THE next question (No. 4 in the printed record) is framed on the point that in Section 23 (4) the final words of the sub -section are that "the Income Tax Officer shall make the assessment to the best of his judgment." In sub -Sections (1) and (3) of Section 23, the language used is slightly different and it states that the Income Tax Officer shall "assess the total income of the assessee, and determine the sum payable by him on the basis of such return," or in the case of Sub -section (3), "of such assessment." The learned Counsel desires to draw a distinction between the language of the three sub -sections, and he argues that as Sub -section (4) does not specifically state that the Income Tax Officer shall determine the sum payable by the assessee, therefore the Income Tax Officer has no power to determine the sum payable. In other words, he argues that Sub -section (4) only empowers the Income Tax Officer to ascertain the amount of taxable income and does not empower him to calculate the amount of tax payable by the assessee. For this proposition the learned Counsel referred to In re Chhotey Lal, (137 I.C. 77). In that case the question at issue was whether the notice under Section 34 in regard to super -tax on the ground that some income had escaped assessment was valid. A Bench of this Court held that the words "had escaped assessment" could not apply, because the whole income had been assessed to income tax, although it had not been assessed to super -tax. The Bench however did hold that another portion of Section 34, would apply which refers to income which "has been assessed at too low a rate." In the course of the judgment the Bench made a reference to the meaning of the words "assessed" and ''assessment" ; and the learned Counsel contends that what was stated in that ruling should be applied in the present case. But there are two reasons why we cannot accept his argument. In the first place as pointed out the question before that Bench was one of super -tax and the meaning of the words "escaped assessment" in Section 34, In the second place, the Bench by some oversight did not refer to the definition of the word "assessee" in Section 2 (2) of the Act. In this definition it is stated "assessee" means "person by whom income tax is payable." We would naturally interpret the word "assessment" in consonance with that definition; and we consider that the word "assessment" in Section 23 (4), means determining the total taxable income and the sum payable on it. Therefore we consider that a notice could be validly issued under Section 29, when the Income Tax Officer had made a best judgment assessment under Section 23(4).;