Sabyasachi Mukharji, J. - (1.) In this reference the following question has been referred to us by the Tribunal: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that before making an assessment under Section 144 of the Income-tax Act, 1961, the asscssee should be given an opportunity of being heard under Section 142(3) of the said Act, in respect of any material gathered on the basis of an enquiry made under Section 142(2) and proposed to be utilised for the purpose of assessment and on that view in confirming the order of the Appellate Asst. Commissioner setting aside the assessment made under Section 144?"
(2.) The assessment years involved in this reference are 1967-68, 1968-69 and 1969-70. In the assessment year 1967-68, the assessee submitted a return under Section 139(2) showing a loss of Rs. 23,550. The ITO issued a notice to the assessee under Section 142(1) requiring the assessee to produce the statutory books but the assessee committed default and the ITO made an assessment under Section 144 of the I.T. Act, 1961. The assessee had claimed that it purchased Samabeong Tea Estate in 1963. It did not disclose any income up to 1965 from that tea estate. It also failed to produce the sale deed in its favour and satisfy the ITO that there was any agreement between the assessee and the seller, M/s. Padma Ltd., by which the latter was to run the estate. The ITO found that there was litigation between Shri K.R. Agarwal, principal director of the assessee, and members of his family and on the basis of an award, the tea estate was allotted to him and also the share capital of the assessee. The ITO was of the view that the assessee-company was, cent per cent. owned by Shri K.R. Agarwal. He, however, proceeded to assess the income of the tea estate in the hands of the assessee as the assessee claimed its ownership. The assessee produced account books but the ITO, for the reasons given by him in his order, rejected the same. The ITO also found defects in the accounts and also observed that the bills, correspondence between the offices of the assessee, staff acquittance rolls, etc., were not produced. The assessee claimed that the tea estate was sold out in November, 1966, but the assessee showed income from the same in the assessment years 1968-69 and 1969-70. The ITO estimated the assessee's income at Rs. 36,000 from tea manufacture and Rs. 4,000 from licence fee aggregating to Rs. 40,000 in the assessment year 1967-68.
(3.) For the assessment year 1968-69, the assessee submitted a return disclosing a loss of Rs. 62,194. In this year also the assessee failed to comply with the notice under Section 142(1) of the I.T. Act, 1961, and the ITO completed the assessment under Section 144 of the Act by estimating the assessee's income at Rs. 40,000. The assessee disclosed a loss of Rs. 37,032 in the return for the assessment year 1969-70 and it also failed to comply with the notice under Section 142(1) in this year. The ITO completed the assessment under Section 144 by estimating the assessee's income at Rs: 20,000.;