Ajit K.Sengupta, J. - (1.) In this reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the Revenue, the following question of law has been referred by the Tribunal for the opinion of this court: "Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in confirming the Commissioner of Income-tax (Appeals) order determining the loss at Rs. 4,20,000 which was done without any verification of the various claims made in the return as against the assessment order passed by the Income-tax Officer under Section 144 at "nil" income ?"
(2.) This reference relates to the income-tax assessment of the assessee-company for the previous year, being the calendar year 1981 corresponding to the assessment year 1982-83. In respect of the said year, the assessee-company filed its return of total income on June 26, 1982, declaring a net assessable loss of Rs. 4,45,140. The said return was accompanied by the audited profit and loss account, balance-sheet and other relevant details in respect of the calendar year 1981. The Income-tax Officer issued a notice under Section 143(2) of the Income-tax Act, 1961, asking the assessee-company to produce its books of account and other evidence on which it may rely in support of the return filed by it. The authorised representative of the assessee sought time to furnish the details and produce books of account. The case was adjourned from time to time and ultimately when there was no compliance, on May 27, 1985, the Income-tax Officer felt that the assessee-company was not prepared to co-operate with the Department and, therefore, proceeded to make an ex parte assessment to the best of his judgment under Section 144 of the Income-tax Act, 1961. The Assessing Officer only observed that, in the absence of accounts and other details and there being nothing on record to establish the assessee's claim of loss, he was not prepared to accept the loss return. The Income-tax Officer, therefore, rejected the loss return filed by the assessee and computed the total income at "nil".
(3.) The assessee-company filed an appeal against the said ex parte assessment to the Commissioner of Income-tax (Appeals) and submitted that the Income-tax Officer erred in ignoring its audited accounts and in rejecting its book results. It was also submitted on behalf of the assessee that proper opportunity was not given to the assessee-company for complying with the notice issued to it under Section 143(2) of the said Act and, in any event, the ex parte assessment made by the Assessing Officer without looking into the audited accounts filed with the return as well as past assessment records of the assessee-company was wholly arbitrary, mala fide, capricious and based on conjectures and surmises and was also contrary to the provisions of law. The Commissioner of Income-tax (Appeals) found that, even if there were good reasons for passing an ex parte order, the Income-tax Officer was wholly unjustified in totally ignoring the loss claimed by the assessee-company. The Commissioner observed that the Income-tax Officer should have based his judgment on the records of the assessee-company for earlier years. He could have derived support from the trend in the tea trade during the calendar year 1981 ; he could have looked around and seen how other tea companies were functioning. Instead of doing this, the Income-tax Officer was piqued and peeved by the behaviour of the appellant and passed his impugned assessment order ignoring the return and the accompanying statements. The Commissioner of Income-tax (Appeals) noted that the assessee was a public limited company and that its shares were regularly quoted on the Calcutta Stock Exchange. The Commissioner also looked into the past assessment records of the assessee-company and found that, in the immediately preceding year, that is to say, in the assessment year 1981-82, the Income-tax Officer, under directions from the Inspecting Assistant Commissioner given in the course of proceedings under Section 144B of the said Act, had determined the loss of the appellant before applying rule 8 of the Income-tax Rules, 1962, at Rs. 24,46,384 and in making the said assessment, the aggregate disallowance made was only Rs. 12,490.;