Assessment – Best judgment assessment – Assessee not very educated person, not properly represented – Supreme Court refused to interfere with assessment but directed that no interest be recovered and no penalty proceedings be initiated.

The dispute before the Supreme Court related to the assessment year 1998-99. The petitioner-assessee failed to appear before the assessing authority which compelled the assessing authority to complete the assessment u/s. 144 of the Income-tax Act, 1961. The said order is dated 29th December, 2005. The petitioner did not file any appeal, instead challenged the assessment order by filing a revision as provided for u/s. 264 of the Act before the Commissioner of Income-tax (Admn.), Muzaffarnagar. The memo of revision was dated 23rd May, 2006. The said revision was dismissed by the Commissioner of Income-tax on 25th March, 2008, as no one attended the office on the fixed date. Thereafter, an application to recall the said order was filed which was dated 9th June, 2008. The said application was dismissed by the order dated 26th October, 2010, on the short ground that there was no provision under the Income-tax Act for recalling the order passed u/s. 264 thereof. Feeling aggrieved, a writ petition was filed.

Before the High Court, Learned counsel for the petitioner submitted that power to pass ex-parte order included the power to recall the same notwithstanding absence of any express provision in respect thereof. He further submitted that the Commissioner of Income-tax should have decided the revision on the merits even if the petitioner could not appear on the fixed date.

The High Court held that it was not necessary to examine the proposition as to whether the Commissioner of Incometax was right in rejecting the restoration application on the ground and on the facts of the present case that he does not possess power to recall the ex-parte order. According to the High Court, even assuming that the Commissioner had power to recall the ex-parte order on the merits, it did not find that the petitioner had been able to establish sufficient cause for his non-appearance on the date fixed. The assessment order was also passed ex parte. It appeared that the petitioner was never serious to pursue his remedies under the Act and filed the revision application as a chance petition and did not prosecute it. The High Court did not find any merit in the petition.

On further appeal, the Supreme Court observed that the facts were very peculiar in this case because the appellants, who were not very educated persons, unfortunately could not be properly represented before the Assessing Officer and, therefore, the assessment was made ex-parte for the assessment year 1998-99. The Supreme Court noted that so far as the subsequent assessment years were concerned, some relief was given to the appellants-assessees by the High Court, but so far as the assessment year 1998-99 is concerned, the assessment was over and the assessment order has become final. In these circumstances, the Supreme Court was of the view that it was not proper to interfere with the assessment order. However, it directed that no penalty proceedings would be initiated and no interest would be recovered from the appellants-assessees and that the amount of tax would be paid within 60 days and if the amount was not paid within 60 days, it would be open to the authorities to charge interest on the assessed tax.