JUDGMENT
Bharucha, J.
1. This reference, made at the instance of the assessee, raises a pure issue of law. Detailed facts need not, therefore, be stated.
2. The assessee is a partnership firm, constituted in 1946. Its partners were the directors of a private limited company called RBSD Pvt. Ltd. Raids were conducted in August/September, 1963, on the premises of the company and various documents were seized. Upon examination thereof, notices under section 148 of the Income-tax Act, 1961, were issued by the Income-tax Officer to the assessee seeking to reassess it for the assessment years 1950-51 to 1958-59. The assessee failed to respond to the notices under section 148. On March 26, 1970, the Income-tax Officer made reassessments for these assessment years under section 147 read with section 144 of the said Act. Appeals were filed before the Appellate Assistant Commissioner and thereafter before the Income-tax Appellate Tribunal. It is not in dispute that whereas the issue in the third question before us was taken as a ground of appeal, it was not urged before the Tribunal.
3. Three questions are referred to us and they read thus :
“(1) Whether, on the facts and in the circumstances of the case, the sanction of the Central Board of Direct Taxes received by the Income-tax Officer for initiating action under section 147(a) of the Income-tax Act, 1961, was valid in law ?
(2) Whether, on the facts and in the circumstances of the case, the action under section 147(a) of the Income-tax Act, 1961, was initiated by the Income-tax Officer after the expiry of the period of limitation ?
(3) Whether, on the facts and in the circumstances of the case, the reassessment made under section 144 of the Income-tax Act, 1961, was legal ?”
4. As far as the first question is concerned, counsel have agreed that it is covered by the judgment of the Supreme Court in Union of India v. Seth R. Dalmia , and that the question must be answered in the affirmative and in favour of the Revenue. It is so answered. Mr. Salve, learned counsel for the assessee, stated that he does not press the second question. Accordingly, an answer to it is not required.
5. This brings us to the third and disputed question. Mr. Dhanuka, learned counsel for the Revenue, submitted that this question should not be answered, since it decided ones not arise out of the judgment of the Tribunal. Having regard to the view that we are inclined to take on the merits, we have not deemed it necessary to consider this submission.
6. It was Mr. Salve’s submission that section 144 of the Income-tax Act, 1961, which deals with best judgment assessments, has no application if the provisions of section 147 of the said Act, which deals with income escaping assessment, have been applied. In his submission, section 143(3), section 144 and section 147 confer upon the taxing authority separate and independent powers of making assessments.
7. At the outset, it must be noted that under the provisions of section 147 of the Income-tax Act, 1961, if the Income-tax Officer finds that income chargeable to tax has escaped assessment, “he may, subject to the provisions of sections 148 to 153, assess or reassess such income.” Section 148 of the said Act requires the Income-tax Officer, before making an assessment or reassessment under section 147, to “serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 139; and the provisions of the Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section”. It will, therefore, be seen that section 144 of the said Act, being a provision of the Act, applies after a notice is served under section 148, which notice is a precondition to the making of an assessment or reassessment under section 147. Section 144 says that “if any person fails to make the return required by any notice given under sub-section (2) of section 139 … the Income-tax Officer, after taking into account all relevant material which the Income-tax Officer has gathered, shall make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment”. A best judgment assessment, applying the provisions of section 144, can, therefore, be made when the provisions of section 147 have been invoked and the assessee has failed to respond to a notice under section 148 of the said Act.
8. Mr. Salve placed reliance upon the words “and the provisions of this Act shall, so far as may be, apply as if the notice were a notice under that sub-section” (that is, section 139(2)) in section 148 of the Income-tax Act, 1961. By reason of the words “so far as may be”, the provisions of section 144 of the said Act, he submitted, stood excluded. A best judgment assessment under section 144, Mr. Salve reasoned, entitled the Income-tax Officer to estimate income on such material as was available and even if no material was available. Under section 147 of the said Act, however, there had to be some material and if the assessee did not respond to a notice under section 148 of the said Act, only an adverse inference could be drawn thereon. The approach of the taxing authority to an assessment under section 147 has to be materially different from its approach to an assessment under section 144. It was impermissible for the taxing authority to estimate income under section 147 as it could under section 144, because it was open to the assessee to show that upon the material before the taxing authority, no adverse inference could be drawn or that the adverse inference drawn was not warranted. Mr. Salve submitted, therefore, that the taxing authority and the Tribunal had, in the instant case, misdirected themselves in law.
9. A best judgment assessment under section 144 of the Income-tax Act, 1961, has to be made upon such material as is available. Section 147 of the said Act predicates the existence of some material. Where an assessee does not respond to a notice under section 148 of the said Act, the taxing authority is obliged to determine the assessee’s income as best as it can based on that material. There is no real difference between the manner in which the taxing authority reaches its conclusions under the provisions of section 144 and section 147. Both are assessments made to its best judgment. It is open to the assessee to argue that the material does not support the assessment made under section 147 as under section 144. There is, therefore, no merit in the submission that the words “so far as may be” in section 148 exclude the applicability of the provisions of section 144 to an assessment made under section 147.
10. Mr. Salve submitted that the Income-tax Act, 1961, itself differentiated between assessments made under section 147 and section 144 of the said Act. He drew our attention to section 153, sub-sections (1) and (2). These sub-sections prescribe different time-limits for assessments under sections 144 and 147. Our attention was also drawn to section 246, clauses (c) and (e) of the said Act. Section 246 sets out which orders are applicable; in clause (c) it speaks of orders under section 143 of the said Act and in clause (e) of orders under section 147. Mr. Salve then referred to the provisions of section 263 of the said Act whereunder the Commissioner is invested with power to revise orders prejudicial to the Revenue; this power does not extend to orders of reassessments made under section 147. The context of all these provisions is entirely different. They have no bearing on the issue before us, namely, whether a best judgment assessment under section 144 can be made when the powers under section 147 are invoked and the assessee does not respond to the notice under section 148 of the said Act.
11. Mr. Salve cited the decision of this court in D. Swarup, ITO v. Gammon India Ltd. [1983] 141 ITR 841 (Bom). It was held that a penalty could not be levied under section 273 of the Income-tax Act, 1961, against an assessee on the basis of a reassessment order under Section 147 of the said Act, because the phrase “regular assessment” in section 273 did not cover a reassessment under section 147. Mr. Salve emphasised the observations that there was a clear indication in the Income-tax Act, 1961, that a reassessment under section 147 was not the same as an assessment under section 143 or section 144 of the said Act.
12. Apart from the fact that the issue in the case of Gammon India Ltd. [1983] 141 ITR 841 (Bom), was entirely different, there is an observation in the judgment which is adverse to Mr. Salve’s contention. It reads thus (P. 845) :
“The mere fact that the machinery which is availed of for the purpose of assessment under section 143 or section 144 of the Act can be availed of while making a reassessment under section 147 does not make the reassessment under section 147 the same as an assessment under section 143 or section 144.”
13. To conclude, we hold that where an assessee does not respond to a notice issued under section 148 of the Income-tax Act, 1961, it is permissible for the taxing authority to assess him on a best judgment basis under section 144 of the said Act.
14. The first question is answered in the affirmative and in favour of the Revenue. The second question is not pressed and is, therefore, not answered. The third question is answered in the affirmative and in favour of the Revenue.
15. The assessee shall pay to the Revenue the costs of the reference.