The officer completed a best judgment assessment under s.144 because I did not attend in answer to the s.143(2) notice. Was he required to give me a separate show cause notice first?
Yes. The proviso to s.144(1) requires that the opportunity of being heard be given by serving a notice calling on the assessee to show cause, on a date and time specified, why the assessment should not be completed to the best of the officer's judgment. Where the record showed no notice other than the s.143(2) notice had been issued, the Allahabad High Court held that no notice under the proviso had been issued, set aside the Commissioner's order refusing relief under s.264 and directed him to pass a fresh order in accordance with law.
Decided by the High Court (R. K. Agrawal J) on 2005-04-29, reported as [2006] 284 ITR 374 (All); (2006) 202 CTR (All) 417; writ petition under Articles 226/227 of the Constitution. It bears on section 144, section 143(2), section 264 of the Income Tax Act 1961, in Assessment & Scrutiny and Appeals matters.
The best judgment cases in every practitioner's head are about the quality of the estimate — honest, on material, not a wild guess. This one is about the step before it, and it is the step most often skipped: the officer has a s.143(2) notice that went unanswered and treats that as licence to assess ex parte. The proviso says otherwise; the opportunity has to be given by a specific notice, on a specified date and time, that tells the assessee the assessment is about to be completed to the best of the officer's judgment. Two things must be checked before running the point. The proviso itself excepts the case where a notice under s.142(1) has already been issued before the making of the assessment, so a file with a live s.142(1) notice is a different case from this one. And the relief obtained here was not annulment: the writ was against the Commissioner's order under s.264, and what the court did was set that order aside and send it back for a fresh decision. The point is a ground of challenge, not by itself a guarantee that the assessment falls.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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Malik Packaging was a partnership firm, Smt. Sofia Malik holding 60 per cent and Anish Khan 40 per cent. For AY 1994-95 it returned income of Rs 3,010. A notice under s.143(2) was issued on 27 October 1995 and served on 7 November 1995. The assessee failed to appear, on account of illness. The Assistant Commissioner made a best judgment assessment under s.144 determining taxable income at Rs 50,000 and assessing the firm as an association of persons. The appeal was dismissed on 15 October 1997 and a revision petition under s.264 was dismissed by the Commissioner on 28 February 2000. The assessee moved the High Court under Articles 226/227. A specific averment had been made in the s.264 petition that no notice other than the s.143(2) notice of 27 October 1995 had been issued, and the Commissioner had himself noticed that fact.
The writ petition succeeded and was allowed. The case fell under s.144(1)(c), failure to comply with the terms of a notice under s.143(2), and the proviso required the opportunity of being heard to be given by serving a notice calling on the assessee to show cause, on a date and time specified in the notice, why the assessment should not be completed to the best of the officer's judgment. The record proved that no notice under the proviso to s.144(1) had been issued. The Commissioner's order dated 28 February 2000 could not be sustained and was set aside, and he was directed to pass a fresh order in accordance with law.
The court identified the limb of s.144 in play as failure to comply with the terms of a notice under s.143(2), and set out the requirement that the Assessing Officer shall, after giving the assessee an opportunity of being heard, make the assessment. It then set out the proviso, under which that opportunity is to be given by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment. Turning to the record, the court held that a specific averment having been made in the s.264 petition that no notice except the s.143(2) notice dated 27 October 1995 had been issued, a fact which the Commissioner had himself noticed, this went to prove the assessee's case that no notice under the proviso to s.144(1) had been issued. The procedure adopted therefore did not answer the statute, and the Commissioner's refusal of relief could not stand.
Specific averment having been made in the petition under Section 264 of the Act that no notice except the notice issued under Section 143(2) of the Act, dated 27.10.1995, having been issued, which fact had also been noticed by the Commissioner of Income Tax, it goes to prove the case set up by the petitioner that no notice under the proviso to Sub-section (1) of Section 144 of the Act had been issued.
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Handle my notice → Ask a CA on WhatsAppYes. The proviso to s.144(1) requires that the opportunity of being heard be given by serving a notice calling on the assessee to show cause, on a date and time specified, why the assessment should not be completed to the best of the officer's judgment. Where the record showed no notice other than the s.143(2) notice had been issued, the Allahabad High Court held that no notice under the proviso had been issued, set aside the Commissioner's order refusing relief under s.264 and directed him to pass a fresh order in accordance with law. This was decided by the High Court (R. K. Agrawal J) and bears on section 144, section 143(2), section 264 of the Income Tax Act 1961. It is reported as [2006] 284 ITR 374 (All); (2006) 202 CTR (All) 417; writ petition under Articles 226/227 of the Constitution. The best judgment cases in every practitioner's head are about the quality of the estimate — honest, on material, not a wild guess. This one is about the step before it, and it is the step most often skipped: the officer has a s.143(2) notice that went unanswered and treats that as licence to assess ex parte. The proviso says otherwise; the opportunity has to be given by a specific notice, on a specified date and time, that tells the assessee the assessment is about to be completed to the best of the officer's judgment. Two things must be checked before running the point. The proviso itself excepts the case where a notice under s.142(1) has already been issued before the making of the assessment, so a file with a live s.142(1) notice is a different case from this one. And the relief obtained here was not annulment: the writ was against the Commissioner's order under s.264, and what the court did was set that order aside and send it back for a fresh decision. The point is a ground of challenge, not by itself a guarantee that the assessment falls. If it applies to you, the first step is this: Ask for the complete order sheet and list every notice actually issued in the year, with dates: s.143(2), any s.142(1), and any separate notice under the proviso to s.144(1).
Malik Packaging was a partnership firm, Smt. Sofia Malik holding 60 per cent and Anish Khan 40 per cent. For AY 1994-95 it returned income of Rs 3,010. A notice under s.143(2) was issued on 27 October 1995 and served on 7 November 1995. The assessee failed to appear, on account of illness. The Assistant Commissioner made a best judgment assessment under s.144 determining taxable income at Rs 50,000 and assessing the firm as an association of persons. The appeal was dismissed on 15 October 1997 and a revision petition under s.264 was dismissed by the Commissioner on 28 February 2000. The assessee moved the High Court under Articles 226/227. A specific averment had been made in the s.264 petition that no notice other than the s.143(2) notice of 27 October 1995 had been issued, and the Commissioner had himself noticed that fact. The matter was decided on 2005-04-29 by the High Court (R. K. Agrawal J). On those facts the High Court held as follows. The writ petition succeeded and was allowed. The case fell under s.144(1)(c), failure to comply with the terms of a notice under s.143(2), and the proviso required the opportunity of being heard to be given by serving a notice calling on the assessee to show cause, on a date and time specified in the notice, why the assessment should not be completed to the best of the officer's judgment. The record proved that no notice under the proviso to s.144(1) had been issued. The Commissioner's order dated 28 February 2000 could not be sustained and was set aside, and he was directed to pass a fresh order in accordance with law.
The court identified the limb of s.144 in play as failure to comply with the terms of a notice under s.143(2), and set out the requirement that the Assessing Officer shall, after giving the assessee an opportunity of being heard, make the assessment. It then set out the proviso, under which that opportunity is to be given by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment. Turning to the record, the court held that a specific averment having been made in the s.264 petition that no notice except the s.143(2) notice dated 27 October 1995 had been issued, a fact which the Commissioner had himself noticed, this went to prove the assessee's case that no notice under the proviso to s.144(1) had been issued. The procedure adopted therefore did not answer the statute, and the Commissioner's refusal of relief could not stand. In the words reproduced by the source cited on this page: "Specific averment having been made in the petition under Section 264 of the Act that no notice except the notice issued under Section 143(2) of the Act, dated 27.10.1995, having been issued, which fact had also been noticed by the Commissioner of Income Tax, it goes to prove the case set up by the petitioner that no notice under the proviso to Sub-section (1) of Section 144 of the Act had been issued."
It was decided by the High Court on 2005-04-29 and is reported as [2006] 284 ITR 374 (All); (2006) 202 CTR (All) 417; writ petition under Articles 226/227 of the Constitution. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 144, section 143(2), section 264, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The writ petition succeeded and was allowed. The case fell under s.144(1)(c), failure to comply with the terms of a notice under s.143(2), and the proviso required the opportunity of being heard to be given by serving a notice calling on the assessee to show cause, on a date and time specified in the notice, why the assessment should not be completed to the best of the officer's judgment. The record proved that no notice under the proviso to s.144(1) had been issued. The Commissioner's order dated 28 February 2000 could not be sustained and was set aside, and he was directed to pass a fresh order in accordance with law. It arises in Assessment & Scrutiny and Appeals matters, on section 144, section 143(2), section 264 of the Income Tax Act 1961, and was decided by R. K. Agrawal J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If the only notice was under s.143(2), plead specifically that no notice under the proviso to s.144(1) was issued — a specific averment on that, noticed by the authority, was what carried the case here. Check whether a s.142(1) notice had been issued before the assessment was made; if it had, the proviso's exception is engaged and the point is not available in this form. Where the assessee did not attend for a reason such as illness, put the reason on record with evidence — but do not rest the challenge on it, because the jurisdictional point is the absence of the proviso notice, not the sufficiency of the excuse. Choose the forum deliberately: this challenge was mounted through a revision petition under s.264 and then a writ against the order rejecting it, which is a route worth remembering where the appellate remedy has been lost. In a faceless s.144 assessment, look for the show-cause notice in the portal record and check its date, the time given, and whether it says the assessment will be completed to the best of judgment.
Validity check could not be completed. Later treatment was NOT checked. No search was run for decisions following or distinguishing this judgment on the proviso to s.144(1), and no appeal history was traced. The relief granted was a remand to the Commissioner under s.264, not annulment of the assessment, and the entry should be read accordingly. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The report as retrieved carried no visible paragraph numbers, so the key quote is located by description rather than by paragraph. The judgment was retrieved twice; the second pass returned the statutory proviso, the operative finding and the concluding paragraph in exact consecutive words, and those are what is quoted, while the facts were read in a rendered form. The date is a further difficulty: indiankanoon indexes the judgment as 29 April 2005 and the retrieved text gives the same date, but the reported citations are of 2006 ([2006] 284 ITR 374 (All); (2006) 202 CTR (All) 417). The 2005 date has been used. The proviso as quoted is the proviso as it stood for AY 1994-95. The proviso to s.144(1) and its exception where a notice under s.142(1) has already been issued were subsequently confirmed against the department's current page for s.144 (/w/section-144-62), whose only recent footnote concerns updated returns under s.139(8A) inserted by the Finance Act 2022; the proviso stands as quoted. One further disclosure about the quote below: the retrieved report carries an OCR slip in the quoted sentence, printing 'Commissioner of Income lax' for 'Commissioner of Income Tax'. The quote reproduces it as 'Income Tax' and changes nothing else. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The writ petition succeeded and was allowed. The case fell under s.144(1)(c), failure to comply with the terms of a notice under s.143(2), and the proviso required the opportunity of being heard to be given by serving a notice calling on the assessee to show cause, on a date and time specified in the notice, why the assessment should not be completed to the best of the officer's judgment. The record proved that no notice under the proviso to s.144(1) had been issued. The Commissioner's order dated 28 February 2000 could not be sustained and was set aside, and he was directed to pass a fresh order in accordance with law.
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