Best judgment assessment [Section 144]:
If any person:
(a) fails to make the return required under section 139(1) and has not made a return or a revised return under sub-section (4) or sub-section (5) of section 139 or
(b) fails to comply with all the terms of a notice issued under section 142(1) or fails to comply with the direction issued under section 142(2A) or
(c) having made a return, fails to comply with all the terms of a notice issued under section 143(2) the Assessing Officer shall make a best judgment assessment.
Before making such assessment the Assessing Officer can take into account all relevant material which he has gathered. The assessee must be given an opportunity of being heard. Such opportunity shall be given by an Assessing Officer 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. Thereafter, the Assessing Officer shall make the assessment of total income or loss to the best of his judgment and determine the sum payable on the basis of such assessment. It may noted that no refund can be granted under section 144.
However, where a notice under section 142(1) has been issued prior to the making of an assessment under this section, it is not necessary to give such opportunity.
In all the three cases stated above it is mandatory for the Assessing Officer to make a best judgment assessment and he has no discretion to make or not to make such assessment. These three cases are alternative and not cumulative for the purpose of making on exparte assessment.
In a case where a Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner issued instructions under section 142(2A) nominated a Chartered Accountant for auditing the assessee‘s accounts and though the concerned assessee was willing to produce the records the concerned Chartered Accountant refused to audit the accounts, the question arose as to whether there was a failure on the assessee‘s part to comply with the directions under section 142(2A) and consequently the best judgement assessment could be made under section 144(b).
The Supreme Court held that if for a frivolous reason the Chartered Accountant declined to undertake the audit of the assessee‘s accounts the assessee could not be held responsible. In such a case there was no default or failure to comply with the direction issued under section 142(2A) on the asssessee‘s part so as to attract the provisions or section 144(b). The best judgement made by the assessing officer was set aside with the directions to appoint another Chartered Accountant within one month to get the accounts audited. [Swadesh Polytex Ltd. v. ITO [1983] 15 Taxman 19 (SC)].