Section 144 — Best Judgment Assessment

Section 144 of the Income-tax Act, 1961, empowers the Assessing Officer to make an assessment to the best of their judgment when a taxpayer fails to comply with certain procedural requirements. This section is invoked when a taxpayer does not file a return, fails to comply with notices, or does not cooperate during the assessment process. The Assessing Officer, in such cases, is authorized to determine the taxpayer's income based on available information and reasonable estimates. The significance of this section lies in its role as a deterrent against non-compliance and as a tool for the tax authorities to ensure that tax liabilities are assessed even in the absence of complete information from the taxpayer. The burden of proof lies with the taxpayer to demonstrate that the assessment made is excessive or incorrect. Practically, this section underscores the importance of timely and accurate compliance with tax filing and documentation requirements.

Common Litigation Flashpoints

1. Disputes over the reasonableness of the officer's estimates
2. Challenges to the validity of invoking Section 144
3. Contentions regarding non-receipt of notices
4. Arguments about the sufficiency of evidence used in assessment

Judgments on Section 144 — Best Judgment Assessment

• M/s. Goldman Sachs Services Pvt. Ltd. vs Joint Commissioner of Income Tax — ITAT, 2020
  Disallowance under section 14A is not applicable if no exempt income is earned during the assessment year.
• Arya Roadways Company Pvt. Ltd. vs I.T.O., Ward-12(1), Kolkata — ITAT,
  The case was remanded to ensure a fair opportunity for the assessee to substantiate its claims regarding the expenditure.
• Commissioner of Income Tax, Karnataka vs M/S Bedi & Company Private Limited — SC,
  The High Court rightly held that the circumstances did not justify the conclusion that the amount was not received as a loan.
• Pawan Sachdeva vs Income-Tax Officer, Ward 19(3), Delhi & Anr. — HC,
  Issuance of notice within the limitation period is sufficient for jurisdiction, even if the service occurs later or with errors.
• T.K.S. Builders Pvt. Ltd. vs Income Tax Officer Ward 25(3) New Delhi — HC,
  Notices under Section 148 must be issued through automated allocation and in a faceless manner as per the Faceless Assessment Scheme.
• Nuvama Wealth Management Limited vs DCIT — ITAT,
  ESOP discount represents consideration for services rendered by employees and is therefore deductible as business expenditure.
• DCIT-7(1)(1) vs Goldman Sachs (India) Securities Pvt. Ltd. — ITAT,
  Discount on issue of employees stock options is allowable as deduction in computing the income under the head profits and gains of business.
• Hyatt International Southwest Asia Ltd. vs Additional Director of Income Tax — SC,
  A Permanent Establishment exists if the enterprise has a fixed place of business at its disposal through which it carries on its business activities.
• Union of India & Anr. vs M/s. Ganpati Dealcom Pvt. Ltd. — SC,
  The 2016 Amendment Act cannot be applied retrospectively as it creates new offences and substantive changes, which cannot be applied to past transactions.