The best judgement assessment means evaluation or estimation in the context income tax law of income of the assessee by the assessing officer. The assessing officer will not act dishonestly or capriciously, he will give his best judgement.

Best judgement assessment types

  1. Compulsory best judgement assessment- It is the judgement in which the assessing offer make the judgement when the assessee is either not cooperating  or when the Assessee has defaulted in supplying any information.
  2. Discretionary best judgment assessment- It is the best judgement assessment which is being done by the assessing officer if there is inconsistency in the method of accounting or when the assessing officer is not satisfied with the correctness or completeness of the accounts.

Cases when Best Judgement Assessment can be made

The Best Judgement Assessment is a procedure which is under the Income Tax Act in order to comply with the principles of natural justice.  As per section 141 of the Income Tax Act, there is an obligation for the assessing officer in order to make an assessment of the total income in the following cases:

  1. If under section 139(1), the person failed to file the return and also a return or a revised return under sub-section (4) or (5) of that section has not been furnished by him.
  2. If any person fails in order to comply with all the terms and conditions that are stipulated under a notice u/s. 142 or either fails to comply with the directions requiring him to get his accounts audited in the terms of section 142(2A).
  3. If the Assessing Officer is also not satisfied with the correctness and the completion of the accounts of the Assessee or if no method of accounting has been regularly employed by the Assessee.

Remedies available to the assessee

  • Assessee is given a reasonable opportunity of being heard by the assessing officer before making a judgement. Such opportunity is given by issuance of the notice.
  • After completion of the best judgment assessment u/s 144 of the IT Act, the assessee has a right to file an appeal to the Commissioner of Grant u/s 264A.The assessee can also ask for a fresh assessment.

General Provisions

  • The assessing officer is empowered u/s 144 in order to assess the total income according to the best of his judgment if the Assessee fails to File Income Tax Return or has also not submitted the documents or he fails to comply with any of the conditions. However, a reasonable opportunity is being provided to the taxpayer of being heard.
  • This is to the exclusion of the provision provided u/s 142(1) of the IT Act where the Assessee has been given prior notice of the assessment. Taxing officers also have the jurisdiction in order to make the assessment under the Central Act even if the same turnover had already been assessed under the local Act.
  • An assessment order which is made relying on the computations that are made in the previous year’s records will not be invalid if the assessee was absent even after the notice was issued to him.
  • When the assessment officer sought for assistance and assessee is not assessing the assessment officer, the officer has the right to make an assessment which is based on the reasonable presumption of documents that are available to him for computation of the tax payable. However, when the assessee will be present, he will be informed about the details on the basis of which the assessing officer has made the judgement.

The term ‘best judgement assessment’ is however not a term of art. Best judgement assessment is quasi-judicial in nature as this is estimation which based on the principles of justice, equity and a good conscience and in common parlance the words ‘best judgement assessment’ means make the best estimate.

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