AJIT K. SENGUPTA, J.

( 1 ) IN this reference under Section 256 (2) of the Income-tax Act, 1961, for the assessment years 1981-82 and 1982-83, the following questions of law have been referred to this court :"1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in quashing the assessment made under Section 144 of the Income-tax Act, 1961 ? if the answer to question No. 1 is in the negative, then whether, on the facts and in the circumstances of the case, the Tribunal should have directed the Income-tax Officer to redo the assessment"

( 2 ) THE facts leading to this reference are that the assessee is Messrs. Popular Electric Co. (P.) Ltd. and the assessment years involved are 1981-82 and 1982-83, for which the previous years ended on March 31, 1981, and March 31, 1982, respectively. The assessee-company is engaged in the business of electrical engineers and contractors. For the two assessment years under reference, returns have not been filed in response to notices under Sections 139 (2) and 142 (1) of the Income-tax Act, 1961. The assessments were made on March 14, 1984, and February 16, 1985, under Section 144, respectively. Considering the facts and circumstances of the case and past records, the Income-tax Officer fixed the total income at Rs. 50,000 for each year. Aggrieved by the orders of the Income-tax Officer, the assessee preferred appeals to the Commissioner of Income-tax (Appeals) who confirmed the action of the Income-tax Officer.

( 3 ) AGAINST the orders of the Commissioner of Income-tax (Appeals), the assessee filed appeals before the Tribunal. It was urged on behalf of the assessee that no basis was given in the assessment orders as to how the Income-tax Officer fixed the total income at Rs. 50,000 for each year. It was pointed out that, for the assessment years 1979-80 and 1980-81, the Income-tax Officer made the assessments under Section 143 (3) of the Act determining the business losses at Rs. 44,366 and Rs. 25,836 on the turnover disclosed at Rs. 6,37,083 and Rs. 5,25,522, respectively. It was stated that, for the assessment years under reference, the turnover was Rs. 3,67,253 and Rs. 5,95,633, respectively, and the company had incurred losses of Rs. 29,094 and Rs. 2,171, respectively, as per the audited accounts. It was urged that the action of the Income-tax Officer in determining the total income of the assessee at Rs. 50,000 for each year as affirmed by the Commissioner of Income-tax (Appeals) should be quashed.

( 4 ) THE Departmental representative, on the other hand, urged that the Income-tax Officer may be directed to allow some reasonable losses and redetermine the income.

( 5 ) THE Tribunal observed that the Income-tax Officer has not given any basis or data to determine the total income of the assessee at Rs. 50,000 for each of these two assessment years under consideration. It held that the Income-tax Officer was not justified in determining the total income of the assessee at Rs. 50,000 when the turnover was only Rs. 3,57,253 and Rs. 5,95,633 for the assessment years 1981-82 and 1982-83, respectively. Further, following the decision of the Supreme Court in the case of State of Kerala v. C. Velukutty, the Tribunal held that the best judgment assessments made by the Income-tax Officer did not conform to the requirements laid down by the Supreme Court in that case. In that view of the matter, the Tribunal quashed the assessments.

( 6 ) NONE appeared for the assessee. We have heard learned advocate for the Revenue. It is now well-settled that the Income-tax Officer, while making a best judgment assessment, should make an intelligent well-grounded estimate. Such estimate must be based on adequate and relevant materials. He should make an honest estimate on the basis of the materials available, inasmuch as such estimate is necessitated by reason of the defaults committed by the assessee either in not making a return or by not complying with all the terms of

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