These are two departmental appeals against order of Appellate Assistant Commissioner setting aside order of Income-tax Officer under s. 144. 2. assessee is Hindu undivided family. For assessment year 1978-79, assessee filed return declaring loss of Rs. 57,725. HUF did n o t respond to several notices issued by Income-tax Officer. final hearing was fixed on 20-3-1981. Again there was no compliance. Income- tax Officer drew inference that assessee was wilfully failing to comply with notices issued. He, therefore, proceeded to make ex parte assessment to best of his judgment. He found on scrutiny of Profit & Loss A/c that interest payment of Rs. 1,60,800 was excessive. There were several cash credits but these were not supported by evidence regarding genuineness. Income-tax Officer, therefore, ignored loss returned and assessed at estimated income of Rs. 30,000. 3. For year 1977-78, assessee had repeated his indifference to department's notices. In this case also, after filing return of loss of Rs. 54,508, assessee did not produce any evidence to support claim for loss. Income-tax Officer made ex parte assessment of Rs. 30,000. 4. Appellate Asst. Commissioner on appeal referred to decision of Madras High Court in case of Dhanalakshmi Pictures v. CIT [1983] 144 ITR 452 and stated that Income-tax Officer ought to have given assessee n opportunity to explain why income of Rs. 30,000 should not have been computed. He also held that merely because there was interest payment it would not necessarily follow that result should be rejected. He, therefore, set aside assessment and directed Income-tax Officer to make fresh assessment according to law. 5. department is on further appeal. It was submitted that in appeal against ex parte assessment under s. 144, Appellate Asst. Commissioner was not justified in holding that this assessment deserves to be set aside because Income-tax Officer should be given one more opportunity to assessee before completing assessment under s. 144. It was submitted before us that there was no procedural irregularity and it is not required that Incom-tax Officer should bpe given one more opportunity to assessee who h s been indifferent to notices from department. Mr. Krishna Kumar appearing for assessee submitted that Madras High Court's decision has laid down correct ratio in ex parte assessment and direction given to Income-tax Officer was proper. 6. We have considered submissions. There is no plea before us regarding non-compliance of various notices issued by Income-tax Officer. It is quite clear that assessee has been indifferent to notices. He did not even file copy of balance sheet of company even when it was specifically asked for. It will be difficult for Income-tax Officer to make any worthwhile scrutiny of accounts without balance sheet. Income-tax Officer, therefore, was entitled to make assessment under s. 144. That section enables him to make assessment after taking into account all relevant materials which Income-tax Officer has gathered. 7. Now section requires Income-tax Officer to make best judgment assessment if there is default of notices. In other words, it is his duty to make ex parte assessment under those circumstances. It is well settled that in making best judgment assessment he was not acting dishonestly or vindictively or capriciously. He must make what is honestly believed to be fair estimate and for this purpose he may take into account all materials of which he was in possession of. It is accepted that in such estimated assessment, there is element of guesswork but it shall not be wild guess and should have reasonable nexus to available materials and circumstances of case. In our opinion, if Income-tax Officer has made assessment on basis of materials and on basis of records and if assessment is not wild one, then such assessment must be accepted as valid and reasonable. 8. It is true that in case of Dhanalakshmi Pictures (supra), Madras High Court has held that even in assessment under s. 144, assessee will have to be given opportunity of being heard and right to question correctness of material on which Income-tax Officer proposed to estimate assessment. This observation was given on facts of case. Therein, Income-tax Officer has based estimate of ex parte assessment on basis that assessee, firm of distributors of films had successful run of two films for which they had distribution right during accounting year, as it turns out Income-tax Officer's information was totally wrong. It was under these circumstances that Madras High Court made observation. This will be clear when we see submissions of assessee before High Court which are given at page 457. It was submitted that whatever may be default of assessee it is duty of Income-tax Officer, even while making best judgment assessment to place before assessee any material which Officer had gathered on basis of any outside enquiry made by him. It should be noted that emphasis in submission was assessee's right to know material gathered by Income-tax Officer on basis of outside enquiry. At page 459, High Court observed as follows: "The problem before us, however, is whether in any assessment made by ITO under s. 144 of Act following default of assessee in making return and in complying with terms of notice under s. 142(1), it is still required of ITO that he should be given opportunity to assessee before utilising materials gathered from elsewhere." It will be seen from above that ratio of Madras High Court is confined to utilisation of Income-tax Officer of materials gathered by him elsewhere. It, therefore, follows that if Income-tax Officer had not used any material outside records, then it is not necessary for him to give another opportunity. 9. It now remains to see whether Appellate Asst. Commissioner could have set aside assessment and sent it back to Income-tax Officer. It is no doubt true that he has got powers to set aside any assessment order but in ex parte assessment by setting aside assessment order, assessee would be given fresh opportunity of producing all evidence as if it is original assessment proceedings. In original assessment proceedings, assessee had not made use of opportunity generously granted by Income-tax Officer. Under these circumstances, ex parte assessment made b y Income-tax Officer as indeed he is bound to do when there is no compliance with notices, would be nullified if Appellate Asst. Commissioner sets aside and allows assessee same privilege as in original assessment. Therefore, in ex parte assessment on appeal, powers of Appellate Asst. Commissioner necessarily must be exercised in such way that assessee does not get any benefit which it was not entitled to. 10. At same time, it is undeniable that Appellate Asst. Commissioner has powers to set aside ex parte assessment also. In order to reconcile these various provisions, we should give finding that on order of Appellate Asst. Commissioner setting aside ex parte assessment Income-tax Officer is only to reappraise materials on records and frame assessment on estimated basis, on basis of that material and further, in case he has framed assessment by utilising any material which he has gathered by his enquiries and which he has not placed before assessee, then, to give opportunity to assessee why materials gathered should not be used as basis for framing assessment. In other words, assessments which have to be set aside by Appellate Asst. Commissioer are those which, in his opi opinion, materials on which assessment is based are insufficient or that some fresh evidence has been considered or there has been failure of natural justice, i.e., not giving opportunity of being heard to assessee. 11. assessee had referred to decision of Andhra Pradesh High Court in case of P. N. Balasubramanian v. ITO [1978] 112 ITR 512. We do not find anything in this decision which goes against principles laid down in t h e earlier paragraphs. main contention considered by High Court therein, as seen at page 518 is that assessment orders passed under s. 144 against which there was no application for reopening under s. 146 can be subject matter of appeal before Appellate Asst. Commissioner. assessee had contended that he cannot go on appeal whereas department had pointed out that assessee can file appeals. High Court accepted department's contention that Appellate Asst. Commissioner can hear appeal against order under s. 144. Under these circumstances, we will appeal against order under s. 144. Under these circumstances, we will upheld order of Appellate Asst. Commissioner setting aside assessment to extent of directing Income-tax Officer to reappraise evidence on record and past assessments of earlier years and frame estimate suitably. It is not assessee's case before us that Income-tax Officer had used any materials which were not placed to assessee. Therefore, ratio of Madras High Court's decision in Dhanalakshmi Pictures' case (supra) does not apply here. 12. Since we have upheld order of Appellate Asst. Commissioner setting aside assessment order, we will dismiss departmental appeals subject to above observations. *** INCOME TAX OFFICER v. L. HASTIMAL CHOWDARY