1997 (9) TMI 88 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Income-tax Officer (ITO) u/s 143(3) without reference to the Inspecting Assistant Commissioner (IAC) u/s 144B.
2. Legality and validity of the assessment order passed by the ITO.
3. Powers of the appellate authority u/s 251 of the Income-tax Act, 1961.

Summary:

1. Jurisdiction of the Income-tax Officer (ITO) u/s 143(3) without reference to the Inspecting Assistant Commissioner (IAC) u/s 144B:
The primary issue was whether the ITO had the jurisdiction to pass an assessment order u/s 143(3) without referring the draft order to the IAC as mandated by section 144B of the Income-tax Act, 1961. The court held that once the assessee files objections to the draft order, the ITO's jurisdiction ceases, and the power to consider the objections and issue directions vests solely in the IAC. The ITO's role becomes ministerial, limited to passing the final order in accordance with the IAC's directions.

2. Legality and validity of the assessment order passed by the ITO:
The court found that the assessment order passed by the ITO on April 12, 1977, without forwarding the assessee's objections to the IAC, was illegal and without jurisdiction. The ITO had no authority to make the assessment after receiving the objections; his only power was to forward the objections to the IAC and follow the IAC's binding directions. Consequently, the assessment order was annulled as it was beyond the ITO's powers under sections 143 and 144B.

3. Powers of the appellate authority u/s 251 of the Income-tax Act, 1961:
The court discussed the powers of the appellate authority u/s 251, which include confirming, reducing, enhancing, or annulling an assessment. The distinction between "setting aside" and "annulling" an assessment was emphasized. An annulled assessment is treated as non-existent, while a set-aside assessment allows for a fresh assessment within the extended time limit provided by section 153. The court concluded that the appellate authority correctly annulled the assessment as the ITO's actions were without jurisdiction.

Conclusion:
The court affirmed the Tribunal's decision that the assessment order passed by the ITO without referring the objections to the IAC was rightly annulled by the Commissioner of Income-tax (Appeals). The requirements of section 144B are mandatory, and non-compliance renders the assessment order void and without jurisdiction. The question was answered in favor of the assessee and against the Revenue.