1989 (6) TMI 282 - HC - Income Tax

Summary

Issues:
1. Whether the assessment made without making reference to the IAC under s. 144B were void in law?

Analysis:
The case involved a reference under s. 256(1) of the IT Act, 1961 for the assessment years 1975-76 and 1976-77. The primary question was whether the Tribunal was correct in holding that assessments made without referring to the IAC under s. 144B were not void in law. The assessee, a partner in a firm, had his premises searched, leading to discrepancies in the books of account. The ITO concluded that the assessee had undisclosed transactions, which were not fully recorded. The IAC directed the inclusion of certain amounts in the assessee's income tax assessment, which the assessee contested, arguing that the ITO should have made a reference to the IAC under s. 144B for additions above a certain threshold. The CIT(A) rejected this argument, stating that non-compliance with s. 144B did not render the assessments void, as it was a procedural section.

The Tribunal upheld the CIT(A)'s decision, emphasizing that even if a reference under s. 144B was required, its absence did not invalidate the assessment. The Tribunal viewed s. 144B as procedural, not jurisdictional, and considered any non-compliance as an irregularity rather than a fatal flaw. The assessee contended that s. 144B should be deemed mandatory, making non-compliance fatal to the assessment's validity. However, the Court disagreed, interpreting s. 144B as procedural, providing the assessee an opportunity to object to the draft assessment order to reduce disputes in subsequent appeals. The Court clarified that failure to follow s. 144B did not affect the ITO's jurisdiction to assess under s. 143(3). The Court cited precedents supporting their interpretation, emphasizing the procedural nature of s. 144B.

In conclusion, the Court held that the assessments made without referring to the IAC under s. 144B were not void in law. The Court's decision was based on the procedural nature of s. 144B, emphasizing that non-compliance did not impact the ITO's jurisdiction to assess. The Court found that the intention behind s. 144B was to streamline the assessment process and reduce disputes, rather than impose a mandatory requirement. Therefore, the assessments were upheld, ruling in favor of the Revenue.