9911796707
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Issues Involved:
1. Validity of the Tribunal's cancellation of the Commissioner's order under Section 263 of the Income-tax Act, 1961. 2. Legality of the Tribunal's finding that the Income-tax Officer's order dated March 11, 1976, should be treated as non est. Detailed Analysis: Issue 1: Validity of the Tribunal's Cancellation of the Commissioner's Order under Section 263 The assessee filed a return on November 6, 1974, and an assessment was made on December 23, 1975. A revised return was filed on December 31, 1975, without a notice under Section 148 of the Act. Subsequently, on March 11, 1976, another assessment order was issued. The Commissioner of Income-tax, in his order dated February 7, 1978, under Section 263, found the second assessment erroneous and prejudicial to the interests of the Revenue. The Tribunal, however, held that the second assessment order was non est due to the lack of a mandatory notice under Section 148, and thus, the Commissioner could not treat it as prejudicial to the Revenue. The High Court observed that the Tribunal erred in not considering whether the second assessment order was "erroneous in so far as it is prejudicial to the interests of the Revenue." The court emphasized that even if an order is void, it binds the parties unless set aside by a competent authority. Thus, the Tribunal should have examined the merits of the Commissioner's findings under Section 263. The court concluded that the Tribunal was not justified in cancelling the Commissioner's order without addressing the core issue of whether the second assessment was prejudicial to the Revenue. Issue 2: Legality of the Tribunal's Finding that the Income-tax Officer's Order Dated March 11, 1976, Should be Treated as Non Est The Tribunal held that the second assessment order dated March 11, 1976, was non est due to the absence of a notice under Section 148, which is mandatory for reassessment. The High Court, however, disagreed with this view, citing that a void order remains effective unless set aside by a competent authority. The court referred to several precedents, including decisions from the Supreme Court and Privy Council, which clarified that even void orders have legal effect until annulled. The court highlighted that the second assessment order, although void, was still binding on the parties until set aside by the Commissioner under Section 263. Therefore, the Tribunal's finding that the order was non est was incorrect. The High Court emphasized that the Tribunal should have evaluated whether the second assessment was erroneous and prejudicial to the Revenue, rather than dismissing it outright as non est. Conclusion The High Court concluded that the Tribunal erred in both cancelling the Commissioner's order under Section 263 and in holding that the second assessment order was non est. The court held that the second assessment order, though void, was binding until set aside, and the Tribunal should have addressed whether the order was prejudicial to the Revenue. Consequently, both questions were answered in the negative and in favor of the Revenue.
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