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Issues involved: Interpretation of the procedure laid down in section 144B of the Income-tax Act, 1961 regarding assessment validity.
Summary: The High Court of Madhya Pradesh considered a reference under section 256(1) of the Income-tax Act, 1961 regarding the validity of an assessment order for the assessment year 1974-75. The Income-tax Appellate Tribunal referred the question of law on whether the failure to follow the procedure under section 144B of the Act invalidated the assessment order. The assessee had declared a loss, but the Income-tax Officer assessed the total income at a higher amount without sending a draft order to the assessee as required by section 144B. The Appellate Assistant Commissioner set aside the order and directed compliance with the procedure, which the Tribunal upheld. The court noted that non-compliance with section 144B was a procedural irregularity, not affecting the jurisdiction of the Income-tax Officer to pass the assessment order. Referring to a previous case, the court held that such non-compliance was curable by following the correct procedure. Consequently, the Tribunal's decision was upheld, affirming that the assessment order was not invalidated by the procedural irregularity. In conclusion, the court's answer to the referred question was affirmative, stating that non-compliance with section 144B of the Act constituted a procedural irregularity that could be rectified by following the correct procedure. The parties were directed to bear their own costs in this reference.
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