1982 (8) TMI 8 - HC - Income Tax

Summary

Issues Involved:
1. Whether the failure to give reasonable opportunity to the assessee of being heard was a procedural irregularity and curable, or rendered the order void ab initio and non est in law.
2. Whether the Tribunal was right in setting aside the order of the Commissioner u/s 263 with a direction to give fresh opportunity to the assessee and then consider passing the order u/s 263 of the Income-tax Act, 1961.

Summary:

Issue 1: Procedural Irregularity vs. Void Ab Initio
The assessee, a lorry body builder, was assessed for the years 1968-69 to 1970-71 without thorough investigation into the genuineness of loans claimed. The Commissioner of Income-tax, exercising suo motu revision power u/s 263, set aside these assessments, directing fresh assessments after proper investigation. The assessee contended that the order was void ab initio as it was passed without giving an opportunity to be heard, violating principles of natural justice. The Tribunal held that the non-compliance was a procedural irregularity, not rendering the order void ab initio, as there was a valid assumption of jurisdiction. The High Court agreed, stating that since the principles of natural justice were embedded in the statute as a statutory procedure, the violation was procedural and curable.

Issue 2: Tribunal's Power to Direct Fresh Order
The Tribunal directed the Commissioner to pass a fresh order after giving the assessee a reasonable opportunity to be heard. The High Court upheld this direction, referencing the Supreme Court's decisions in CIT v. National Taj Traders and Kapurchand Shrimal v. CIT, which supported the Tribunal's power to remand cases for fresh consideration following statutory procedures. The High Court emphasized that merely setting aside the Commissioner's order without such a direction would perpetuate the erroneous order of the ITO, which was prejudicial to the interests of the Revenue.

Conclusion:
The High Court answered both questions in the affirmative, holding that the Tribunal was correct in treating the non-compliance as a procedural irregularity and in directing the Commissioner to pass a fresh order u/s 263 after giving the assessee a reasonable opportunity to be heard. The references were answered against the assessee, and the Revenue was awarded costs. An oral application for leave to appeal to the Supreme Court was rejected.