1981 (8) TMI 87 - AT - Income Tax

Summary

Issues Involved:
1. Existence and status of the Assessee as an Association of Persons (AOP).
2. Validity of the assessment orders under Section 147 of the IT Act, 1961.
3. Competence of the Commissioner of Income Tax (CIT) to revise orders under Section 263 of the IT Act, 1961.
4. Procedural irregularity under Section 144B of the IT Act, 1961.

Issue-wise Detailed Analysis:

1. Existence and Status of the Assessee as an AOP:
The assessee contended that there cannot be any AOP of Shri Ramanbhai B. Amin & Others. The CIT and ITO overruled this objection, stating that the existence and status of the assessee were not necessary considerations in the proceedings under Section 263 of the IT Act, 1961. The Tribunal agreed that this point need not be decided in the present proceedings and should be examined in the regular appeals against the assessment orders.

2. Validity of the Assessment Orders under Section 147:
The assessee argued that the assessment orders were passed under Section 147 of the IT Act, 1961, and thus could not be revised under Section 263. The Tribunal found no substance in this argument, clarifying that the assessment orders were made for the first time under Section 143(3) read with Section 147, and not reassessment orders. Therefore, the CIT had the authority to revise these orders under Section 263.

3. Competence of the CIT to Revise Orders under Section 263:
The assessee contended that the CIT was not competent to revise the orders as they were void ab initio due to procedural irregularities. The Tribunal rejected this contention, stating that the CIT can regard an order as erroneous if the ITO failed to make necessary inquiries. The Tribunal emphasized that the ITO is not only an adjudicator but also an investigator and must ascertain the truth of the facts stated in the return.

4. Procedural Irregularity under Section 144B:
The assessee argued that the assessment orders were void ab initio because the ITO failed to follow the procedure under Section 144B of the IT Act, 1961. The Tribunal found that the ITO had initial jurisdiction to complete the assessments and that the failure to follow Section 144B was a procedural irregularity, not a jurisdictional defect. The Tribunal held that such irregularity could be rectified by higher authorities, and thus the assessment orders were not void but only irregular or erroneous.

Conclusion:
The Tribunal upheld the CIT's order, stating that the assessment orders were erroneous and prejudicial to the interest of the revenue due to the procedural irregularity under Section 144B. The appeals filed by the assessee were dismissed, affirming the CIT's direction to the ITO to make fresh assessment orders following the proper procedure.