1985 (7) TMI 171 - AT - Income Tax

Summary

Issues involved:
1. Compliance with the directions of the ITAT and the provisions of s. 144B during assessment.
2. Validity of the assessment made by the ITO under s. 143(3) without following s. 144B procedures.
3. Jurisdiction of the ITO and the legality of the assessment order.

Detailed Analysis:

1. Compliance with ITAT directions and s. 144B provisions:
The case involved cross-appeals by the Department and the assessee against the order of the ld. CIT (A) regarding compliance with the directions of the ITAT and the provisions of s. 144B during assessment. The Department argued that the ITO strictly followed the ITAT's directions, while the assessee contended that the ITO failed to comply with mandatory provisions of s. 144B. The ITAT observed that the ITO's earlier assessment order was set aside for not being well-considered and complete, as required by the directions given by the IAC under s. 144B. The Tribunal held that the ITO must make a fresh assessment in accordance with the law and the directions provided. The Madhya Pradesh High Court's decision in a similar case was cited to support the view that an order set aside becomes non-est, rendering the earlier directions under s. 144B void.

2. Validity of assessment made without following s. 144B procedures:
The issue of whether the ITO must follow s. 144B procedures if the assessed income varies by Rs. 1 lakh from the returned income was addressed. The Tribunal emphasized that when the income to be assessed varies by Rs. 1 lakh, the ITO must adhere to the mandatory provisions of s. 144B. The Madhya Pradesh High Court and the Madras Tribunal's decisions were cited to support the view that compliance with s. 144B is mandatory to safeguard the assessee's interests and ensure a fair assessment process.

3. Jurisdiction of the ITO and legality of the assessment order:
The Tribunal analyzed the jurisdiction of the ITO and the legality of the assessment order in light of non-compliance with s. 144B procedures. Citing various court decisions, including the Supreme Court and High Court judgments, the Tribunal held that failure to comply with mandatory provisions renders the assessment order invalid and without jurisdiction. The Tribunal emphasized that the CIT (A) was not justified in directing the ITO to redo the assessment without following the prescribed mandatory provisions. The assessment made by the ITO was deemed invalid and lacking jurisdiction, leading to the dismissal of both the Departmental and assessee's appeals.

In conclusion, the Tribunal's judgment highlighted the importance of strict compliance with statutory provisions, especially s. 144B, during the assessment process to ensure a fair and lawful outcome. The decision emphasized the need for ITOs to follow prescribed procedures diligently and held that non-compliance could render assessment orders invalid and lacking jurisdiction.