1972 (1) TMI 28 - HC - Income Tax

Whether on the facts and circumstances of the case the Tribunal was justified in upholding the order of the Appellate Assistant Commissioner directing the Income-tax Officer to make a fresh assessment after issuing a proper notice under section 23(2) of the Income-tax Act 1922 for the assessment year 1960-61 held that Appellate Assistant Commissioner was correct in exercising the power under s. 31(3)(b) and the Tribunal was justified in upholding that order

Summary

Issues:
1. Validity of the assessment order under section 23(3) without issuing a notice under section 23(2) of the Income-tax Act, 1922.
2. Jurisdiction of the Appellate Assistant Commissioner to set aside the assessment and direct a fresh assessment under section 31(3)(b).
3. Interpretation of section 31(3)(b) regarding the requirement of a prior inquiry before directing a fresh assessment.
4. Application of judicial principles in exercising the power to set aside an assessment and direct a fresh inquiry.
5. Tribunal's authority to address only the points raised in the appeal.

Analysis:
The judgment pertains to an assessment for the year 1960-61 where the assessee, engaged in public service for religious and charitable purposes, declared nil income, but the Income-tax Officer estimated the income at Rs. 1,00,000 without issuing a notice under section 23(2) of the Income-tax Act, 1922. The Appellate Assistant Commissioner found the assessment completed under section 23(3) to be invalid due to the absence of the section 23(2) notice and directed a fresh assessment. The Tribunal dismissed the appeal challenging the Appellate Assistant Commissioner's jurisdiction to set aside the assessment.

The main contention raised was whether the Appellate Assistant Commissioner had the authority under section 31(3)(b) to set aside the assessment and direct a fresh assessment without annulling it under section 31(3)(a). The court clarified that the failure to issue a notice under section 23(2) did not render the assessment a nullity, as the Income-tax Officer had jurisdiction over the proceeding despite the procedural error. The Appellate Assistant Commissioner's decision to set aside the assessment was upheld as appropriate under the circumstances.

Furthermore, the interpretation of section 31(3)(b) was discussed, emphasizing that the provision allowed for a fresh assessment even if no prior inquiry had been conducted, especially in cases where the assessment order was deemed arbitrary. The court highlighted that the Income-tax Officer was required to issue a notice under section 23(2) before conducting a fresh inquiry, ensuring procedural compliance.

The judgment also stressed the application of judicial principles in exercising the power to set aside an assessment and direct a fresh inquiry, citing relevant case law to support the proper execution of such powers by the Appellate Assistant Commissioner. Additionally, the Tribunal's limitation to address only the points raised in the appeal was affirmed, emphasizing the scope of the Tribunal's authority in adjudicating on disputed issues.

In conclusion, the court affirmed the Appellate Assistant Commissioner's decision under section 31(3)(b) and upheld the Tribunal's ruling. The question posed regarding the validity of the direction for a fresh assessment was answered in the affirmative, granting costs to the Commissioner of Income-tax.