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TMI Blog2009 (10) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... referred itself it is clear that there were contrary decisions of the Tribunal, one in the case of Rajesh Kumar vs. Dy. CIT in IT(SS)A No. 10/Del/2007 and another in the case of Asstt. CIT vs. Rakesh Kumar in IT(SS)A No. 101/Del/2007. In the case of Rajesh Kumar vs. Dy. CIT the Tribunal after considering the decision of Hon'ble Supreme Court in the case of Rajesh Kumar & Ors. vs. Dy. CIT (2006) 206 CTR (SC) 175 : (2006) 287 ITR 91 (SC) and also the decision of the Larger Bench of the Hon'ble Supreme Court in the case of Sahara India (Firm) vs. CIT (2008) 216 CTR (SC) 303 : (2008) 7 DTR (SC) 27 : (2008) 300 ITR 403 (SC), held that though as per the decision of Hon'ble Supreme Court as reported in (2006) 206 CTR (SC) 175 : (2006) 287 ITR 91 (SC) have held that order passed under s. 142(2A) directing special audit was bad in law because of non-observance of principles of natural justice but in view of the decision of Larger Bench of Supreme Court in the case of Sahara India (Firm), the law declared on the rule of audi alteram partem is applicable prospectively. Therefore, the assessment made after reference was made for special audit does not render the assessment bad in law but the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as such the judgment dt. 1st Nov., 2008 rendered by the Hon'ble Supreme Court is also a judgment rendered in assessee's own case. In the said case, their Lordships have held that before passing an order under s. 142(2A) of the Act, directing the assessee to obtain a special audit of its accounts, principles of natural justice are required to be observed. The Larger Bench of Supreme Court decided the matter in Sahara India (Firm) vs. CIT and agreed with the decision of the Supreme Court in the case of Rajesh Kumar & Ors. vs. Dy. CIT. (iii) In the light of the legal position, their Lordships in the cases Sahara India (Firm) and Sahara India Financial Corp. Ltd. held as under: "The next crucial question is that keeping in view the fact that the time to frame fresh assessment for the relevant assessment year by ignoring the extended period of limitation in terms of Expln. 1 (ia) to sub-s. (3) of s. 153 of the Act is already over, what appropriate order should be passed. As noted above, the learned Addl. Solicitor General had pleaded that if we were not inclined to agree with him, the interpretation of the provision by us may be given prospective effect, otherwise the interest of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted. Reliance is placed on the judgment of Hon'ble Madhya Pradesh High Court in National Textile Corporation Ltd. (M.P.) vs. CIT (2008) 216 CTR (MP) 153 : (2008) 5 DTR (MP) 117 wherein it has held that it is not permissible for the Tribunal to comment upon the manner in which a particular decision was rendered by the Supreme Court/High Court. It is also not permissible for the Tribunal to side track the decision of the High Court on the ground that it did not take into consideration a particular provision of law. (vii) Shri Sharma also referred to some of the decisions relating to function of the Supreme Court and effect of its orders. (vii) In view of the above, it is submitted that in the light of the judgment rendered in assessee's own case in (2006) 206 CTR (SC) 175 : (2006) 287 ITR 91 (SC), the assessment order under s. 158BC, dt. 3rd June, 2005 deserves to be held as barred by limitation within the meaning of the provisions contained in cl. (ii) to Expln. 1 of s. 158BE of the Act. 4. Shri S.D. Kapila represented one of the intervener in this appeal namely PHI Seeds Ltd. The counsel for intervener fairly admitted that since the decision of Tribunal in the case of Rajesh Ku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to accept such a contention. Firstly, it is to be noted that the Supreme Court itself has earlier raised a doubt about the correctness of its decision in the case of Rajesh Kumar & Ors., therefore, Larger Bench was constituted. Hon'ble Supreme Court while referring the matter to Larger Bench observed as under: "A close reading of the decision shows that the observation in this regard appears to have been made in the context of the assessment in terms of s. 158BC (block assessment) of the Act. Such assessments are relatable to a case when raid has been conducted at the premises of an assessee. Had that being so, limited to the facts involved in that case, we would have negatived the contentions of the learned counsel for the petitioner. But certain observations of general nature have been made. The effect of these observations appears to be that in every case where the AO issued a direction in terms of s. 142(2A) of the Act, the assessee has to be heard before such an order is passed. This does not appear to be the correct position of the law. Therefore, we refer the matter to a Larger Bench." [reported in Sahara India (Firm) vs. CIT (2007) 209 CTR (SC) 20 : (2007) 289 ITR 473 (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the same judgment clarified that though the orders in question were vitiated by the failure to observe the principle of "audi alteram partem" yet its ruling on the question of law would apply prospectively, (i.e., after 11th April, 2008) and it would not be open to the appellant to urge before the appellant authorities that the extended period of limitation under Expln. 1(iii) to s. 153 of the Act was not available to the AO because of an invalid order under s. 142(2A) of the IT Act. Thus the law laid down by the Hon'ble apex Court will apply prospectively. This view has been approved by the jurisdictional High Court in IT Appeal No. 184 of 2009, dt. 9th April, 2009. For sake of gravity the order of the Hon'ble Delhi High Court is reproduced herein: "This appeal preferred under s. 260A of the IT Act, 1961 ('Act' for short) by the assessee challenges the consolidated order dt. 30th June, 2008 of the learned Tribunal in the cross-appeal filed by the appellant and the Revenue in IT(SS)A No. 10/Del/2007 and IT(SS)A No. 17/Del/2007. Vide this order, the learned Tribunal has held that the assessment completed was within the period of limitation and in light of the judgment of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is covered by the above stated observations made by the Larger Bench in Sahara India (Firm). The decision of the learned Tribunal based on Sahara India (Firm) is held to be valid." In view of the above as also in view of the decision of jurisdictional High Court the contention of the learned counsel for the assessee that in view of the decision of the Hon'ble Supreme Court in the case of Rajesh Kumar & Ors., the assessment is required to be annulled, is de void of merits. 7. It is also contended by the learned counsel for the assessee that since the decision of Hon'ble Supreme Court in the case of Rajesh Kumar has not been overruled by Larger Bench and since there are no observations or directions that the above proposition would be applicable in the case of Rajesh Kumar also, since the assessee herein is one of the parties before the Supreme Court in the case of Rajesh Kumar & Ors., the decision of Larger Bench of Supreme Court in the case of Sahara India (Firm) should not be applied. This contention is also unacceptable to us. Under Art. 141 of the Constitution of India the law as laid down by the Hon'ble Supreme Court is binding on all. If a Larger Bench does not agree with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been granted to the appellant. In pursuance of the said order, a fresh notice was issued to the appellant for appearance on 12th Feb., 2002. On the said date at the request of the appellant, the case was adjourned to 14th March. 2002 and then to 23rd March, 2002, when the appellant again sought time for collecting the requisite details/information and he was granted three months' time for the said purpose. The case was fixed on 25th June, 2002. According to the appellant, he appeared before the AO on 25th June, 2002 and requested for some more time to furnish the bank statements etc. and the case was accordingly kept for 29th June, 2002. However, on 29th June, 2002, when the appellant appeared before the AO, he is said to have been told that the assessment order had already been passed on 7th June, 2002. Being aggrieved, the appellant challenged the said order by preferring a writ petition. In the writ petition, it was alleged that the assessment order was ante dated and in fact the same was passed on 29th June, 2002, by which date the period of limitation was over. Interpolation in the order sheets dt. 23rd March, 2002 and 25th June, 2002 was alleged and it was also stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... code of conduct, by an officer acting against all canons of fair play and transparency in discharging its duties as statutory functionary. Accordingly, as stated supra, the appeal was allowed; assessment order dt. 7th June, 2002 was set aside and demands raised consequent thereto were quashed, with a direction to the Commr. of Commercial Taxes, Rajasthan to nominate another AO, not below the rank of a Senior CTO, for making fresh assessment." Before the Hon'ble Supreme Court the appellant contended that- "In the light of its afore-extracted observations and a clear finding that the assessment order for the asst. yr. 1995-96 had been ante-dated, the order was null and void. It was urged that assessment proceedings after the expiry of the period of limitation being a nullity in law, the High Court should have annulled the assessment and there was no question of a fresh assessment. Thus, the nub of the grievance of the appellant is that in remanding the matter back to the AO, the High Court has not only extended the statutory period prescribed for completion of assessment, it has also conferred jurisdiction upon the AO, which he otherwise lacked on the expiry of the said period." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs could be said to be null and void, as pleaded on behalf of the appellants? 15. All irregular or erroneous or even illegal orders cannot be held to be null and void as there is a fine distinction between the orders which are null and void and orders which are irregular, wrong or illegal. Where an authority making order lacks inherent jurisdiction, such order would be without jurisdiction, null, non est and void ab initio as defect of jurisdiction of an authority goes to the root of the matter and strikes at its very authority to pass any order and such a defect cannot be cured even by consent of the parties. However, exercise of jurisdiction in a wrongful manner cannot result in a nullity-it is an illegality, capable of being cured in a duly constituted legal proceedings. 16. Proceedings for assessment under a fiscal statute are not in the nature of judicial proceedings, like proceedings in a suit in as much as the AO does not adjudicate on a lis between an assessee and the State and, therefore, the law on the issue laid down under the civil law may not stricto sensu apply to assessment proceedings. Nevertheless, in order to appreciate the distinction between a 'null and void' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the principle in the present case, we hold that even if direction of special audit under s. 142 (2A) without affording an opportunity of being heard was not correct, the AO was not lacking the jurisdiction for framing assessment thereafter. The only requirement was to afford reasonable opportunity while framing assessment also. Since the Tribunal in the case of Rajesh Kumar has upheld the validity of assessment but as remanded the matter back to the AO which decision of Tribunal has been approved by the jurisdictional High Court in the present case also the assessee cannot seek annulling of the assessment as done by the CIT(A). Constitution Bench of the Hon'ble Supreme Court in the case of Guduthur Bros. vs. 110 (1960) 40 ITR 298 (SC) held- "Held, that as the AAC pointed out only to an illegality which vitiated the proceedings after they were lawfully initiated, the notice issued under s. 28(1)(a) did not cease to be operative and it was open to the ITO to take up the matter at the point at which the illegality supervened and to correct his proceedings. The notice under s. 28(1)(a) having remained still to be disposed of, the proceedings started after the order passed by the AA ..... X X X X Extracts X X X X X X X X Extracts X X X X
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