9911796707
TMI Blog1983 (8) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 148 of the Income-tax Act, 1961 ('the Act') for the assessment year 1975-76 was initiated and the assessment was set aside. It was subsequently made under section 144 of the Act and reopened under section 146 of the Act. The reopened assessment came to be pending and was taken up at the same time as for the assessment year 1976-77 when the ITO passed orders for both the years on the same day. An assessment which was made as a protective measure in respect of Ram Ratan and Co., claimed as firm but treated as a benami concern of Shri Bherulal Tiwari, had been set aside earlier and this was also made again under section 144 on the same day, i.e., on 24-9-1982. This assessment was again made as a protective measure, though the assessee complains that the authorities tried to recover the tax. In all these three cases, it is the department's contention that Shri Ram Ratan had not furnished evidence and information required of him under section 142(1) of the Act. It was for this reason that the assessments under section 144 came to be made. No application under section 146 for reopening the assessments were filed in respect of all the three assessments. Lot of arguments wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was not in possession of the information or documents required of him. He wanted further enquiry on this issue because the assessee had not stated this fact in an affidavit on oath. He set aside the assessment not only for this examination but also for giving the assessee an opportunity to examine the documents and books of account in the custody of the department. The operative part of his orders is that the assessments were 'set aside' with a direction to the ITO to make fresh assessments in accordance with law. At any rate, we should imagine that the taxpayer would have been satisfied with the relief. It is, however, the assessee's case that in respect of these assessments, the assessments themselves are illegal. Such illegal assessments must be quashed in the sense that they should be annulled and not merely set aside. The arguments for holding that the assessments are illegal raised before the first appellate authority were repeated before us. The learned counsel claimed that the reasons on which the assessments were set aside were incorrect as a statement made before the ITO need not be rejected merely because it was not in the form of an affidavit. If the first app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being void. This statement was made even in the context of penalty. Here, the learned departmental representative pointed out, there was valid initiation of proceedings either by issue of notice or by the assessee filing return or both. The illegality that is canvassed is in the procedure of assessment culminating in the final assessment which has already been set aside by the first appellate authority. The learned departmental representative has relied heavily on the decision of the Supreme Court in the case of Kapurchand Shrimal v. CIT [1981] 131 ITR 451 wherein their Lordships of the Supreme Court have clearly pointed out that where an assessment was made without an enquiry, the assessment was liable to be set aside. In fact, the Supreme Court pointed out that it is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh, unless forbidden from doing so by statute. He, therefore, claimed that the first appellate authority had a statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is in this context we hold that the first appellate authority was justified in holding them to be invalid and consider that his further direction to examine Shri Ram Ratan in an affidavit is more meant to assuage the grievance of the assessee than as a specific direction to bind the ITO to a particular course of action. We do, therefore, think that it is not necessary for us to do any hair-splitting about this direction. It is sufficient for the purpose of disposal of the present appeal that we do agree with the appellant that the assessments were invalid. In fact, the revenue itself does not seem to have any objection to this finding of the first appellate authority inasmuch as it has not come up in appeal. We will, therefore, now deal with the assessee's objections as to whether his prayer to annul the assessment is incorrect in law as was contended before us. Section 251 of the Act under the heading 'Powers of the AAC or, as the case may be, the Commissioner (Appeals)' states that "in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment ; or he may set aside the assessment and refer the case back to the ITO for making a fresh asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de if it is otherwise untenable, say, for lack of taxable income or invalidity of the notice under section 148 or any such reason. It is under these circumstances that we should consider ourselves unable to interfere with the orders of the first appellate authority. No doubt, the learned departmental representative relied upon the decision of the Supreme Court in the case of Grindlays Bank Ltd. where it was held that the time provided by the stay cannot be reckoned for time limit purposes because of the inherent powers of the High Court to neutralise unfair advantage gained by a party in getting the stay. This decision cannot obviously help the revenue because neither the AAC nor this Tribunal has any such inherent power as has the High Court. But, here again, the issue is premature because the learned departmental representative in citing this decision is asking us to pre-judge the issue and hold that the subsequent assessment will be valid in the same manner as the counsel for the assessee wants us to hold that the subsequent assessment would be invalid. Validity or otherwise would depend upon the facts and the law relating to such subsequent assessment and any opinion at this st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e be any ambiguity or doubt on this matter, we are of the view that this order should clarify such doubt and should satisfy the taxpayer in these appeals. 4. We have, however, to deal with the decisions cited by the learned counsel for the assessee before parting with the case. The Supreme Court in Pooran Mall Son's case was dealing with an order of summary assessments and retention order passed beyond the time limit. It is in this context, the Supreme Court had held that a fresh assessment cannot be directed under these circumstances. It is not so in the assessee's case. The Gauhati High Court in Tarulata Syam's case quashed an assessment without an opportunity and was not concerned with a fresh assessment. The decision was rendered under writ jurisdiction of the High Court. It was under similar circumstances that the Calcutta High Court in the case of Mohini Debi Malpani struck down a similar ex parte assessment under its writ jurisdiction. The question of a fresh assessment was not the issue before the High Court in this case as well. So were the facts in the decision of the Kerala High Court in the case of T.C.N. Menon where again the order of assessment was quashed for lac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in remitting the matter to the ITO inasmuch as the ITO did not have the jurisdiction to proceed with the assessment ab initio. It is not the case here because the assessment proceedings have been started either by notice or by returns from the assessee and it is not the complaint of the assessee that the assessment proceedings were not initiated or that there was no valid proceeding pending before the ITO. Hence, perusal of these citations on behalf of the assessee shows that none of these decisions are of any assistance to the taxpayers in this case as they rest on facts which are clearly distinguishable. In fact, these decisions merely serve to buttres our conclusion that there could be no bar against a direction to make a fresh assessment in a case where the ITO had validly assumed jurisdiction. 5. It is under these circumstances that even after hearing the learned counsel for the taxpayers at great length, we are not convinced that there was anything wrong with the order of the Commissioner (Appeals) in setting the assessments which were illegal with a direction to make a fresh assessment, which as stated earlier, has to be in accordance with law. We are not prepared to pre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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