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TMI Blog1971 (2) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... the return in this respect and so he rejected the account and made a best judgment assessment under section 143(3) of the Income-tax Act, 1961, hereinafter referred to as " the Act ", adding Rs. I 0,000 to the income of the assessee in respect of his transactions in dry ginger and Rs. 1,000 in respect of his transactions in pepper, estimating the profit in dry ginger at 12% and in pepper at 2% of the turnover. From this order the petitioner filed an appeal before the Appellate Assistant Commissioner. That was dismissed. The petitioner then filed a revision before the 2nd respondent. He accepted the finding of the Income-tax Officer as regards the income of the petitioner from his transactions in dry ginger, but deleted the addition of Rs. 1,000 in respect of the alleged income from the pepper transactions. In the order of assessment the Income-tax Officer said that after rejecting the accounts of the assessee he made enquiries and that he was satisfied from the materials gathered by him, namely, the profits made by other dealers carrying on similar businesses and from the profits disclosed in the return for the previous year by the petitioner himself that the profit of the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, therefore, he will be bound to give an opportunity to the assessee in respect of the materials so gathered. In this case the assessee may have a thousand explanations to offer as to why he could not make the same profit in the year in question as in the previous year. An admission in the return of the percentage of profits from the transaction in dry ginger or pepper made by the assessee in the previous year would be relevant material for a best judgment assessment for the subsequent year provided that an opportunity of being heard on this material was given to the assessee. When an Income-tax Officer is making an assessment to the best of his judgment against a person in default he is entitled to use his own knowledge of the previous returns by the assessee and the assessments. In Commissioner of Income-tax v. Laxminarain Badridas Lord Russell of Killowen said : He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for this purpose he must, their Lordships think, be able to take into consideration local knowledge and repute in regard to the assessee's circumstances, and his own knowledge of previous returns by and assessments of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party cannot take advantage of the void character of the order. This, I think, is the principle laid down by the Privy Council in Durayappah of Chandikuy, Mayor of Jaffna v. W. J. Fernando . In that case a minister of local government in Ceylon exercised his power under an Ordinance and dissolved the Jaffna Municipal Council on the ground that it was incompetent to perform its duties. No notice or opportunity to meet the charges against the council was given to the council. The order was, therefore, void as between the minister and the council. Then the question arose whether the appellant who was the mayor of Jaffna and who automatically lost his office was entitled to challenge the minister's order. Lord Upjohn, speaking for the Privy Council, said : " Lord Morris of Borth-y-Gest also considered this question and reached the conclusion that the order of the watch committee was voidable and not a nullity. He examined the question as to the nature of the relief that the party aggrieved (Ridge) would apply for, which would be that the decision was invalid and of no effect and null and void. Their Lordships entirely agree with that and with the conclusions which he drew from it, na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be held that an act of a public authority which is void, can be turned by the acquiescence of the party affected into a valid one. If the act is ultra vires and void, how can anyone's subsequent inaction validate it ? In 1945, Mr. Rubinstein in his Jurisdiction and Illegality, at page 221 has observed : " Furthermore, the decision arrived at in breach of this duty should not operate under any circumstances against him, otherwise the very purpose underlying this rule would be defeated. Hence, a purported dismissal or expulsion arrived at in breach of the rule cannot be operative as against the person concerned. But there is no justification for holding that there is no jurisdiction or that the decision is a nullity. Not only can this right be waived but it also seems clear that, in litigated proceedings, the other party, i.e., the party who has been heard, cannot impeach the proceedings on this ground. Yet, if this defect negatives jurisdiction and renders the proceedings a nullity, should not the other party be able to disregard the purported decision ? " In 1969, in Anisminic Ltd. v. Foreign Compensation Commission Lord Reid said: " It has sometimes been said that it is only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the decision of the watch committee was voidable but not void. But this involves the inquiry as to the sense in which the word 'voidable', a word deriving from the law of contract, is in this connection used. If the appellant had bowed to the decision of the watch committee and had not asserted that it was void, then no occasion to use either word would have arisen. When the appellant in fact at once repudiated and challenged the decision, so claiming that it was invalid, and when in fact the watch committee adhered to their decision, so claiming that it was valid, only the court could decide who was right. If in that situation it was said that the decision was voidable, that was only to say that the decision of the court was awaited. But if and when the court decides that the appellant was right, the court is deciding that the decision of the watch committee was invalid and of no effect and null and void. The word ' voidable ' is therefore apposite in the sense that it became necessary for the appellant to take his stand : he was obliged to take action, for unless he did, the view of the watch committee, who were in authority, would prevail. In that sense the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e act because the minister in England was not 'in authority'. But where the author of a void act is " in authority " it might produce legal consequences unless and until it is invalidated with retrospective or prospective effect. In his General Theory of Law and State Hans Kelsen observed : " The decision made by the competent authority that something that presents itself as a norm is nul ab initio because it fulfils the conditions of nullity determined by the legal order, is a constitutive act ; it has a definite legal effect ; without and prior to this act the phenomenon in question cannot be considered to be 'nul'. Hence the decision is not 'declaratory.', that is to say, it is not, as it presents itself, a declaration of nullity; it is a true annulment, an annulment with retroactive force. There must be something legally existing to which this decision refers. Hence, the phenomenon in question cannot be something nul ab initio, that is to say, legally nothing. It has to be considered as a norm annulled with retroactive force by the decision declaring it nul ab initio. just as everything King Midas touched turned into gold, everything to which the law refers becomes law, i.e., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord Morris ' reached the conclusion that the order of the watch committee was voidable and not a nullity' : and the foot-note refers to page 119 of Ridge v. Baldwin . On that page, Lord Morris twice said that it should be declared that the termination of the appellant's appointment was 'void'; and Speight J., in Denton v. Auckland City', flatly says that this passage in the judicial Committee's decision is 'erroneous'. However, the next few sentences indicate that the judicial Committee must have had in mind a further passage in Lord Morris's speech, at page 125, where he makes it clear that although the court will declare the decision to be ' invalid and of no effect and null and void ' this would be done only if the appellant took the necessary action, so that in this limited sense the decision ' could be said to be voidable '. A decision reached by a Tribunal wholly outside its jurisdiction and in complete defiance of natural justice is about as void as anything can be ; but if nobody who is entitled to challenge or question it chooses to do so, it remains in being. Yet to describe such a decision as being 'voidable' is to use that word in a sense that is not only very special b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a man has never had a fair trial by the appropriate trial body, is it open to an appellate body to discard its appellate functions and itself give the man the fair trial that he has never had? " and. answered it by saying that no such doctrine exists. One of the reasons given by him for his conclusion was : " If one accepts the contention that a defect of natural justice in the trial body can be cured by the presence of natural justice in the appellate body, this has the result of depriving the member of his right of appeal from the expelling body. If the rules and the law combine to give the member the right to a fair trial and the right of appeal, why should he be told that he ought to be satisfied with an unjust trial and a fair appeal ? Even if the appeal is treated as a hearing do novo, the member is being stripped of his right to appeal to another body from the effective decision to expel him. I cannot think that natural justice is satisfied by a process whereby an unfair trial, though not resulting in a valid expulsion, will nevertheless have the effect of depriving the member of his right of appeal when a valid decision to expel him is subsequently made. Such a deprivatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out how the right to object could be lost, " no matter whether the proceedings are void or voidable, since that did not affect the court's practice in granting or withholding a remedy ". (See Ramnath Goenka v. Amarchand and Mangaldas ). Judicial discretion plays an indispensable part in the law. But it ought not to be allowed to undermine constitutional fundamentals. One of these, surely, is that the citizen may resist unlawful governmental action as of right. If this were made a matter of discretion, the court would be taking upon itself the power to dispense public authorities from observance of the law. Counsel for the revenue contended that since there has been no miscarriage of justice as the petitioner had full opportunity of canvassing the correctness of the order of the Income-tax Officer before the appellate as well as the revisional authorities, no interference under article 226 is called for. But it would be inconsistent with all the decisions, if I were to say that after a breach of natural justice has been found there must then be a further enquiry to ascertain whether there has been a miscarriage of justice. The breach of natural justice is itself the miscarria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That principle cannot apply here because the petitioner had no notice that the Income-tax Officer would proceed to make a best judgment assessment, and so had no opportunity to raise the objection before him. Even if the petitioner had raised his objection before the appellate authority, it is very doubtful that the appellate authority could have passed a valid order even after complying with natural justice. Normally, as already indicated, neither the appellate authority nor the Commissioner could have passed a valid order, even after complying with natural justice. Assuming that the appellate or the revisional authority could have passed an original 'order of assessment after giving a pre- assessment notice, the right of appeal vested in a party to an Appellate Assistant Commissioner against an original order of assessment would become otiose. Even if no appeal or revision had been filed by the petitioner, it would have been open to the petitioner to approach this court and challenge the order of the Income-tax Officer on the ground of non-compliance with the principles of natural justice. If the order of the Income-tax Officer was a nullity and if the petitioner had no opportun ..... 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