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TMI Blog1983 (2) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... t take up Taxation Case No. 28 of 1974. For the assessment year 1966-67, return was filed on behalf of the assessee on October 7, 1966, before the ITO, B-Ward, Dhanbad. Later on, this file was transferred to the ITO, ' D ' Ward, who passed the assessment order: afore said on May 27, 1969. On May 7, 1971, the Addl. Commissioner of Incometax issued notice to the assessee informing him that he intended to pass an order under s. 263(1) of the Act as, according to him, the assessment order passed in respect of the aforesaid year was prejudicial to the interests of the Revenue. The Addl. Commissioner heard the assessee and passed an order on May 21, 1971 cancelling the aforesaid order of assessment dated May 27, 1969, made by the ITO, D-Ward, and directed a fresh assessment to be made for that assessment year by the ITO, Ward-B who had the jurisdiction over the assessee at the relevant time. This order was passed, because the ITO, Ward-D, had no jurisdiction over the assessee at the relevant time and the assessment order could have been passed only by the ITO, Ward-B. Against that order, the assessee filed an appeal before the Tribunal. According to the Tribunal, the power under s. 263(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance on sub-s. (5) of s. 124 aforesaid in support of his contention that an order passed by an ITO in respect of an assessee over whom he had no jurisdiction shall not be nullity in the sense that in the eye of law it does not exist. According to the learned counsel, if an order passed by an ITO in respect of an assessee, who is carrying on business at a place which is beyond the area: allotted to such an ITO, was to be a nullity, then there was no occasion to make provision like sub-s. (5) saying that no person shall be entitled to call in question the jurisdiction of an ITO after the period prescribed under that sub-section, because an order, or a proceeding, which is a nullity can be challenged at any time. Learned counsel further urged that an order wholly without jurisdiction in the sense being non est cannot become valid order after the expiry of a period fixed, within which an objection could have been entertained. However, the learned counsel for the assessee submitted that for the purpose of the present case even if it is assumed that an order passed by an ITO in respect of the assessee who is not within his jurisdiction is an illegal order, still on that ground itself the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the order has caused prejudice to the interests of the Revenue or was likely to cause such a prejudice. It is true that sub-s. (1) of s. 263 vests power in the Commissioner in subjective terms, but it has been pointed out by the Supreme Court in a series of judgments that even when an enactment vests discretion in any authority saying " if it appears " if he is satisfied ", " if he considers necessary ", that does not mean that it is a matter of only a subjective satisfaction and such authority has not to judge the circumstances in an objective manner. Reference in this connection may be made to the well-known cases of Barium Chemical's Ltd. v. Company Law Board [1966] 36 Comp Cas 639 (SC), Rampur Distillery and Chemical Co. Ltd. v. Company Law Board [1970] 40 Comp Cas 916 (SC), Purtabpur Company Ltd. v. Cane Commissioner of Bihar, AIR 1970 SC 1896, and M. A. Rasheed v. State of Kerala, AIR 1974 SC 2249. The Tribunal has pointed out that the Addl. Commissioner having held that the ITO concerned had no jurisdiction over the assessee during the relevant year of assessment, has not pointed out as to how the order of assessment was prejudicial to the interests of the Revenue. Learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the Commissioner pursued. The Tribunal was, therefore, justified in setting aside the order of the Income-tax Commissioner. " In the case of Russell Properties Pvt. Ltd. v. A. Chowdhury, Addl. CIT [1977] 109 ITR 229 (Cal), it was pointed out (p. 242): " ... there must be material before the Commissioner before he passes the order to come to the conclusion that the order sought to be rectified was erroneous in so far as it was prejudicial to the interests of the Revenue. To such a conclusion the Commissioner can come on relevant material facts in respect of which reasonable opportunity must be given to the person sought to be affected and such reasonable opportunity again, on the principles of natural justice, requires that the person to be affected should be given intimation of the materials." On behalf of the Department, it was submitted that once it is established that the ITO in question had no jurisdiction to pass the assessment order on the relevant date, that itself shall make the assessment order erroneous and prejudicial to the interests of the Revenue. According to Mr. Rajgarhia, in such cases, for the exercise of power under subs. (1) of s. 263 of the Act the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given as to the parties to whom the loans were advanced, with amounts and rate of interest and as to when the interest income was received. On the basis of all the aforesaid reasons given by the Commissioner and the High Court, the Supreme, Court approved the order passed under s. 33B aforesaid. According to Mr. Rajgarhia, this judgment should be read to lay down that no sooner it is found that an order of assessment has been passed by an ITO who had no jurisdiction over the assessee, that by itself shall amount to an erroneous order which is prejudicial to the interests of the Revenue. In my opinion, the Supreme Court never purported to lay down anything like that in the aforesaid case. The Supreme Court has clearly pointed out that not only the assessment order was without jurisdiction, but at the same time it had been passed without taking into consideration the relevant materials and in a hurry which was bound to be prejudicial to the interests of the Revenue. Mr. Rajgarhia also placed reliance on another judgment of the Supreme Court in the case of Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323. In that case also it had been found that the ITO had no jurisdiction to make t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be advisable while setting aside an assessment Order to record categorical findings as to how it was prejudicial to the interests of the Revenue because that itself may prejudice the assessee when the matter is again heard by the ITO. It is true that while setting aside an order of assessment and directing a subordinate authority to reconsider the matter afresh, the appellate or revisional authority should not record conclusive findings on the questions involved, but at the same time it cannot be held that the orders passed by the subordinate authorities should be set aside without indicating the reasons, in exercise of the power which is circumscribed by the conditions mentioned in the very section. If in the instant case, the Commissioner had indicated some material on the basis of which he was satisfied that not only the order was without jurisdiction, but at the same time, it was prejudicial to the interests of the Revenue, there would have been no difficulty. In such a situation, I am left with no option but to answer the question in the affirmative and against the Department. So far as the remaining three taxation cases, Taxation Case Nos. 29, 60 and 61 of 1974 are concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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