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TMI Blog1981 (7) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... rm as well as the assessees filed their returns. The firm showed an income of Rs. 60,000, while the assessees in both the references showed their income at Rs. 25,079 each. Thereafter, notices under s. 142 were issued against the firm and the assessees failed to comply with these notices, whereupon the ITO completed the assessment against them under s. 144 on or about 30th December, 1963. On the basis of his assessment of the firm's income for the relevant assessment year, the ITO apportioned to the assessees their share of profit in the firm under s. 158 of the I.T. Act. The share of each of the partners so assessed by the ITO was Rs. 70,000. The firm of M/s. K. C. Shah and Company filed an appeal against the ex parte assessment made against it before the AAC. By his order dated 9th November, 1964, the AAC set aside the assessment of the firm made under s. 144 of the I.T. Act and directed the ITO to make a fresh assessment. It seems that thereafter the revenue preferred an appeal before the Income-tax Appellate Tribunal, but the same was dismissed on 17th May, 1966. The assessees did not prefer any appeals against the ex parte assessments made against them on the basis of their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest on the amounts refunded. According to the Tribunal, the assessees became entitled to a refund immediately on the order of the AAC dated 9th November, 1964, setting aside the ex parte assessment of the firm. The Tribunal held that the ITO ought to have immediately rectified the assessments of the assessees and given them refunds within a period of six months from the date of the order setting aside the ex Parte assessment against the firm. The Tribunal thereupon awarded interest to the assessees for the period of delay after the expiry of six months from 10th November, 1964. Before the Tribunal the revenue had urged that no appeal lay to the AAC from the order of the ITO refusing interest. The revenue also urged that no appeal lay to the Tribunal from the order of the AAC refusing to award interest. Both these contentions were negatived by the Tribunal. Thereafter, under the provisions of s. 256(1) of the I.T. Act, 1961, a reference has been made to us. In Income-tax Reference No. 98 of 1971, the following three questions have been referred to us for determination : " (1) Whether, on the facts and in the circumstances of the case, it was open to the revenue to contend b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding to Mr. Joshi, it was pursuant to the order of the Tribunal dated 13th March, 1967, that the ITO rectified the assessments in question and made a refund order. In the alternative, Mr. Joshi submitted that the relevant date would be the date of the order of the AAC dated 18th October, 1966, which allowed the appeal of the assessee against the order of the ITO refusing to rectify the assessments in question. Both these submissions of Mr. Joshi cannot be accepted. What requires consideration is the date when the assessee became entitled to a refund. In the present case, the assessments, which were originally made on the assessees, were based upon the ex parte assessment which was made against the firm of which they were partners. The only income of the assessees is the profit which they derived from the business of the firm apart from a small sum of Rs. 200, which was by way of interest on securities, which is also shown in the firm's return. Their share in the profits of the firm was apportioned to them by the ITO under the provisions of s. 158 of the I.T. Act on the basis of the ex parte assessment which he made against the firm itself. If this ex parte assessment against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 9th November, 1964. The contention of Mr. Joshi that the assessees became entitled to a refund pursuant to the order of the Tribunal dated 13th March, 1967, also cannot be accepted for the above reasons. In fact, the order dated 13th March, 1967, in terms merely clarified the order of the AAC dated 18th October, 1960, and gave to the ITO a specific direction to complete the assessments of the partners on the basis of the returned income, which assessments he may modify later after the completion of the assessment of the firm. The Tribunal, therefore, rightly came to the conclusion that the assessees were entitled to interest on the amounts refunded after the expiry of the period of six months from the order dated 9th November, 1964. In this connection, a reference may be made to the case of Purshottam Dayal Varshney v. CIT [1974] 94 ITR 187 (All). The Allahabad High Court in this case has observed that as soon as the assessment order is set aside, the tax paid by the assessee under the assessment order becomes refundable to him. No doubt, the ITO is entitled to withhold the refund with the previous approval of the Commissioner during the pendency of remand proceedings under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since we have held that the assessees bad right of appeal before the AAC from the order of the ITO dated 17th July, 1967, it is not strictly necessary to go into this question at all. Our attention was, however, drawn to the observations of the Madras High Court in the case of Addl. CIT v. Dalmia Magnesite Corporation [1979] 117 ITR 930. In that case the Madras High Court observed as follows (p. 937): " It is a well-established principle that if an intermediary appellate authority purported to deal with a matter in appeal as if that intermediary authority had jurisdiction to deal with that appeal though in fact that authority had no jurisdiction to deal with the appeal, the order of that appellate authority would become appealable to a higher appellate authority." It should, however, be pointed out that there is a distinction between cases where the court or tribunal inherently lacks jurisdiction and cases where the jurisdiction is exercised irregularly by courts or tribunals. In Mulla's Code of Civil Procedure, 13th edn., Vol. 1, at p. 157 it is observed as follows: " It is a fundamental rule that a judgment of a court without jurisdiction is a nullity. Where by reason of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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