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TMI Blog1976 (10) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 156, along with the assessment order, does the assessment become invalid in law? (5) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the service of the assessment order under section 144 showing the computation of total income and the notice of demand under section 156 showing the tax payable was sufficient compliance for purposes of assessment for the assessment year 1963-64 ? " The facts which are relevant to the questions referred to above may be briefly stated. Shri Syed Mubarik Shah Naqshbandi (hereinafter referred to as "the assessee") did not file any return of income for the assessment year 1963-64 under section 139(1) of the Act. A notice under section 139(2) of the Act was issued to him but the assessee did not file any return of income in response to that notice. Thereafter, a notice under section 148 was also issued to him directing him to file a return of his income. The assessee did not comply with this notice. Thereafter, the Income-tax Officer issued notice to the assessee under section 142(1) of the Act informing him that his assessment would be made on February 16, 1968. The assessee di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omission of the Income-tax Officer to determine the tax payable by the assessee in the assessment order, the said order could not be held to be invalid. The Tribunal, therefore, dismissed the appeal filed by the assessee. But, at the instance of the assessee, the Tribunal has referred the questions already stated above to this court under section 256(1) of the Act. Before proceeding to consider the validity of the assessment order it may be stated that the assessee at no stage disputed the correctness of the income as determined by the Income-tax Officer in the assessment order. Although the assessee had before the Appellate Assistant Commissioner questioned the quantum of the tax which he was called upon to pay under the demand notice on the ground that it had not taken into account the tax which had been deducted at the source, such a contention was not raised before the Tribunal and in any case the correctness of the quantum of the tax payable by the assessee does not arise for consideration before us. The only question that we are called upon to consider is whether the assessment order is invalid by reason of the fact that it does not mention the tax payable by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not necessary to multiply the examples of procedural sections which are, however, mandatory in character and the violation of which makes the assessment order invalid. At this stage it is necessary to reproduce the relevant portion of section 144 of the Act which is in the following terms: ".............. the Income-tax Officer, after taking into account all relevant material which the Income-tax Officer has gathered, shall make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment." There is no dispute that this section is mandatory to the extent that it requires the Income-tax Officer to determine the income of the assessee. The question is whether it is also mandatory as regards the determination of the sum payable by the assessee by way of tax. A plain reading of the language of the section does not justify any distinction to be made between the two portions of the section and, in our view, the determination of the tax payable by the assessee is as much mandatory as the determination of his income. In our view, there would be no justification to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee defaulted in payment of the tax. Thereupon, the Income-tax Officer passed an order in the following terms: " Tax not paid. Issue penalty notice." Pursuant to this order a notice of demand was issued to the assessee under section 29 of the Indian Income-tax Act, 1922. The assessee challenged the validity of this demand notice on the round that no order levying the penalty had been passed as required under section 46(1) of the said Act. The Bombay High Court upheld this contention and cancelled the penalty. In so doing, the High Court made the following observations : " The contention urged before the Tribunal and also before us is that the penalty imposed was contrary to law inasmuch as no proper order was passed by the Income-tax Officer under section 46(1). That sub-section provides that when an assessee is in default in making payment of income-tax the Income-tax Officer may in his discretion direct that in addition to the amount in arrears a sum not exceeding that amount shall be recovered from the assessee. It is clear that the direction that the Income-tax Officer has to give under section 46(1) must be a direction which must take the form of an order and that ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the date on which the assessment order or the demand notice is served upon the assessee. This decision of the Madras High Court was approved by the Supreme Court in Commissioner of Income-tax v. Balkrishna Malhotra [1971] 81 ITR 759 (SC). In neither of these cases did the question arise for consideration whether the assessment order should not only specify the income as determined by the Income-tax Officer but should also specify the tax payable on such income. But there are certain observations made by the Madras High Court in the case of Viswanathan Chettiar [1954] 25 ITR 79, 85 (Mad), which suggest that the determination of the income and the determination of the tax payable thereon are inseparable parts of an assessment order. These observations are as follows: " But that difference need not detain us further in determining the question when an order of assessment is 'made' within the meaning of section 34(2) of the Act. Sub-sections (1), (4) and (3) of section 23 provide for one stage, assessment of the income and the determination of the sum payable by the assessee as tax on the basis of such assessment of the income. That, it seems to us, determines the scope of 'making' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complies with the requirements of section 144 of the Act, inasmuch as the amount of tax payable by the assessee has been stated in the notice of demand. It is no doubt true that there is no prescribed form for the passing of an assessment order, but, on the other hand, there is a prescribed form for the notice of demand and in this case the amount of tax payable by the assessee has been stated only in the notice of demand. A notice of demand always contains the tax payable by the assessee but it does not follow that a notice of demand should be treated as part of the assessment order. As already observed, a notice of demand is issued in consequence of an assessment order and not as part of it. The learned counsel for the revenue further contends that there is a clear distinction between the two parts of section 144 of the Act, namely, (1) which requires the Income-tax Officer to determine the income of the assessee, and (2) which requires the Income-tax Officer to determine the tax payable by the assessee. According to the learned counsel it is the first part which requires the application of mind by the Income-tax Officer and the second part is only a mechanical application of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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