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TMI Blog1981 (8) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... he Board of Directors of the Company form time to time. Since the amount so paid was payable to the Board of Directors who were the members of the family of Shri Ramanbhai B. Amin and there being no definite share known. Action u/s. 147 was taken to assessee it in the status of AOP. The required notice u/s. 147 was served on the assessee and in response to the service of such notice returns were filed for all the four years declaring the share income at Nil. 3. In response to various notices issued and served on the assessee, the following objections were raised before the ITO. (1) There cannot be any AOP of Shri R.B. Amin Ors. (2) Income received by the Board of Directors had been shown by the Directors in their own cases and the same has been assessed in their own hands therefore, the same income cannot be taxed twice. (3) In an AOP there was always equal shares while in this case there are no equal shares. (4) Payments made to the Board of Directors were as per direction and approval of Company Law Board. (5) It has also been argued that the ITO having originally jurisdiction over the company should have initiated the action and the notice u/s 147 is therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ITO erred in not adopting the procedure enjoined by s. 144B of the IT Act, 1961 which was applicable to each of the said assessment orders. Consequently, he directed the ITO to make fresh assessment orders after following the procedure as laid down u/s. 144B(1) of the IT Act. 1961. Against this common order the assessee filed appeals (ITA Nos. 2056, 2055, 2057 2058 (Ahd)/80). 8. The ld. Commr. (Appeals) while disposing of appeals filed against the assessment orders, vide his order dt. 19th September, 1980 held that the appeals are infructuous because the assessment orders against which appeals were filed no longer remained as they were set aside by the CIT u/s. 263 of the IT Act, 1961, vide his order dt. 16th September, 1980. Against such finding the assessee filed appeals as stated above. 9. Against the orders passed by the CIT u/s. 263 of the IT Act, 1961 the assessee filed separate appeals. 10. The first contention of the ld. counsel for the assessee was that there was no assessee in the name of Shri Ramanbhai B. Amin Others and the proceeding of the ITO as well as the proceedings u/s 263. of the IT Act, 1961 are bad in law and void and the proceedings suffer from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 by the ld. CIT. On behalf of the revenue it was pointed out that the assessment orders were passed u/s. 143(3) read with s. 147 of the IT Act, 1961. Really speaking there were no orders of reassessment by the ITO u/s. 147(a) or 147(b) of the Act and as such, there is no bar to revise orders in question u/s. 263 of the IT Act, 1961. 14. In our considered opinion the contention of the assessee has no substance. From the material on record it is clear that no reassessment orders were passed against the assessee in respect of the disputed income. As discussed above, the ITO in these years found that Alembic Glass Industries Ltd. vide its resolution dt. 28th March, 1970 resolved to pay to the committee of directors collectively the remuneration at the rate of 3% of net profit per annum. According to him, the amount so paid to the Board of Directors who are the members of the family of Shri Ramanbhai B. Amin and there being no definite share known, he issued notice u/s. 147 to assess the income of the assessee in the status of AOP. In response to service to notice u/s. 147 of the Act returns were filed declaring Nil Income. 15. In our opinion each must be determined on its own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction to complete assessment orders u/s. 143(3) of the IT Act, 1961. After exercising such jurisdiction vested in him he issued notices. In pursuance of service of such notices, returns were filed. The ITO examined all the materials and he completed the assessments assessing income in each year which was exceeding Rs. 1 lac. The only irregularity committed by the ITO was not to follow the procedure as laid down u/s. 144B. Even if such procedure was followed and there was an addition exceeding Rs. 1 lac, the ITO had the jurisdiction to pass assessment orders finally making such additions. So in the present case the ITO had jurisdiction to pass assessment orders and there is also nothing to show that in passing assessment orders he exceeded his jurisdiction. It was further pointed out that no hard and fast line can be drawn between nullity and illegality but this much is clear that an irregularity is a deviation from a rule of law which does not take away the foundation or authority for the proceedings or apply to its whole operation, whereas a nullity is a proceeding that is taken without any foundation for it, or so essentially defective as to be of no avail of effect whatsoever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has been conferred by the statute itself. 22. The other point for consideration is whether the order passed by the ld. CIT is erroneous and prejudicial to the interest of the revenue or such an order is nullity and void as contended by the ld. counsel for the appellant. 23. We may state here that the words prejudicial to the interest of the revenue have not been defined under the IT Act but they must mean that the orders of assessment challenged are such as are not in accordance with law, in consequence where of the lawful revenue to the state has not been realised or cannot be realised. Reference may be made to the ratio of decision in the cases of Dwaji Dadabhai Co. vs. S.P. Jain Anr. (1957) 31 ITR 872 (Cal) and Addl. CIT vs. Mukur Corporation (1976) Taxation 44 (III) 69 (Guj). 24. In order that the CIT may consider an order to be erroneous for the purpose of s. 263 of the Act the error of law may not be apparent on the fact of the order. The CIT may consider an order of the ITO to be erroneous not only if it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is stereotyped order which simply accepts what the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prejudicial to the interest of the revenue. 26. The contention of the ld. counsel for the appellant has been as discussed above that such assessment orders were not erroneous only but they were void abinitio because the ITO failed to follow the procedure as required u/s. 144B of the IT Act, 1961. In our opinion the contention of the ld. counsel for the appellant could hardly be accepted. 27. It is difficult sometimes to distinguish between an irregularity and a nullity, but the safest rule to determine what is an irregularity and what is a nullity is to see whether the party can waive the objection, if he can waive it, it amounts to an irregularity; if he cannot, it is a nullity. Reference may be made to the ratio of decision in the case of Dhirendra Nath Gorai vs. Sudhir Chandra Ghosh 1964 AIR (SC) 1300. In the case of Dasa Muni Reddy vs. Appa Rao 1974 AIR (SC) 2089, their Lordship pointed out that want of jurisdiction must be distinguished from irregular or erroneous exercise of jurisdiction. If there is want of jurisdiction the whole proceeding is coram non judice. The absence of a condition necessary to found the jurisdiction to make an order or give a decision deprives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee may get better opinion of higher authorities in case the addition was to be made more than Rs. 1 lac. So that procedure was beneficial to the assessee. In other words such procedure was made for protecting the interest of assessee in private capacity, which might be dispensed with without infringing any public right or public policy. 30. From the aforesaid discussion it is clear that there was no want of jurisdiction on the part of the ITO when he started assessment proceedings. So it could not be called a case in which the whole proceedings could be called coram non judice. In the present case, the ITO in not referring the matter to the IAC u/s. 144B of the Act, 1961 committed an irregularity or he erroneously exercised jurisdiction while making addition exceeding Rs. 1 lac. So in our considered opinion, the assessment orders passed by the ITO were not void but only irregular or erroneous exercise of jurisdiction. Such orders can certainly be called erroneous and prejudicial to the interest of the revenue because such orders could not be orders passed in accordance wit law and on the basis of such orders the state cannot successfully recover the dues form the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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