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TMI Blog1983 (4) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 144B was bad and illegal. For reasons given in paragraphs 5 to 7 of his order, the Commissioner (Appeals) accepted the assessee's submission and held that the order of the assessment was a nullity being not a legal order, and annulled the assessment. 3. Being aggrieved by the order of the Commissioner (Appeals), the department has come up in appeal. Finding that different Benches of the Tribunal were taking contrary and conflicting views on the issue, the members who heard the appeal originally, referred the case to the President for constituting a Special Bench. The Special Bench was constituted and this is how the matter has come up for hearing before this Bench. 4. It is common ground that the provisions of section 144B(1) are applicable in this case and that the ITO should have completed the assessment after going through the procedure laid down in section 144B. However, while according to the department, the omission to follow the procedure laid down under section 144B is only a curable procedural defect, the case of the assessee which has been accepted by the Commissioner (Appeals) is that the provisions of section 144B are mandatory and, therefore, the completion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued by the Inspecting Assistant Commissioner under sub-section (4) shall be binding on the Income-tax Officer. (6) For the purposes of sub-section (1), the Board may, having regard to the proper and efficient management of the work of assessment, by order, fix, from time to time, such amount as it deems fit : Provided that different amounts may be fixed for different areas : Provided further that the amount fixed under this sub-section shall, in no case, be less than twenty-five thousand rupees. (7) Nothing in this section shall apply to a case where an Inspecting Assistant Commissioner exercises the powers or performs the functions of an Income-tax Officer in pursuance of an order made under section 125 or section 125A." It is pertinent to mention that simultaneously, with the introduction of section 144B, section 144A was also inserted in the Act, with effect from 1-1-1976. For understanding the scheme of the Act in this regard and the purpose for which section 144B is introduced in the Act, it will, therefore, be necessary to refer to section 144A which reads as under : "144A. (1) An Inspecting Assistant Commissioner may, on his own motion or on a reference being ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted accordingly. In terms of section 144B in the present form, the jurisdiction to make an assessment except in certain specific cases is with the ITO and remains with him until he finally completes the assessment. He prepares the draft assessment order, forwards a copy thereof to the assessee wherever necessary under section 144B(1), sends the draft order with the assessee's objections to the IAC under section 144B(4) and completes the assessment order in conformity with the directions given to him by the IAC under section 144B(4). Section 144A authorises the IAC, on his own motion as well as on a reference made by the ITO or on an application made by the assessee, call for and examine the record of any proceedings for which the assessment is pending and issue directions for the guidance of the ITO to enable him to complete the assessment. The powers envisaged in section 144A are of the nature of general superintendence over the ITO's work. They naturally include both directing relief and enhancement of the assessment. As against this, the scope of powers envisaged in section 144B is limited to whether and to what extent the IAC might, on consideration of the draft assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Special Bench of the Tribunal in the cases of Rex Cinema Co-owners v. Sixth ITO [1983] 3 ITD 633 (Bom.) and ITO v. Sippy Films [1982] 1 ITD 1031 (Bom.) (SB), it has to be held that section 144B is a procedural section though it cannot, perhaps, be disputed that the provisions therein are mandatory and if an assessment is completed without following the procedure laid down in the section, the assessment will not be a valid assessment. 7. Apparently, the issue is squarely covered by the two recent decisions of the Madhya Pradesh High Court in the cases of Banarsidas Bhanot Sons v. CIT [1981] 129 1TR 488 and H. H. Maharaja Raja Pawer Dewas v. CIT [1982] 138 ITR 518, against the assessee and in favour of the revenue. In this context, the observations by their Lordships of Banarsidas Bhanot : "Learned counsel for the assessee relied on the well-known principle that if a power is conferred and the manner of exercising the power is also indicated, the power must be exercised in the manner indicated by the Act conferring the power and not otherwise. But this principle does not mean that every defect in the manner of exercise of the power makes the ultimate order passed in the exerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Tarachand Gupta Bros, AIR 1971 SC 1558 and Bhupendra Singh v. G. K. Umath AIR 1970 SC 91, and (2) issues in those cases were different. The Court was not called upon to decide the issue that arises in this case and, therefore, the observations relied upon are mere obiter dicta. 8. We have carefully gone through the above four decisions. In the English case, it was obligatory on the part of the 'service' to ascertain the opinion of the workers to whom the issue relate by means it thought fit. The recommendation was made without complying with this mandatory direction. It was held that this failure of the 'service' rendered the recommendation void. Apart from the fact that in that context the expressions 'void' or 'invalid' have the same meaning the question of time-limit within which a fresh report can be submitted by the 'service' was not involved. In the decision of the Supreme Court in the case of Lala Ram Swarup the question was whether and to what extent the jurisdiction of the Civil Court to deal with particular matters can be excluded by the Special Acts. It was in that context that their Lordships made observations regarding the jurisdiction of the Civil Courts in pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llows : (1) An Exclusionary Clause using the formula 'an order of the tribunal under this Act shall not be called in question in any Court' is ineffective to prevent the calling in question of an order of the tribunal if the order is really not an order under the Act but a nullity. (2) Cases of nullity may arise when there is lack of jurisdiction at the state of commencement of inquiry, e. g., when : (a) authority is assumed under an ultra vires statute, (b) the tribunal is not properly constituted, or is disqualified to act, (c) the subject-matter or the parties are such over which the tribunal has no authority to inquire, and (d) there is want of essential preliminaries prescribed by the law for commencement of the inquiry. (3) Cases of nullity may also arise during the course or at the conclusion of the inquiry. These cases are also cases of want of jurisdiction if the word 'jurisdiction' is understood in a wide sense. Some examples of these cases are : (a) when the Tribunal has wrongly determined a jurisdictional question of fact or law, (b) when it has failed to follow the fundamental principles of judicial procedure, e. g., has passed the order without giving an opportu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s hereinabove are distinguishable inasmuch as : (1) notice under section 19(2) of the Assam Agricultural Income-tax Act, 1939, was not served in the case of Shashi Prasad Baruah and this notice was the very foundation of the order, (2) in the case of Jai Prakash Singh the assessment was to be made on the legal representatives of the deceased. However, the proceedings were taken against only one of the several representatives. The whole estate was thus not represented, and (3) in the case of Sham Lal the assessment was based on materials placed on record in violation of the principles of natural justice and, in fact, there was no evidence to come to the conclusion that the assessee was a partner in the firm. It was in those circumstances that the High Court held that the only course open to the Tribunal was to annul the assessment order passed by the ITO. Against this, the Allahabad High Court has specifically held in the case of Sant Baba Mohan Singh v. CIT [1973] 90 ITR 197 that if the initiation of the proceedings was valid, the proper course was to set aside the assessment with a direction to make a fresh assessment. It may be stated that in this case, the assessment was made un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supervenes subsequently in the proceedings, the order has got to be set aside with a direction to make a fresh order according to law. In our this view, we are supported by the decisions of the Supreme Court in the case of CIT v. National Taj Traders [1980] 121 ITR 535 and Kapurchand Shrimal v. CIT [1981] 131 ITR 451. It is pertinent to mention that in the case of National Taj Traders, the Commissioner had passed his order under section 263 of the Act without allowing the assessee an opportunity of being heard as required under section 33B of the 1922 Act. When the matter came up before the Tribunal, the Tribunal set aside the order of the Commissioner directing him to pass fresh order after allowing the assessee an opportunity as required by the Act. In pursuance of the order of the Tribunal, the Commissioner passed his order which was, admittedly, after the expiry of two years from the date of the order sought to be revised. The assessee challenged the order. In fact, the Calcutta High Court accepted the assessee's contention. However, the Supreme Court reversed the Calcutta High Court's decision, holding that the time-limit applied to the first order to be passed by the Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must result in nullity of the proceedings. In any event, there is no dispute that the assessment in which the provisions of section 144B are applicable if completed without complying with the requirements of section 144B, cannot be sustained as valid. Therefore, we have no difficulty in holding that the provisions of section 144B(1) are mandatory. Anticipating the arguments of the departmental representative, Shri Dastur submitted that the distinction drawn by the Gujarat High Court in the case of P. V. Doshi v. CIT [1978] 113 ITR 22 between mandatory provisions resulting in nullity of the proceedings and mandatory provisions not resulting in nullity of the proceedings should not be relied upon as no such distinction has been noticed by the Supreme Court in the two decisions relied upon by him, namely, Ram Swarup and Tarachand Gupta. Alternatively, be submitted that the provisions herein are in public interest and cannot be waived and, therefore, even if the test laid down by the Gujarat High Court is applied, the order of the Commissioner annulling the assessment will have to be upheld. On carefully going through the Gujarat High Court's decision, we find no merit in the submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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