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TMI Blog1983 (4) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... Finding that different Benches of the Tribunal were taking contrary and conflicting views on the issue, the Members who heard the originally, refereed 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 s. 144B(1) are applicable in this case and that the ITO should have completed the assessment after going through the procedure laid down in s. 144B. However while according to the Department the omission to follow the procedure laid down under s. 144B is only a curable procedural defect, the case of the assessee which has been accepted by the CIT(A) is that the provisions of s. 144B is only a curable procedural defect, the case of the assessee which has been accepted by the CIT(A) is that provisions of s. 144B are mandatory and, therefore, the completion of the assessment in violation of the provisions of s. 144B is null and void. In support of their rival contentions the assessee's counsel and the Departmental Representative advanced detailed arguments and supported their contentions by placing reliance on a number of High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this section shall apply to a case where an IAC exercise the powers or performs the functions of an ITO in Pursuance of an order Made under section 125 or section 125A". It is pertinent to mention that simultaneously with the introduction of s, 144B s. 144A was also inserted in the IT Act, 1961, with effect from 1st Jan., 1976. For understanding the scheme of the Act in this regard and the purpose for which s. 144B is introduced in the Act it will, therefore, be necessary to refer to s. 144A which reads as under: "144A. (1) An IAC may on his own motion or on a reference being made to him by the ITO or on the application of an assessee, call for an examine the record of any proceeding in which an assessment is pending and, if he considers that, having regard to the nature of the case or the amount involved or for any other reason, it is necessary or expedient so to do, he may issue such directions as he thinks fit for the guidance of the ITO to enable him to complete the assessment and such directions shall be binding on the ITO: Provided that no directions which are prejudicial to the assessee shall be issued before an opportunity is given to the assessee to be heard. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im to complete the assessment. The powers envisaged in s. 144A are of the nature of general superintendent over the ITO's work. They naturally include both directing relief and enhancement of assessment. As against this, the scope of powers envisaged in s. 144B is limited to whether and to what extent the IAC might, on consideration of the draft assessment order and the objections raised by the assessee and the assessment records etc., direct the ITO not to make the additions/disallowances proposed by him in the draft assessment order. In any event, the jurisdiction to make assessment as stated earlier always remains with the ITO. The ITO is bound, in the first instance to forward the draft of the proposed assessment order in case he proposes to make variation of more than Rs.1,00,000 in the net income or loss returned by the assessee. However it is for the assessee to make use of the powers available to the IAC under s. 144B to scrutinise the additions/disallowance vis-a-vis his objections as the matter does not go to the IAC unless he objects to the proposed variation in income or loss within the time allowed in the section. 6. As regards the proviso to s. 144B(4). The Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Learned counsel for the assessee relied on the well-known principle that if a power conferred and the manner of exercising the power is also indicated, the power must be exercised in the manner indicate by the Act conferring the power and not otherwise. But this principle dose not mean that every defect in the manner of exercise of the powers make the ultimate order passed in the exercise of the power invalid. A question of this nature has to be answered having regard to the relevant statutory provision, the object behind it and the deviation in the particular case from its strict compliance. We have already indicated that s. 144B is a procedural provision and the object behind this section is to give a comprehensive opportunity in cases where the variations proposed by the ITO in the income returned are in excess of Rs. 1 lakh. If the draft order issue is capable of giving full opportunity to the assessee to meet the proposed variations, it cannot be said that the defect in the draft order makes the entire proceedings invalid. At any rate, no question of jurisdiction is involved in such cases. Any non-compliance with s. 144B can be set right by the Tribunal by remanding the proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion 'void' or 'invalid' have the same meaning and 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 Ram Swarup Ors. vs. Shikar Chand Anr., the question was whether and to what extent the jurisdiction of the Civil Court to deal with particular matters can be excluded by Special Acts. It was in that context that their Lordship made observations regarding the jurisdiction of the Civil Courts in paragraph 13 of the decision at page 896 relied upon by the assessee's counsel. In the decision in the case of Union of India vs. Tarachand Gupta Bros., again, the question was whether and to what extent the jurisdiction of Civil Courts was excluded by the special provisions of Import and Export (Control) Act, 1947. It was in that context that their Lordships held in paragraph 21 that— "A determination which takes into consideration factors which the officer has no right to take into account, is no determination. This is also the view taken by Courts in England. In such cases the provision excluding jurisdiction of Civil Courts cannot operate so as to exclude an inquiry by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ential preliminaries prescribed by the law for commencement of the inquiry. (3) Case 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 opportunity of hearing to the party affected, (c) when it has violated the fundamental provisions of the Act e.g., when it fails to take into account matters which it is required to take into account or when it takes into account extraneous and irrelevant matters. (d) when it has acted in bad faith, and (e) when it grants a relief or makes an order which it has no authority to grant or make." In the circumstances, we are of the view that the above four decisions have no direct bearing on the point at issue before us and, therefore, the fact that these decisions have not been noticed by the Madhya Pradesh High Court in its two decisions in (1981) 21 CTR (MP) 161 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 vs. CIT (1973) 90 ITR 197 (All) 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 under s. 143(3) without issue and service of a valid notice under s. 143 (2). The Jammu and Kashmir High Court has also taken the same view in the case of Rattan Lal Tiku vs. CIT (1974) 97 ITR 553 (J K). The Andhra Pradesh High Court has in the case of Addl. CIT vs. Boina Suranna (1980) 124 ITR 328 (AP), also held that in a case like the one before us, the whole proceedings do not become a nullity and the assessment can and should be set aside with a direction to make a fresh assessment from the stage at which the illegality supervened. It is true tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eard as required under s. 33B of the Indian IT Act, 1922. When the matter came up before the Tribunal, the Tribunal set aside the order of the CIT 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 CIT 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 CIT and not the order passed in pursuance of the Tribunal's order. In the case of Kapurchand Shrimal vs. CIT, the ITO completed the assessment in the status of HUF without making proper inquiry as required of him under s. 25A of the Indian IT Act, 1922, in view of the fact that the assessee had made a claim for partition in time. The assessment so made was held to be illegal. The question was whether the Tribunal should or should not have directed the ITO to make a fresh assessment. The Supreme Court held: "when the Tribunal h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 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 vs. Shikar Chand AIR 1966 (SC) 891 and Union of India vs. Tarachand Gupta Bros. AIR 1971 (SC) 558. Alternatively, he 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 CIT annulling the assessment will have to be upheld. On carefully going through the Gujarat High Court's decision, we find no merit in the submission made by Shri Dastur. In this connection, it has to be noted that the proposition, namely, "that the safest rule to determine what is an irregularity and what is a nullity is to see whether the party can waive the objection; and if he can waive it, it amounts to irregularity; if he cannot, it is nullity" quoted with approval by the Gujarat High Court in the above case has been taken verbatim from the Supreme Court's decision itself in the case of Dhirendra Nath Gorai vs. Sudhir Chandra Gh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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