1980 (1) TMI 2 - SC - Income Tax

Assessment Order - Inherent Powers - Defect in notice under s. 142(1) is a procedural lapse and does not affect the fundamental jurisdiction of ITO to make assessment. High court has jurisdiction to direct ITO to make a fresh assessment.

Summary

Issues:
1. Whether the High Court erred in directing a fresh assessment after quashing the assessment order.
2. Whether the High Court possessed the power to direct a fresh assessment in the given circumstances.

Detailed Analysis:
1. The main issue before the Supreme Court was whether the High Court erred in directing a fresh assessment after quashing the assessment order. The appellant argued that the High Court was wrong in making the direction as the assessment had become barred by limitation, thereby accruing a valuable right not to be assessed. The appellant contended that the High Court did not have the authority to deprive them of this accrued right. The assessment year in question was 1972-73, and the appellant filed a writ petition challenging the notice under section 142(1) of the Income Tax Act. The assessment proceedings were stayed by court orders from March 17, 1975, to August 31, 1976. The assessment order was eventually made on March 31, 1977, which was within the limitation period. The Supreme Court held that the assessment order was not barred by limitation as the period of stay by court orders was excluded from the computation of the limitation period.

2. The second issue revolved around whether the High Court had the power to direct a fresh assessment. The Supreme Court analyzed the nature of assessment proceedings as quasi-judicial and the certiorari jurisdiction of the High Court under Article 226. The Court explained that in cases where the High Court quashes an order, the remaining part of the proceeding stands revived before the inferior court or tribunal for fresh consideration. The High Court does not typically substitute its own order for the quashed one. However, the High Court has the power to pass further orders necessary for complete justice between the parties. In this case, the High Court's direction for a fresh assessment was deemed necessary to neutralize any unfair advantage gained by the appellant due to the litigation. The Court emphasized that the High Court acted within its jurisdiction and in the sound exercise of its judicial discretion by directing a fresh assessment.

In conclusion, the Supreme Court dismissed the appeal and upheld the High Court's decision to direct a fresh assessment, emphasizing that it was necessary for complete justice between the parties and within the High Court's jurisdiction.