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Issues Involved:
1. Jurisdiction of the Inspecting Assistant Commissioner under section 144A and 144B of the Income-tax Act, 1961. 2. Validity of the assessment order made in violation of section 144B and principles of natural justice. 3. Power of the appellate authority to set aside the assessment for fresh assessment. Summary: Jurisdiction of the Inspecting Assistant Commissioner under section 144A and 144B: The court examined whether the Inspecting Assistant Commissioner (IAC) had the jurisdiction to issue directions regarding the disallowance of "reduction for past savings" under section 144A, even though this matter was not covered by the objections under section 144B. The court held that the IAC's power under section 144A is broad and can be invoked independently of section 144B. The IAC can issue directions on any matter relevant to the pending assessment, provided the assessee is given an opportunity to be heard. The court cited CIT v. M. S. P. Exports Pvt. Ltd. and CIT v. N. Krishnan to support this view. Validity of the assessment order made in violation of section 144B and principles of natural justice: The court addressed whether the assessment order, made without following the mandatory provisions of section 144B and in violation of natural justice, was void ab initio or merely suffered from a procedural irregularity. The court concluded that non-compliance with procedural requirements does not render the assessment order a nullity. The assessing authority retains jurisdiction to correct procedural defects and complete the assessment afresh. The court referenced Vishwanath Prasad Bhagwati Prasad v. CIT, which held that section 144B is procedural, and non-compliance does not void the assessment but necessitates correction and re-assessment. Power of the appellate authority to set aside the assessment for fresh assessment: The court affirmed the appellate authority's power to set aside an assessment and direct a fresh assessment in accordance with the law. Section 251(1)(a) and section 254(1) of the Income-tax Act empower appellate authorities to correct errors and issue directions for re-assessment. The court cited Kapurchand Shrimal v. CIT, where the Supreme Court held that appellate authorities have the duty to correct errors and issue appropriate directions for fresh assessment. Conclusion: The court upheld the order of the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal, which set aside the assessment for fresh assessment after providing due opportunity to the assessee. The question referred to the court was answered in the affirmative, in favor of the Revenue and against the assessee. There was no order as to costs.
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