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TMI Blog1985 (11) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... given an opportunity as is provided for under section 144A of the Income-tax Act, 1961 ('the Act') also. According to Mr. Ruhela, since section 144A clearly provided that enhancement could be made by the IAC over and above what the ITO has proposed to do but the same is subject to condition that an opportunity has to be provided to the assessee. Since the opportunity has not been provided to the assessee, the directions become invalid and, consequently, an irregularity crept in. Therefore, all the proceedings from the time of the irregularity automatically become irregular. Such irregularity does not mean that the assessment made is bad in law but one in which wrong procedure has been applied which could be redone. He relied on the Special Bench decision in Ram Gopal Neotia v. ITO [1982] 1 ITD 160 (Cal.), the Madhya Pradesh High Court decision in Kimtee v. CIT [1985] 151 ITR 73 and also the Supreme Court decision in the case of Guduthur Bros. v. ITO [1960] 40 ITR 298. According to Mr. Ruhela, the Supreme Court has clearly held that the ITO had jurisdiction to continue the proceedings from the stage at which the irregularity had occurred. According to Mr. Ruhela, the Commissioner ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or further directions and guidance. The case was fixed several times by you without much purpose. On 11-8-1980 you had examined the case and adjourned it to 12-8-1980 but strangely enough there is nothing on record to show that the case was examined on 12-8-1980 and strangely you had issued again notice under section 143(2) for 26-9-1980. Subsequently entries also do not indicate any progress, when the case was fixed for 29th July and 11th August and the account books were produced, you should have yourself noted down the relevant figures of quantitative details and examined that with reference to the results shown in the assessment year 1976-77 and then submitted me a detailed note. The IAC's note was before you even in the month of April 1980, wherein the assessment made for 1977-78 was assailed as an underassessment. In your present reference, you have compared the results of assessment year 1978-79 with the results of assessment year 1977-78, which itself was not a proper assessment. You should have compared the results of this year with that of assessment year 1976-77. You should have obtained the price list of 1976-77 as well as price list of this year and should have calcula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies from the assessee. The assessee filed the reply in regard to the levy of penalty and, therefore, the ITO without affording an opportunity to the assessee went ahead and levied the penalty of Rs. 16,000. In appeal, the AAC deleted the penalty and directed that refund should be granted of the penalty amount. Since the AAC had held that the proceedings were defective, the ITO proceeded to correct the defect and issued notice to the assessee calling him to give his explanations. 5. In the meanwhile, the assessee filed a writ petition which was dismissed by the High Court as the remedy of appeal has not yet been fully exhausted by the assessee. Special leave was asked for by the assessee which was granted and in this special leave their Lordships were confronted with the manner of levy of penalty by the ITO. Their Lordships observed thus in regard to the manner: "There is no question here that the requirements of section 28(1)(a) of the Income-tax Act were not completely fulfilled. If the appellants had not filed their return, as they were required by law to do, the omission would attract clause (a) of sub-section (1) of section 28. We say nothing as to that. Sub-section (3) of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Officer is well within his jurisdiction to continue the proceedings from the stage at which the illegality has occurred and to assess the appellants to a penalty, if any, which the circumstances or the case may require." Now, in the instant case, the situation is almost identical with the issue before their Lordships of the Supreme Court. The only difference is in the present case it is the IAC who has denied an opportunity to the assessee. It is at this stage that the illegality has stepped in. Section 144A clearly provides that no directions which are prejudicial to the assessee shall be issued before an opportunity is given to the assessee to be heard. There fore, the directions are no doubt, illegal but the subordinate officer has necessarily to follow the directions, which in the instant case, the ITO had done. Merely for the reason that a superior officer has bypassed the provisions of the law and had given the directions to the ITO, the ITO has not been given any powers under the statute to overlook the directions of the IAC, the assessment should not have been annulled. The ITO is bound by the directions given by the IAC under section 144A. The Explanation to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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