TMI Blog1997 (9) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... 048. She was heard by the Income-tax Officer for the purpose of assessment. As in the assessment to be made under sub-section (3) of section 143 of the Income-tax Act, 1961, ("the Act" for short), the Income-tax Officer proposed to enhance the income returned by the assessee by more than rupees one lakh, which was the amount fixed by the Board at the material time under sub-section (6) of section 144B of the Act, he forwarded the draft of the proposed order of assessment to the assessee as required by sub-section (1) of section 144B of the Act on March 30, 1977. The said draft assessment order was served on the assessee on April 4, 1977. On receipt of the draft assessment order, the assessee forwarded her objections to the proposed variation in her returned income to the Income-tax Officer on April 6, 1977, which was within the stipulated period of 7 days of the receipt of the draft order. It appears that the said objections escaped the attention of the Income-tax Officer. He, therefore, took it as a case of "no objection" and completed the assessment on April 12, 1977, on the basis of the draft order. Aggrieved by the order of assessment made by the Income-tax Officer, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the objections to the Inspecting Assistant Commissioner and to pass the final order in terms of the directions of the Inspecting Assistant Commissioner which were binding on him. The Commissioner (Appeals) also considered the question whether in such circumstances, the order of assessment could be set aside or has to be cancelled. It appears that the expression "cancel" has been used inadvertently by the Commissioner (Appeals) for the expression "annul", because under section 251 of the Act, the power of the appellate authority in disposing of an appeal against an order of assessment is to confirm, reduce, enhance or "annul" the assessment or to set aside the assessment and refer the case back to the Assessing Officer to make a fresh assessment. In this case, on consideration of the fact that the order of assessment passed by the Income-tax Officer on April 12, 1977, was wholly illegal and without jurisdiction, the Commissioner (Appeals) was of the opinion that it was liable to be annulled. That being so, he annulled the same. The expression "cancel" appears to have been used by him in the order inadvertently for the word "annulled", because in an appeal against an assessment he d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Inspecting Assistant Commissioner under sub-section (4) of section 144B shall be binding on the Income-tax Officer. According to learned counsel, the moment objections are filed by the assessee to a draft order, the jurisdiction of the Income-tax Officer to, make an assessment comes to an end, and the only power vested in him thereafter is to pass a final order of assessment in accordance with the directions given by the Inspecting Assistant Commissioner which are binding on him. He cannot vary or depart from those directions. That being so, according to learned counsel, the order made by the Income-tax Officer in this case, on the face of it, is not only illegal, but without jurisdiction and that being so, it is liable to be annulled. Reliance is placed in support of this contention on the decision of the Gauhati High Court in Sonai River Tea Co. Ltd. v. CIT [1990] 182 ITR 162 and the decision of the Orissa High Court in Commercial Enterprisers v. State of Orissa [1991] 81 STC 84. We have carefully considered the rival submissions. In this case, there is no dispute about the fact that the Income-tax Officer proposed to enhance the returned income of the assessee by more t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a penalty, he may confirm or cancel such order or vary, it so as either to enhance or to reduce the penalty ; (c) in any other case, he may pass such orders in the appeal as he thinks fit." It is clear from the above provision that the powers of the appellate authority are different in appeals against different types of orders. In an appeal against the order of assessment, he has the power to "affirm, reduce, enhance or annul the assessment" or to set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment according to the directions given by him. In the case of an appeal against the order of penalty, the power is to "affirm or cancel such order" or vary it so as either to enhance or reduce the penalty. In other cases, he has power to pass such order as he thinks fit. It is clear from the above that in an appeal against the order of assessment, besides the power to reduce or enhance the assessment, he has the power to confirm or annul the assessment, or to set aside the same and refer the case back to the Assessing Officer for making a fresh assessment. There is no power to set aside the order in the case of penalty. In the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of such variation exceeds the amount fixed by the Board under sub-section (6), the Income-tax Officer shall, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the assessee. (2) On receipt of the draft order, the assessee may forward his objections, if any, to such variation to the Income-tax Officer within seven days of the receipt by him of the draft order or within such further period not exceeding fifteen days as the Income-tax Officer may allow on an application made to him in this behalf. (3) If no objections are received within the period or the extended period aforesaid, or the assessee intimates to the Income-tax Officer the acceptance of the variation, the Income-tax Officer shall complete the assessment on the basis of the draft order. (4) If any objections are received, the Income-tax Officer shall forward the draft order together with the objections to the Inspecting Assistant Commissioner and the Inspecting Assistant Commissioner shall, after considering the draft order and the objections and after going through (wherever necessary) the records relating to the draft order, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 250, 254, 260, 262, 263 or 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act (iii) where in the case of a firm, an assessment is made on a partner of the firm in consequence of an assessment made on the firm under section 147. Explanation 1.--In computing the period of limitation for the purposes of this section . . . (iv) the period (not exceeding one hundred and eighty days) commencing from the date on which the Income-tax Officer forwards the draft order under sub-section (1) of section 144B to the assessee and ending with the date on which the Income-tax Officer receives the directions from the Inspecting Assistant Commissioner under sub-section (4) of that section, or, in a case where no objections to the draft order are received from the assessee, a period of thirty days, or ;" On a conjoint reading of sections 143, 144B, 251 and 153 of the Act, it becomes abundantly clear that if an assessment is set aside by the appellate authority, an extende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order may be set aside if there is any error, which requires further enquiry to be conducted by the appellate authority." It is clear from the above decisions that if there is an irregularity in making an order of assessment, it may be set aside by the appellate authority with a direction to the assessing authority to make a fresh assessment in accordance with law. But if the order happens to be without jurisdiction, it has to be annulled. The word "annul" is not a technical word and may be expressed in equivalent words. In Black's Law Dictionary (sixth edition), it has been defined to mean : "To reduce to nothing ; annihilate ; obliterate ; to make void or of no effect ; to nullify ; to abolish ; to do away with. To cancel ; destroy ; abrogate. To annul a judgment or judicial proceeding is to deprive it of all force and operation, either ab initio or prospectively as to future transactions." An assessment should, therefore, be annulled where the assessment proceeding is a nullity, in the sense that the Assessing Officer had no jurisdiction to take the proceeding and/or to make a final order of assessment himself. Once the assessment is annulled, the order of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d functions of the assessing authority. The power to consider the draft order and the objections of the assessee is thereafter vested in the Inspecting Assistant Commissioner and he is the authority to determine the income of the assessee. The only remaining thing to be done by the Income-tax Officer is to pass a final order of assessment pursuant to and in accordance with the directions of the Inspecting Assistant Commissioner. If, in cases falling under section 144B of the Act, the Income-tax Officer arrogates to himself the power to pass an assessment order without referring the case to the Inspecting Assistant Commissioner, such an assessment will be without jurisdiction and it will be liable to be annulled by the appellate authority. We are supported in our above conclusion by the observations of the Supreme Court in a recent decision in Panchamahal Steel Ltd. v. U. A. Joshi, ITO [1997] 225 ITR 458, where on a reading of section 144B of the Act, it was observed: ". . . once a draft assessment order is made and the matter is referred to the Inspecting Assistant Commissioner on receiving the assessee's objections, the function of the Income-tax Officer practically comes to a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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