TMI Blog1991 (6) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... n income of Rs. 6,860. An assessment was made on him on December 23, 1975. On December 31, 1975, the assessee filed a revised return showing an enhanced income. No notice under section 148 of the Act was issued by the Income-tax Officer. On March 11, 1976, however, another assessment order, on an income of Rs. 17,097, was made on the assessee. Subsequently, the Commissioner of Income-tax, looking into the file of the assessee, held in his order dated February 7, 1978, under section 263 of the Act, that the above said second assessment order of the Incometax Officer dated March 11, 1976, was erroneous, in so far as it was prejudicial to the interests of the Revenue. For coming to this conclusion, apart from stating that only one assessment could be made for a year, lie made the following observations : "In the original return, the assessee has admitted net agricultural income of Rs. 2,500 while in the revised return, net agricultural income admitted is Rs. 5,000. In the original return, the assessee has not admitted any income from property. Only in the return filed on January 5, 1976, (this must be the revised return filed on December 31, 1975), the assessee has admitted proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in cancelling the order of the Commissioner of Income-tax passed under section 263 of the Act, without even going into the merits of the case as to whether there was prejudice done to the Revenue. Learned counsel contended that the Tribunal had also failed to appreciate the true scope of the expression "prejudicial to the interests of the Revenue". In that context he brought to our notice Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC), where it was held that (at page 328): Even where an income has not been earned and is not assessable, merely because the assessee wants it to be assessed in his or her hands in order to assist someone else who would have been assessed to a larger amount, an assessment so made can certainly be erroneous and prejudicial to the interests of the Revenue." (underlining is ours) Then, he referred to Venkatakrishna Rice Co. v. CIT [1987] 163 ITR 129 (Mad), where after reiterating that for invoking section 263, the order of the Income-tax Officer must not only be erroneous, but also the error must be of such a kind that it can be said of it that it is prejudicial to the interests of the Revenue, this court observed as follows (at page 137) : " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, counsel pointed out that even though the above said second assessment order by the Income-tax Officer was a void order, yet it has to be set aside and it cannot be ignored and the Tribunal erred in holding that since the said second order of the Income-tax Officer was non est, the subsequent order of the Commissioner under section 263 was not justified. Learned counsel for the Revenue also cited V. Raju v. CIT [1984] 147 ITR 212 (Mad), where it was held that any order passed by an authority without following the principles of natural justice was null and void even though it had been passed well within its jurisdiction. However, it was observed in the said decision as follows (at page 217) : "So long as the order is passed under a statutory provision, it continues to be enforceable, unless it is set aside by the appropriate forum constituted under the same Act. Therefore, the assessee will be acting at his risk and peril if he ignores the order as being null and void." Learned counsel for the Revenue also cited the following passage from Anisminic Ltd. v. Foreign Compensation Commission [1969] 2 AC 147 (HL) at page 169 : "If it is a nullity, that could only be established b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Paswan, AIR 1954 SC 340 and observed as follows : "In Kiran Singh v. Chaman, Paswan, AIR 1954 SC 340,342; [1955] 1 SCR 117, 121, Venkatarama Ayyar J., observed that the fundamental principle is well established that a decree passed by a court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon-even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the court to pass any decree, and such a defect cannot be cured even by consent of parties." After referring to Kiran Singh, v. Chaman Paswan, AIR 1954 SC 340, thus, the Supreme Court in A. R. Antulay v. R. S. Nayak [1988] 2 SCC 602, 650 ; AIR 1988 SC 1531, 1546, also, observed as follows : "This question has been well put, if we may say so, in the decision of this court in M. L. Sethi v. R. P. Kapur, AIR 1972 SC 2379 ; [1972] 2 SCC 427 ; [1973] 1 SCR 697, where Mathew J., observed that the jurisdiction was a verbal coat of many colours and referred to the decision in Anism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are void or voidable. Up to a point there is a sound basis for this distinction. But attempts have been made to carry it beyond that point and to use it as a means of turning firm rules of law into matters of discretion. Although it is now reasonably clear that these attempts have failed, a good deal of confusing reasoning has accumulated and requires to be sorted out. 'Void or voidable' is a distinction which applies naturally and without difficulty to the basic distinction between action which is ultra vires and action which is liable to be quashed for error on the face of the record. Action which is ultra vires is unauthorised by law, outside jurisdiction, null and void, and of no legal effect. But an order vitiated merely by error on its face is, as has been seen, intra vires and within jurisdiction, but liable to be quashed because of the exceptional powers of control which the courts established three centuries ago and which they recently revived. Such an order is voidable, being intra vires and valid and effective, unless and until the court quashes it." (underlining is ours) The author, in relation to the above said order which is "outside jurisdiction, null and void and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar the above-referred AIR 1988 SC 1531 (A. R. Antulay v. R. S. Nayak), we agree with his contention and hold that the Tribunal was not justified in holding that the above-referred second assessment order of the Income-tax Officer was non est in any absolute sense, since it would bind the parties unless set aside. Till it was set aside by the Commissioner under section 263, it bound the parties and the question is only whether the Commissioner was right in setting it aside under section 263 and ordering fresh assessment. Then, with reference to the first question referred to us, viz., whether the Tribunal was right in cancelling the said action of the Commissioner, though we find that the Tribunal has not expressed in so many words that the order of the Commissioner under section 263 was cancelled or set aside, we will be justified in holding that the Tribunal, by implication, has set aside the said Commissioner's order, because paragraph 3 of the Tribunal's order states as follows : "The Commissioner cannot treat a non est order as prejudicial to the Revenue ... For this reason alone the order of the Commissioner has to be set aside." So, it cannot be said that the first ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the matter of assessment of an association and/or the members thereof. Since the Income-tax Officer's order makes it difficult for the Department to get at the total income of the association of persons, it had to be removed out of the way. If it is removed out of the way, the resulting position would be as though there had been no such order even in the first instance, and the field may be clear for the exercise of option once more, as though the Department can begin from the very beginning. This intention to circumvent the clear consequence of the law, as laid down by the courts, is not definitely purpose which could actuate the Commissioner of Income-tax under section 263 of the Act. This is because, far from the Income-tax Officer's order being prejudicial to the interests of the Revenue, the present action of the Commissioner in seeking to set aside that order is really prejudicial to the Revenue since it is prejudicial to the law laid down by tile courts." In the above said case in Venkatakrishna Rice Co. v. CIT [1987] 163 ITR 129 (Mad), the Income-tax Officer originally assessed the share of income of the assessee from a joint venture in its hands. The Commissioner, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tration of the Revenue. No doubt, learned counsel for the assessee argued that in the present case also the Commissioner, in passing the order under section 263 of the Act, sought to circumvent another provision of law. Section 153 of the 'Act provides two years' time from the end of the assessment year in question for passing the assessment order tinder section 143 or section 144 of the Act. But, if an order is passed under section 263 by the Commissioner, further time is secured for making a fresh assessment because section 153 (2A) itself provides two years' time from the end of the financial year in which the order under section 263 is passed by the Commissioner. So, learned counsel for the assessee argued that in order to gain more time only the above said order under section 265 was passed. In reply to this argument, learned counsel for the Revenue pointed out that there was no such circumvention at all because the assessment order related to 1974-75 and the first assessment order was made on December 23, 1975, and the second assessment order was made on March 11, 1976, that is, even within one year of the end of the said assessment year, and on that very date, viz., March ..... X X X X Extracts X X X X X X X X Extracts X X X X
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