TMI Blog1989 (9) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of section 144B of the Income-tax Act, 1961, are procedural or substantive ? 2. Even if it be conceded that the provisions are procedural, whether these are directory or mandatory ? 3. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the Appellate Assistant Commissioner was right in setting aside the assessment and directing the Income-tax Officer to make a fresh assessment in accordance with law, as the assessment proceeding could not be considered to be null and void, but duly vitiated by a supervening irregularity ? 4. Whether the Income-tax Appellate Tribunal was bound to follow its earlier decision which was rendered on identical facts in the case of another assessee wherein the interpretation of a provision of law, viz., section 144B of the Act, was at issue ?" The assessee sought annulment of the Income-tax Officer's order under section 251 of the Income-tax Act of 1961 and in none of the four questions is there a reference to that section. The first appellate authority in the instant case found that the Incometax Officer while passing the assessment order was ignorant of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med and thereafter section 144B procedure will have to be followed. If the assessee protests and files objections to the draft assessment order as prepared by the Income-tax Officer the draft order along with the objections of the assessee is sent to the Inspecting Assistant Commissioner for "directions". On receipt of the directions, the Income-tax Officer finalises the assessment order. This, in a nutshell, is the scheme incorporated in section 144B. All orders under section 144B are appealable under clause (d) of section 246. The Commissioner of Income-tax (Appeals) will dispose of appeals under section 251 of the Act. A second appeal as in section 254 to the Tribunal is further provided. A special rule of limitation is prescribed in sub-section (2A) of section 153. For facility of reference, the above referred to provisions are extracted hereunder : "246. (1) Subject to the provisions of sub-section (2), any assessee aggrieved by any of the following orders of an Assessing Officer ..... may appeal to the Deputy Commissioner (Appeals) against such order - ...... 251. Powers of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals). - (1) In di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and can set aside the order appealed from. The two are specified as powers of the appellate authority in section 251. There are no guidelines for the appellate authority as to when an order is to be set aside and as to when an order is to be annulled. In the absence of guidelines, what course, is to be adopted became arduous and difficult for decision. In search of an answer, we traversed the powers of the appeal courts in criminal law in that discipline. When orders are passed without compliance with the statutory provisions, such orders are termed irregular orders and the effect of such orders is treated from the standpoint of curability of the orders. In constitutional law, orders passed per incuriam are quashed or annulled. There is no settled practice as on today in that discipline as to what orders are to be annulled or quashed and what orders are to be set aside. There is also no settled practice as to when an order is annulled and as to whether further inquiry can be held or not. In civil law, appellate authorities do confirm or modify orders under appeal. Expressions such as quash and annul have a constitutional flavour and generally the flavour is not shared by civil an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erpreted in AIR 1984 SC 1164 (Babulal Nagar v. Shree Synthetics Ltd.), to mean to pass orders as per the statute which mean again as per section 251 of the Act. This is to run in a circle without a destination or an end. With great respect, such a reasoning does not answer the issue. In a case from the Andhra Pradesh High Court in H. S. Imam v. CIT [1988] 171 ITR 214, the assessment order was found passed without following the procedure in section 144B. That court observed (at p. 219): "Ends of justice would be met adequately by setting aside the assessment and giving a fresh opportunity to the assessee to make appropriate representations in a de novo assessment enquiry before the officer. It may be true that, in so doing, the period of limitation is enlarged. But this is a hazard associated with the direction to make a fresh assessment and it cannot be avoided ..." Questions of limitation cannot be equated with hazards in litigation nor do the ends of justice warrant avoidance of statutory provisions and, for that reason, we cannot follow the ratio laid down in that case. There is the case of the Madhya Pradesh High Court in H. H. Maharaja Pawer Dewas v. CIT [1982] 138 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentative was not served notice-Chooharmal Wadhuram v. CIT [1971] 80 ITR 360 (under sections 24B(2), 34(1)(a) of the 1922 Act). In that case, cases under the Code of Civil Procedure were considered. It was held that when after enquiry certain legal representatives were discovered who were earlier not served notices, it was held that the earlier orders are not nullified and it was observed (at p. 374) : "If this principle was rejected in its application to assessment proceedings, it would in many cases frustrate the proceedings for assessment of income of a deceased person and result in escapement of such income from taxation without any fault on the part of the revenue authorities." We have earlier referred to two Karnataka cases where more or less on the same reasoning assessment orders were not invalidated. (G. R. Steel and Alloys P. Ltd. v. CIT [1985] 152 ITR 220 and Ashok Kumar (K.) v. CIT [1986] 162 ITR 543). We may point out that under the Code of Civil Procedure the effect of not bringing all the legal representatives on record was considered in Raja Ram Mahadev Paranjype v. Aba Maruti Mali, AIR 1962 SC 753, Daya Ram v. Shyam Sundari, AIR 1965 SC 1049 and Babulal Nagar v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge 353. Impelled by these ramifications, we state that the subject-matter even as on today is inchoate. Before parting with the subject, we may refer to a case cited by the Revenue in this regard, Raleigh Investment Co. Ltd. v. Governor General in Council [1947] 15 ITR 332 (PC). The Revenue laid great stress on the following passage in that case (headnote) : "An assessment made under the machinery provided by the Act, if based on a provision subsequently held to be ultra vires, is not a nullity like an order of a court lacking jurisdiction. Reliance on such a provision is not an excess of jurisdiction but a mistake of law made in the course of its exercise". (para. 14). The Indian Supreme Court did not follow this case on the issue of ouster of jurisdiction of civil courts. What is laid down in the above passage is more relevant when orders are declared ultra vires. The last line in the passage suggests that jurisdiction is different from the concepts of ultra vires. Even as to that aspect more will be stated in an appropriate case when an order is declared ultra vires. As it is, we are entrenched in jurisdiction in the instant case and searching for a solution in fields not rele ..... X X X X Extracts X X X X X X X X Extracts X X X X
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