TMI Blog1977 (8) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... atter whether the case was rightly reopened (which is purely a legal matter going to the very root of the jurisdiction), after having raised and not pressed the point before the Appellate Assistant Commissioner when the matter was taken up before the Appellate Assistant Commissioner for the first time ?" The assessment year in question was 1960-61 corresponding to the relevant accounting year ending March 31, 1960. The original assessment order was passed for that year on December 2, 1961. Thereafter, in the assessment year 1961-62, the Income-tax Officer noticed that the assessee had sold gold worth Rs. 19,421 and the fund for acquisition of gold represented the income of the assessee. A show-cause notice was issued on January 11, 1962, and the assessee had given his explanation. The proceedings for reassessment under section 147 were initiated by the notice dated September 3, 1963, in response to which the assessee filed his return on October 3, 1963. The assessee raised objections about the validity of the notice and also on merits challenging this reassessment by relying upon the affidavit of one Shri Kanji Vora in support of the plea that gold ornaments had been converted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further found that the Income-tax Officer had not specified under which sub-section of section 147 he reopened the assessment. There were no reasons recorded by the Income-tax Officer for reopening assessment even when an enquiry in that connection as to the source of investment had been made by that officer after receiving the reply of the assessee of August 22, 1963. This omission on the part of the assessee assumed great importance as the Income-tax Officer was proceeding on totally different grounds after receiving the explanation regarding the source of investment in gold ornaments from the assessee. He also considered that the assessee had shown gold ornaments worth Rs. 45,000 in his wealth-tax return and, therefore, the source of the investment in gold ornaments having been explained, on that ground also the notice should be considered to be bad in law. Therefore, his final conclusion was that the subsequent reopening of the assessment was only on account of the change of opinion as to whether there had been actually sale of ornaments and, therefore, on that ground reopening of assessment was not justified. He, therefore, annulled the order of reassessment by his order, dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 147 could be waived or not, it would be proper at this stage to consider the settled legal position is to the nature of this reassessment proceeding under section 147 or the corresponding section 34 of the earlier Act in the light of the safeguards which have been laid down as conditions precedent or as fetters on the jurisdiction of the authority in wider public interest. Section 147 provides for reassessment of the income escaping assessment as under: "147. If-- (a) the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e available for the authorities who have to give the sanction. In Kasturbhai Lalbhai v. R. K. Malhotra, Income-tax Officer [1971] 80 ITR 188 (Guj) Bhagwati C.J. (as he then was) in terms pointed out at page 191 that it must be remembered that section 147 empowered the Income-tax Officer to disturb the finality of an assessment already made and to assess or reassess the income of the assessee. Such an action is bound to result in considerable anxiety and harassment to the assessee and the legislature has, therefore, imposed certain conditions subject to which alone the Income-tax Officer can reopen an assessment which is already concluded. These conditions are succinctly stated by their Lordships in Johri Lal (HUF) v. Commissioner of Income-tax [1973] 88 ITR 439 (SC). There the question had arisen because the Income-tax Officer had proceeded on the basis of section 34(1)(b) of the old Act and not on the basis of section 34(1)(a) and, therefore, it was held that in the absence of material on record to show that the Income-tax Officer had formed the requisite belief, recorded his reasons for taking action under section 34(1)(a) and obtained the sanction of the Central Board of Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imself proceeded only under section 34(1)(b) and not on the basis of section 34(1)(a), the order in those circumstances could not be justified under section 34(1)(a). Therefore, it was held that without the three relevant conditions precedent being first fulfilled, the proceedings could not be initiated for reassessment under section 34(1)(a). The same would be true for section 34(1)(b) where the Income-tax Officer had in consequence of information in his possession to form that belief that income chargeable to tax had escaped assessment for any assessment year. Therefore, these three conditions precedent having been introduced by way of safeguards in wider public interest so that the finally concluded proceedings which at the time of original assessment could be reopened through initial procedure of appeal, revision or rectification before the assessment became final could not be lightly reopened, with the consequent hardship to the assessee and also unnecessary waste of public time and money in such proceedings. Therefore, these are treated as fetters on the jurisdiction of the authority reopening the proceedings under sections 147 and 148 read with section 151. That is why in Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lier stages where the Income-tax Officer is to record his reasons and obtain sanction of the Commissioner. The legal position about waiver of such a mandatory provision created in the wider public interest to operate as fetter on the jurisdiction of the authority is well settled that there could never be waiver, for the simple reason that in such cases jurisdiction could not be conferred on the authority by mere consent, but only on conditions precedent for the exercise of jurisdiction being fulfilled. If the jurisdiction cannot be conferred by consent, there would be no question of waiver, acquiescence or estoppel or the bar of res judicata being attracted because the order in such cases would lack inherent jurisdiction unless the conditions precedent are fulfilled and it would be a void order or a nullity. The settled distinction between invalidity and nullity is now well brought out in the decision in Dhirendra Nath Gorai v. Sudhir Chandra Ghosh, AIR 1964 SC 1300, 1304, where their Lordships had gone into this material question as to whether the act in breach of the mandatory provision is per force a nullity. The passage in Macnamara on Nullities and Irregularities, referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on arose whether, in view of the injunction order obtained by the assessee, ignoring the two years' limit laid down as a fetter for issuance of the notice under section 7(2), the best judment assessment procedure was permissible. At page 2070, the learned Chief Justice first held that if a return under section 7(1) was not made, the service of a notice under section 7(2) of the Act was the only method for initiation of a valid assessment proceeding under the Act. The period of two years under section 7(2) was a fetter on the power of the authority and was not just a bar of time. It was the scheme of the Act that the service of notice within two years from the end of the return period was an imperative requirement for initiation of assessment proceeding, as also reassessment proceeding under the Act. Further proceeding, at page 2071, their Lordships pointed out the settled legal distinction between the provisions which conferred jurisdiction and provisions which regulated procedure, because jurisdiction could neither be waived nor created by consent, while a procedural provision could be waived by conduct or agreement. Their Lordships pointed out that in that case the assessee could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Act which permitted the Income-tax Officer to pass an order of seizure within 90 days. The provision was held to be not a mandatory provision and at page 400 it was also pointed out that there was no question of the period of limitation under section 132(5) involving public interest. It was intended for the benefit of the parties. The settled principle which had been stated on Craies on Statute Law, 6th edition, at page 259, was as under: "As a general rule, the conditions imposed by statutes which authorise legal proceedings are treated as being indispensable to giving the court jurisdiction. But if it appears that the statutory conditions were inserted by the legislature simply for the security or benefit of the parties to the action themselves, and that no public interests are involved, such conditions will not be considered as indispensable, and either party may waive them without affecting the jurisdiction of the court." Therefore, the period of limitation prescribed under section 132(5) being intended for the benefit of the person concerned, it was held that the assessee could waive that provision. That decision could not, therefore, be invoked in the present con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t contracting out of the Acts so there could be no contracting in. A status of control of premises under the Rent Control Acts could not be acquired either by estoppel or by res judicata. Their Lordships in terms held that the principle was that neither estoppel nor res judicata could give the court jurisdiction under the Acts which those Acts said it was not to have. Therefore, bar of res judicata or estoppel or waiver were negatived in such a case where the plea was outside the ambit of the Rent Control Act, for the simple reason that as one could not confer jurisdiction by consent, similarly one could not by agreement waive exclusive jurisdiction of the rent courts over the buildings in question. It is true that section 254(4) in terms provides that save as provided in section 256 (which provides for the reference to the High Court), orders passed by the Appellate Tribunal on appeal shall be final. That finality or conclusiveness could only arise in respect of orders which are competent orders with jurisdiction and if the proceedings of reassessment are not validly initiated at all, the order would be a void order as per the settled legal position which could never have any fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dhyan Ghosal v. Smt. Deorajin Debi, AIR 1960 SC 941, where the question had arisen about the applicability of section 28 of the Calcutta Thika Tenancy Act, 1949, and the plea having been rejected by the munsif trying a suit, revision, the High Court had held that operation of section 28 of the Act was not affected by the subsequent amendment Act and the case was remanded to the munsif for disposal according to law. After the final decree was passed by the munsif and the appeal finally came to the Supreme Court, it was held by the Supreme Court that the order of the High Court holding section 28 to be applicable could not operate as res judicata in appeal before the Supreme Court, because the High Court's order of remand was merely an interlocutory order, which did not terminate the proceeding pending before the munsif and which had not been appealed from at that stage. Consequently, in the appeal from the final decree or order it was open to the party concerned to challenge the correctness of the High Court's decision. The two special features which distinguished that case were: one, that the order of the High Court which was relied upon to invoke the principle of res judicata was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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