Sarbjit Singh vs Commissioner Of Income Tax, New ...
1992 Latest Caselaw 692 Del

JUDGMENT

(1) Mr. Mahinder Narain, J.-With respect to the assessment year1976-77, the Income-tax Appellate Tribunal has referred the following questions of law to this Court : "(1)Whether on the facts and in the circumstances of the case, the Income-tax Officer had jurisdiction to make assessment u/Sec.143(3) and whether his order dated 30.03.1979 was a nullity inlaw?(2) Whether on the facts and in the circumstances of the case, the Commissioner of Income-tax (Appeals) had the right or jurisdiction on 19.07.1979 when he passed the order to extend the period of limitation to pass draft assessment order which had expired on 31.03.1979?(3) Whether on the facts and in the circumstances of the case the Commissioner of Income-tax (Appeals) was justified in law insetting aside the assessment and directing the Income-tax Officer to make fresh assessment by taking recourse to Section 144B of the Act ?"

(2) For the purpose of decision of this reference, it is necessary to refer to the provisions of Section 144B of the Income-tax Act which existed prior to it being omitted from the income-tax Act as amended by the Taxation Laws (Amendment) Act, 1984. Section 144B of the Income-tax Act reads as under: "(1)Notwithstanding anything contained in this Act, where, in an assessment to be made under Sub-section (3) of Section 143,the Assessing Officer proposes to make, before the 1st day ofOctober, 1984, any variation in the income or loss returned which is prejudicial to the assessed and the amount of such variation exceeds the amount fixed by the Board under Subsection (6), the Assessing 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 assessed.(2) On receipt of the Draft Order, the assessed may forward hisObjections, if any, to such variation to the Assessing Officer within seven days of the receipt by him of the Draft Order or within such further period not exceeding fifteen days as the Assessing 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 assessed intimates to the Assessing Officer the acceptance of the variation, the Assessing Officer shall complete the assessment on the basis of the Draft Order.(4) If any objections are received, the Assessing Officer shall forward the Draft Order together with the objections to the Deputy Commissioner and the Deputy Commissioner shall after considering the Draft Order and the objections and after going through (wherever necessary) the records relating to the Draftorder, issue, in respect of the matters covered by the objections,such directions as he thinks fit for the guidance of the Assessing Officer to enable him to complete the assessment.Provided that no directions which are prejudicial to the assessed shall be issued under this Sub-section before an opportunity is given to the assessed to be heard.(5) Every direction issued by the Deputy Commissioner under Subsection (4) shall be binding on the Assessing Officer.(6) For the purposes of Sub-section (1), the Board may, having regard to the proper and efficient management of the work of assessment, by order, fix, from time to time, such amount as it deems fit:Provided that different amounts may be fixed for differentareas;Provided further that the amount fixed under this sub-sectionshall, in no case, be less than twenty five thousand rupees.(7) Nothing in this section shall apply to a case where a Deputy Commissioner exercises the powers or performs the function of an Assessing Officer in pursuance of an order made under Section 125 or Section 125A."

(3) In the assessment year in question 1976-77. the assessed had returned a total income of Rs. 47.798.00. The Income-tax Officer made the assessment .on a total income of Rs. 1.49.710.00. While purporting to do so, he did not comply with Section 144B of the Income-tax Act.

(4) It is not disputed that the provisions of Section 144B of the Income-tax Act were attracted inasmuch as the amount which had been fixed by the Board under the provisions of Section 144B was rupees 1 lac. The variation in the instant case being more of rupees 1 lac, the provisions of Section 144-B(6) were attracted.

(5) The Income-tax Officer had made the assessment on 30.03.1979.An appeal was preferred against the order of the Income-tax Officer. In theappeal, the assessed contended that as Section 144 of the Income-tax Act had not been complied with, the assessment order was bad in law.

(6) The Commissioner (Appeals) came to the conclusion that the matter was procedurally irregular, and the defect was curable, and not fatal to the validity of the assessment. Accordingly, the assessment is set aside.Direction was given to make an assessment in accordance with law. This direction was given following the Allahabad High Court judgment reported in90 Itr 197.

(7) Aggrieved, the assessed preferred an appeal before the Tribunal and contested the correctness of the order of the Commissioner (Appeals).

(8) Before the Income-tax Appellate Tribunal it was contended that the Income-tax Officer not having complied with the mandatory provisions of Section 144B of the Income-tax Act, 1961, the Commissioner (Appeals)should have annulled the assessment instead of setting it aside. It was also contended that the Commissioner (Appeals) by setting aside the assessment order had extended the period of limitation for passing of the draft assessment order, which had already expired. This the Commissioner (Appeals),had no power to do.

(9) The Tribunal, however, followed its earlier order in Mehta Charitable Trust, Nainital, Ita No. 3099 (Del) 78-79, and in the case of VimlaTalkies, Itr No. 5342 (Del) 77-78 dated 25.10.1979, and held that the order of the Commissioner of Income-tax (Appeals) could not have anulled.

(10) Before us Mr. Syali contended that the provisions of Section 144B of the Income-tax Act require that the Income-tax Officer must proceed in the manner specified by the statute, wherever he wishes to make an addition of amount in excess of the limit fixed by the Board, whether the addition is to equal the limit or exceeded it. That the manner provided by the statute is that the Income-tax Officer must prepare a draft order [Section 144 ]. invite objections [Section 144B. On receipt of objections.send the draft order to the Deputy Commissioner [Section 144B ]. It is only after proceedings before the Deputy Commissioner, that the Income-tax Officer can proceed again in the matter, in accordance with the directions of the Deputy Commissioner [Section 144B) ].

(11) In other words, Mr. Syali con tends that where the provisions of Section 144B of the Income-tax Act require the Income-tax Officer to act IN a certain manner, he is permitted to act only in that manner, or he cannot act at all. All other methods are forbidden to the Income-tax Officer. For this proposition, Mr. Syali relies upon the principle of law which was reiterated by the Privy Council in Nazir Aimed v. King Emperor .

(12) The aforesaid principle has been reiterated by the Supreme Courting Bahadur Singh and Another v .State of Vindh-P..: Ballabhdas Agarwala v. J.C Chankravarty, : State of Uttar Pradesh v. Singh& other Singh & Others. AIR1964 Supreme Court's; Gujarat Electricity Board v. Girdharlal Moti Lal and Others, ; and Ramachandra Keihav Adke(Dead) by LRs. v. Govind Joti Chavare & Others, .

(13) In connection with the said contention one has to note that Article 265 of the Constitution says that no tax shall be levied or collected except by authority of law. By virtue of this provision, no tax can be levied,and no tax can be collected without authority of law. The authority of law under which the income-tax can be levied, is the Income-tax Act, 1961. Levy of tax is preceded by determination of the amount leviable as tax, and the word "levied" in Article 265 of the Constitution would include the procedure by which the income-tax is quantified.

(14) The procedure for quantifying income-tax is provided by the Income-tax Act, 1961. The said procedure is statutory assessment proceedings, and when statute provides a particular procedure which leads to levy oftax. that procedure cannot be varied from the one postulated by the statute.If the tax is not levied according to the statutory procedure, the levy of tax would not be according to the authority of law. The levy of tax by non-statutory procedure would be contrary to Article 265 of the Constitution ofIndia. In this view of the matter, the observations made by the Privy Council in Nazir Aimed v. King Emperor, and the subsequent cases become significant.

(15) Mr. Syali further contends that whereas in the normal case, the Income-tax Officer has undoubted jurisdiction to proceed to pass an assessment order, by virtue of the provisions of Section 144B, wherever the Income-tax Officer proposes to make addition of an amount equal to or exceeding the limit fixed by the Board under Section 144B, in the instant case rupees 1 lac, his jurisdiction to pass an assessment order is eclipsed until such time as the Deputy Commissioner after proceeding in accordance with the provisions of Section 144B passes a direction under Section 144B, which direction is binding on the income-tax Officer, who has to pass assessment orders in accordance with such directions.

(16) Mr. Syali also cited before usll31TR 22(Gujarat)andl964Supreme Court 1300, at page 1304, wherein it has been said that there cannot be any waiver of provisions which confers jurisdiction. Mr. Syali also cited182 Itr 162 (Gauhati) which lays down that Section 144B lays down conditions precedent. Only upon those conditions precedent being satisfied, the Income-tax Officer can have jurisdiction to pass an order of assessment wherever additions are made in excess of the limit fixed by the Board under Section 144-B(6).

(17) The aforesaid pronouncements of the Gujarat High Court and the Gauhati High Court appear to be in consonance with the principle laid down in Nazir Ahmed's case, and the cases where the principle in Nazir Ahmed's case was accepted by the Supreme Court, although no specific reference to these cases is made to the said cases.

(18) Large number of other cases referred to by Counsel, do not specifically refer to the principle in Nazir Ahmed's case. All judgments pronounced by Courts in ignorance of a statute or statutory provisions are judgments Per Incuriam. They are not precedents, they have no bindingeffect. 1988(2) Scc 607 (7 Judges), 1942(2) All ER194 and 1944 (1) An ER 300.

(19) The cases referred to by Mr. Syali are; .

(20) Cases referred to by Mr. Gupta are 194 Itr 186; 194 Itr 700;40 Itr 298; 90 Itr 197; 138 Itr 518: 129 Itr 488; 18 Itr 569; 148 ITR283; 151 Itr 73; 152 Itr 220; 162 Itr 543; 179 Itr 139: 180 Itr 297; 180ITR 625; 128 Itr 445; 97 Cir 138; 194 Itr 186; 194 Itr 700; 113 ITR22; 180 Itr 84; 182 Itr 84; l82 Itr 162 and 48 Stc 466. In my view,where the statute provides a thing to be done in a particular manner, it must be done in that manner; or not at all. All other methods are forbidden. If this was not so, there is no point of having a statutory provision, or a statutory methodology. Of course, the aforesaid observation will hold good only when a statutory provision is not ultra vires the Constitution. In the instant case there is no contention that the provisions of Section 144B of the Act are ultra vires the Constitution.

(21) I am also of the view that the undoubted jurisdiction which the Income-tax Officer has to make an assessment order, was eclipsed when conditions of Section 144B were satisfied. When the Income-tax Officer chooses to make an addition to the return in excess of the limit fixed by the Board under Section 144B, and that jurisdiction is eclipsed.

(22) In my view because of provisions of Section 144B the jurisdiction to pass an assessment order, which vested in the Income-tax Officer, has been taken away, and instead he is statutorily obliged to carry out the binding directions issued by the Deputy Commissioner, which in this case was never sought by him. The Income-tax Officer's powers and jurisdiction to make an assessment is taken away by the said provisions, and he is only permitted by statute to make a draft assessment order, and finally to make an assessment order in accordance with the directions issued by the Income-tax Commissioner.

(23) In this view of the matter, as the judgments cited by the Counsel have not considered the provisions of Section 144B in the light of Nazir Ahmed's case, or the judgments of the Supreme Court, the said judgments need not be considered in detail, as they are not approached the question of jurisdiction of the Income-tax Officer to make an assessment in the light of the provisions of Section 144B, that is to say the jurisdiction of the Income-tax Officer to pass an assessment order is taken away by the provisions of Section 144 when he proposes to make an assessment order by making addition of an, amount equal to and in excess of the limit fixed by the Board under Section 144B, Income-tax Officer's jurisdiction to pass orders himself being replaced by a statutory obligation to comply with the binding directions of the Deputy Commissioner, in the matter of making an assessment order.

(24) I am further of the view that the Deputy Commissioner by setting aside the order in appeal cannot extend special period of limitation provided in Section 144B.

(25) It is also necessary to record that Section 144B of the Income-tax Act has been deleted from the Income-tax Act w.e.f. 01.04.1989.

(26) In this view of the matter the questions under Section 256 of the Income-tax Act have to be answered thus ; (1)The Income-tax Officer has no jurisdiction to pass the assessment order dated 30.03.1979, and the same is contrary to the provisions of Section 144B of the Income-tax Act, the order of assessment is, therefore, a nullity as having been passed without jurisdiction.(2) The Commissioner of Income-Tax (Appeals) could not extend the period of limitation on 19.07.1979, and to pass a draft assessment order which had expired on 31.03.1979.(3) In view of the fact that Section 144B of the Income-tax Act did not confer power in the Commissioner of Income-tax (Appeals)to set aside the assessment order, he could not re-confer the jurisdiction on the Income-tax Officer to make a freshassessment.