Judgment:
At the instance of the assessee, the Income-tax Appellate Tribunal (Allabahad Bench), Allahabad, referred to this court the following questions relating to the assessment year 1969-70 under section 256(1) of the Income-tax Act, 1961 (for short, 'the Act'), for opinion :
'1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the provisions of section 144B appear in Chapter XIV dealing with procedure for assessment and are, therefore, procedural in nature and non-compliance therewith would be a procedural lapse ?
2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in upholding the order of the Appellate Assistant Commissioner in restoring the case back to the Income-tax Officer directing him to consider afresh from the stage where the irregularity intervened ?'
The facts, briefly stated, are that the assessee filed a return declaring income of Rs. 57,811. The assessing authority, however, assessed the income of the assessee at Rs. 3,61,270. The dispute was then carried in appeal to the Appellate Assistant Commissioner by the assessee. It was contended before the Appellate Authority that no draft order having been served on the assessee and no reference having been made to the Inspecting Assistant Commissioner, the assessment at Rs. 3,61,270 was a nullity in view of section 144B of the Act which enjoined upon the assessing authority to forward a draft order to the assessee, inasmuch as the variation in the income returned by the assessee and sought to be assessed by the assessing authority, exceeded more than rupees one lakh and then refer the same with the objections of the assessee, if any filed, to the Inspecting Assistant Commissioner. The contention before the appellate authority was that the provisions as contained in section 144B of the Act having not been complied with by the assessing authority, the assessment order was a nullity and hence deserved to be annulled. The Appellate Assistant Commissioner having verified the facts from the assessing authority was satisfied that the provisions of section 144B of the Act were altogether omitted by the assessing authority. However, he took the view that non-compliance with section 144B, was merely a procedural irregularity on the part of the assessing authority and, therefore, he set aside the assessment order and sent the matter back to the assessing authority directing him to re-do the assessment after complying with the provisions of section 144B of the Act.
Not satisfied with the decision of the appellate authority, the assessee went up in appeal to the Appellate Tribunal which affirmed the order of the Appellate Assistant Commissioner holding that the provisions of section 144B appearing in Chapter XIV in the Act are procedural in nature that non-compliance therewith would be a procedural irregularity capable of being rectified and that section 144B not giving rise to a jurisdictional question, the Appellate Assistant Commissioner was right in setting aside the assessment order and sending the matter back to the assessing authority to re-do the assessment observing the special procedure as contained in section 144B of the Act.
The short question for consideration in this reference is whether section 144B is procedural in nature and whether non-compliance therewith will render an assessment order a nullity. Section 144B falls in Chapter XIV which bears the caption : 'Procedure for assessment'. It is, therefore, manifest that sections 139 to 158 falling in chapter XIV relate to procedure for making assessment. Section 144B is, therefore, procedural in nature, non-compliance with which cannot render an assessment a nullity. In Sant Baba Mohan Singh v. CIT : [1973]90ITR197(All) , this court held that a proceeding is a nullity when the authority taking it has no jurisdiction either because of want of pecuniary jurisdiction or of territorial jurisdiction or of jurisdiction over the subject-matter of the proceeding. A proceeding is a nullity when the authority taking it has no power to have seisin over the case. The case in hand is not one where the Income-tax Officer lacked territorial or pecuniary jurisdiction or he had no power to have seisin over the case. It is not disputed that the Income-tax Officer who issued notice under section 23(2) of the Act of 1922 had no power to do so. The only contention of counsel for the assessee is that the provisions of section 144B not having been complied with by the Income-tax Officer, the assessment completed by him was rendered void and, therefore, that should have been annulled by the Appellate Assistant Commissioner. Section 144B does not confer jurisdiction on the assessing authority to make assessment. The Income-tax Officer, undoubtedly, had jurisdiction to make the assessment on the assessee. Section 144B merely sets out a special procedure to be followed in the cases where the Income-tax Officer proposes to make any variation in the income or loss shown in the return by the assessee which is more than rupees one lakh. The rationale behind section 144B(1) is that if the income returned by the assessee is sought to be assessed with a variation of more than rupees one lakh, then greater precaution should be taken and that is why it is stated that if the variation entails the amount of more than rupees one lakh then a draft order should first be prepared and that should be served on the assessee to enable him to file objections and when the objections are filed, then the draft order together with the objections of the assessee should be referred to the Inspecting Assistant Commissioner for seeking his assistance in the matter and all these precautions have been taken by the Legislature to prevent arbitrariness, if any, on the part of the Income-tax Officer. Section 144B was enacted with a view to ensuring that the assessment made by the assessing authority is not arbitrary, whimsical, capricious or unreasonable. It does not confer jurisdiction on the assessing authority to make the assessment and, therefore, non-compliance with it cannot render the assessment void and liable to be annulled. It is trite that procedural irregularity is always curable. But surely where the assessing authority lacks jurisdiction in making an assessment then the order will be a nullity.
We are supported in regard to the view we have taken by a catena of authorities, namely, Des Raj Kul Bhushan v. CIT , G. R. Steel and Alloys Pvt. Ltd. v. CIT : [1985]152ITR220(KAR) , H. H. Maharaja Raja Pawar Dewas v. CIT : [1982]138ITR518(MP) and Bonarsidas Bhanot and Sons v. CIT : [1981]129ITR488(MP) .
For the above reasons, we do not see any merit in the contention of the counsel for the assessee who vehemently argued before us that the provisions of section 144B are mandatory, which proposition we do not dispute. No doubt the procedure laid down in section 144B is mandatory without following which no assessment can be completed. It is one thing to say that a given procedure is mandatory and has got to be followed, but it is altogether a different thing to say that an order passed without following the procedure is rendered void. Expect one, no authority could be cited by counsel for the assessee that the impugned assessment order was void for want of compliance with section 144B Sonai River Tea Co. Ltd. v. CIT is the solitary authority in favour of the assessee. Section 251(1)(a) of the Act states that while disposing of an appeal, the Appellate Assistant Commissioner or the Commissioner (Appeals) may, inter alia, set aside the assessment and refer the case back to the Income-tax Officer for making a fresh assessment in accordance with the directions given by the Appellate Assistant Commissioner or the Commissioner (Appeals) as the case may be. In Sonai River Tea Co. Ltd. v. CIT , the Gauhati High Court observed (at page 167) : 'While the second appellate authority can pass orders as it thinks fit, it is seen that the whole subject-matter is arranged with meticulous care by Parliament but no guidelines are there in the Act of 1961 as to when to annul and when to quash an order. The subject-matter is left inchoate for courts to grapple with the issues.' We regretfully differ from these observations of the Gauhati High Court. Section 251 of the Act may not have stated the circumstances in which the assessment can be set aside or annulled, but it is well-settled that non-compliance with procedural law is merely an irregularity capable of being rectified, unlike the jurisdiction lapse. If jurisdiction is not vested in any authority, that cannot be conferred upon him either by agreement or by remanding the case to that authority with a direction too do something which he cannot do otherwise.
Then counsel for the assessee relied on the statutory part in [1991] 187 ITR 73, which shows that the Supreme Court dismissed the Departmental Special Leave Petition (Civil) No. 5454 of 1984 - CIT v. Ashok Textiles against the order dated November 21, 1983 of the Gujarat High Court which in I. T. A. No. 58 of 1983 rejected a reference application on the question whether the Tribunal rightly affirmed the order of the Commissioner (Appeals) in deleting certain additions made by the officer purporting to act under section 144B of the Income-tax Act, 1961, who added back certain sums in the assessees assessment, but did not send a draft assessment order to the assessee as required under that section. Copies of the relevant record of the case of Ashok Textiles [1991] 187 ITR 73, and a full text of the judgment of the Supreme Court has not been filed to show that in the case of Ashok Textiles [1991] 187 ITR 73, the assessment was set aside by the appellate authority with a direction to re-do the assessment. Therefore, it cannot be urged on behalf of the assessee that before the Supreme Court, an identical question was posed that has been posed before us in this reference. Therefore, the assessee cannot take any aid from the judgment of the Supreme Court.
In the light of the foregoing discussion, we answer both the questions Nos. 1 and 2 in the affirmative, that is, in favour of the Revenue and against the assessee. No order as to costs.