COMMISSIONER OF INCOME-TAX VS MRS. RATANBAI N. K. DUBHASH
1999 P T D 3637
[230 I T R 495]
[Bombay High Court (India)]
Before Dr. B. P. Saraf and Dr. Pratibha Upasani, JJ
COMMISSIONER OF INCOME-TAX
versus
Mrs. RATANBAI N. K. DUBHASH
Income-tax Reference No.54 of 1987, decided on 30/09/1997.
(a) Income-tax---
----Assessment---Appeal-,--Difference between cancellation and annulment of assessment---Indian Income Tax Act, 196.1, Ss.143..,144B, 153 & 251.
(b) Income-tax---
----Assessment---Draft assessment order ---I.T.O. proposing to enhance income by more than one lakh of rupee's for assessment year 1974-75-- I.T.O. ignoring objection of assessee and passing assessment order without forwarding draft order to I.A.C.---Assessment order had been passed without jurisdiction and was liable to be annulled---Indian Income Tax Act, 1961, Ss. 143 & 14413.
(c) Income-tax---
----Assessment---Appeal---Limitation---Extension of limitation---Difference between setting aside assessment and annulment of assessment---Assessment order annulled by Appellate Authority---Limitation for fresh assessment not extended---Indian Income Tax Act, 1961, Ss. 143 & 153.
In an appeal against an order of assessment, the Appellate Authority has the power to "affirm, reduce, enhance or annul the assessment" or to set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment according to the directions given by him. In the case of an appeal against an order of penalty, the power is to "affirm or cancel such order" or vary it so as, either to enhance or reduce the penalty. The Legislature has, 'thus, used different expressions, such as, "annulling the assessment", "setting aside the assessment" or "cancelling the order of penalty". The expression "cancellation of assessment" has been used in section 146 of the Income Tax Act, 1961,which deals with the power of the Assessing Officer to reopen a best judgment assessment under section 144 of the Act. It is, thus, clear that the Legislature has consciously and deliberately used the expression "annulment of assessment" in section 251 of the Act. There is a material distinction between setting aside an assessment and annulment of an assessment. In a case where the order of assessment is set aside, it is open to the Assessing Officer to make a fresh assessment in accordance with law. In the case of annulment, the order becomes non est. On a conjoint reading of sections 143, 144B; 251 and 153 of the Act, it becomes abundantly clear that if an assessment is set aside by the Appellate Authority, the extended time-limit is available for making a fresh assessment in pursuance of the direction of the Appellate Authority, but in the case of annulment, `no such extended time is available. There are no guidelines in -section 251 or any other provision of the Act as to when an order is to be set aside and when it is to be annulled. If there is an irregularity in making an order of assessment, it may be set aside by the Appellate Authority with a direction to the assessing authority to make a fresh assessment in accordance with law. But if the order happens to be without jurisdiction, it has to be annulled An assessment should, therefore, be annulled where the assessment proceeding is a nullity, in the sense that the Assessing Officer had no jurisdiction to take the proceeding and or to make a final order of assessment himself.Once the assessment is annulled, the order of assessment will cease exist The Income-tax Officer will be at the stage where the illegality supervened, which resulted in the annulment of the assessment. It would be open to the Income-tax Officer to take up the matter from the point at which the illegality supervened and to pass a fresh order even in case of annulment of the assessment, if it can be made according to the provisions of law and if the time-limit for taking further proceedings in the matter and making the assessment, if any, is still available. This distinction assumes importance in view of the provisions of section 14413 of the Act, which mandates the Income-tax Officer to make a reference to the Inspecting Assistant Commissioner in certain cases and to make the assessment in terms of the directions of the Inspecting Assistant Commissioner and section 153 of the. Act, which prescribes the time limit for assessments and reassessments. Under section 14413, a special procedure has been laid down for assessment in cases falling thereunder and the power to decide the objections of the assessee to the draft order of the Income-tax Officer is vested in the Inspecting Assistant Commissioner only. Under subsection (5) of section 14413, every direction issued by the Inspecting Assistant Commissioner under section 14413(1) is binding on the Income-tax Officer. In cases failing under section 14413 of the Act, the quasi judicial function of the Income-tax Officer as an Assessing Authority comes to an end the moment the assessee files objections to the draft order. The power to determine the income of the assessee thereafter gets vested in the Inspecting Assistant Commissioner to whom the Income-tax Officer is required to forward the draft order together with objections. The only thing that remains to be done by the Income-tax Officer is to pass a final order in accordance with the directions given by the Inspecting Assistant Commissioner.. The function of the Income-tax Officer to make the final assessment under section 144B(5) of the Act is more in the nature of a ministerial function because he can pass the order only in accordance with the directions of the Inspecting Assistant Commissioner. He cannot vary or depart from the directions given by the Inspecting Assistant Commissioner. Moreover, the requirements of section 144B of the Act are mandatory. The Income-tax Officer has no option but to follow the same. If, in cases falling under section 144B of the Act, the Income-tax Officer arrogates to himself the Power to pass an assessment order without referring the case to the Inspecting Assistant Commissioner, such an assessment will be without jurisdiction and it will be liable to be annulled by the Appellate Authority.
An extended time-limit has been provided for making fresh assessment in cases where the original assessment has been set aside by the
Appellate Authority under section 251 of the Act. No extended limitation is, however, available under section 251 for making fresh assessment in a case where the original assessment is annulled:
Held accordingly, that the admitted position was that on receipt of the draft order of assessment, the assessee did file objections and the Income- tax Officer completed the assessment himself on the basis of the draft order without forwarding the draft order and the objections to the Inspecting Assistant Commissioner and obtaining directions from him. Such an order; on the face of it, was beyond the powers of the Income-tax Officer under section 143 read with section 144B of the Act and, hence, without jurisdiction. The Tribunal was, therefore, justified in its conclusion that the assessment was liable to be annulled. There was a time-limit for making the assessment. If the original time-limit was still available, the Income-tax Officer could proceed from the stage at which the illegality, which resulted in the annulment of the assessment supervened and to make the assessment afresh.
Commercial Enterprisers v. State of Orissa (1991) 81 STC 84 (Orissa); Panchamahal Steel Ltd. v. U.A. Joshi, I.T.O. (1997) 225 ITR 458 (SC) and Sonai River Tea Co. Ltd. v. CIT (1990) 182 ITR 162 (Gauhati) ref.
T. U. Khatri with J. P. Deodhar instructed by H. D. Rathod for the Commissioner.
Andhyarujina for the Assessee
JUDGMENT
DR. B. P. SARAF, J.---By this reference under section 256(1) of the Income Tax Act, 1961, the Income-tax. Appellate Tribunal has referred the following question of law to this Court for opinion at the instance of the assessee:
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessment order passed by the Income-tax Officer under section 143(3) without reference to the Inspecting Assistant Commissioner had rightly been cancelled by the Commissioner of Income-tax (Appeals)?"
This reference pertains to the assessment year 1974-75. The material facts giving rise to this reference are as follows:
The assessee is an individual. She filed the return of her income for the assessment year 1974-75 with the Income-tax Officer on January 8, 1976, declaring a total income of Rs.3,20,048. She was heard by the Income-tax Officer for the purpose of assessment. As in the assessment to be made under subsection (3) of section 143 of the Income Tax Act, 1961, ("the Act" for short), the Income-tax Officer proposed to enhance the income returned by the assessee by more than rupees one lakh, which was the amount fixed by the Board at the material time under subsection (6) of section 144B of the Act, he forwarded the draft of the proposed order of assessment to the assessee as required by subsection (1) of section 144B of the Act on March 30, 1977. The said draft assessment order was served on the assessee on April 4, 1977. On receipt of the draft assessment order, the assessee forwarded her objections to the proposed variation in her returned income to the Income-tax Officer on April 6, 1977, which was within the stipulated period of 7 days of the receipt of the draft order. It appears that the said objections escaped the attention of the Income-tax Officer. He, therefore, took it as a case of "no objection" and completed the assessment on April 12, 1977, on the basis of the draft order. Aggrieved by the order of assessment made by the Income-tax Officer, the assessee appealed to the Commissioner of Income-tax (Appeals), Bombay. In the appeal before the Commissioner (Appeals), it was contended by the assessee that the order of assessment passed by the Income-tax Officer on April 12, 1977, was illegal and without jurisdiction, because the Income-tax Officer had no power or authority to make the order of assessment except in terms of the directions given by the Inspecting Assistant Commissioner under section 144B of the Act. The order was also challenged on the ground that it was back-dated. However, for the present purpose, it is not necessary for us to enter into the merits of that ground of challenge. The case of the Income-tax Officer before the Commissioner of Income-tax (Appeals) was that he did not receive any objections to the draft order from the assessee and, as such, he was empowered to pass the order of assessment in terms of the draft order within a period of 30 days from the date on which the draft order under subsection (1) of section 144B was forwarded to the assessee. The Income- tax Officer also denied the contention of the assessee that the order was back dated. The Commissioner (Appeals) directed the Income-tax Officer to make an enquiry and submit a report whether any objections to the draft order had been filed on April 6, 1977, as contended by the assessee. Pursuant to the directions of the Commissioner (Appeals), the Income-tax Officer conducted an enquiry and made a report to the Commissioner (Appeals). In his report, he conceded that the assessee had filed objections to the draft order on April 6, 1977, which were received by his office on the same day. He, however, tried to justify the order of assessment made by him on April 12, 1977, on the basis of the noting made by the record clerk on April 11,1977, in the assessment record that no objections had been filed by the assessee. In view of the admitted position that objections had been filed by the assessee to the draft order under section 144B of the Act, the Commissioner (Appeals) held that the impugned order of assessment made by the Income-tax Officer on the basis of the draft order was illegal and without jurisdiction. According to him, the Income-tax Officer had no jurisdiction to pass the order of assessment after the receipt of objections from the assessee within the stipulated time. The only authority he had thereafter was to forward the objections to the Inspecting Assistant Commissioner and to, pass the final order in terms of the directions of the Inspecting Assistant-Commissioner, which were binding on him. The Commissioner (Appeals, also considered the question whether in such circumstances, the order of assessment could be set aside or has to be cancelled. It appears that the expression "cancel" has been used inadvertently by the: Commissioner (Appeals) for the expression "annul", because under section 251 of the Act, the power of the, appellate authority in disposing of an appeal against an order of assessment is to confirm, reduce, enhance or "annul" the assessment or to set aside the assessment and refer the case back to the Assessing Officer to make a fresh assessment: In this case, on consideration of the fact that the order of assessment passed by the Income-tax Officer on April 12, 1977, was wholly illegal and without jurisdiction, the Commissioner (Appeals) was of the opinion that it was liable to be annulled. That being so, he annulled the same. The expression "cancel" appears to have been used by him in the-order inadvertently, for the word "annulled", because in an appeal against an assessment he does not have the power to "cancel" the assessment. The power is to annul the assessment. Against the above order of the Commissioner (Appeals), the Revenue appealed to the Income-tax Appellate Tribunal ("the Tribunal"). Before the Tribunal, it was contended by the Revenue (?) that the order was completed by-the Income-tax Officer on the basis of the draft assessment order without forwarding the objections to the Inspecting Assistant Commissioner and awaiting his directions which were binding on him and which he was not empowered to do in view of the filing of objections to the draft order by the assessee within the stipulated time. The Tribunal, on consideration of the provisions of sections .143(3) and 1448 of the Act, held that the order of assessment passed by the Income-tax Officer in violation of the provisions of subsection (4) of section 1448 of the Act was illegal and not sustainable. The Tribunal, therefore, affirmed the order of the Commissioner (Appeals) cancelling (annulling) the order of assessment. Hence, this reference at the instance of the Revenue.
We have heard Mr. Khatri, learned counsel for the Revenue, who submits that non-compliance with the requirements of section 1448 of the Act is an irregularity, which would not vitiate the order of assessment. According to learned counsel, in such a case, the order passed, by the Income-tax Officer can be set aside with a direction to the Income-tax Officer to make- a fresh order after complying with the requirements of section 1448 of the Act:
Mr. Andhyarujina, learned counsel for the assessee, on the other hand, submits that the order of assessment passed by the Income-tax Officer without complying with the mandatory requirements of section 1448 of the Act is an order without jurisdiction. Learned counsel submits that once objections to the draft assessment order are received by the Income-tax Officer within the stipulated time, the only power left to him is to forward the objections to the Inspecting Assistant Commissioner. Thereafter, it is the Inspecting Assistant. Commissioner who has the jurisdiction to consider the objections of the assessee and to decide the same and issue suitable directions to the Assessing Officer to enable him to complete the assessment. Our attention was drawn by Mr. Andhyarujina to subsection (5) of section 1448 of the Act, which provides that every direction issued by the Inspecting Assistant Commissioner under subsection (4) of section 1448 shall be binding on the Income-tax Officer. According to learned counsel, the moment objections are filed by the assessee to a draft order, the jurisdiction of the Income-tax Officer to make an assessment comes to an end, and the only power vested in him, thereafter, is to pass a final order of assessment in accordance with the directions given by the Inspecting Assistant Commissioner which are binding on him. He cannot very or depart from those directions. That being so, according to learned counsel, the order made by the Income-tax Officer in this case, on the face of it, is not only illegal, but without jurisdiction and that being so, it is liable to be annulled. Reliance is placed in support of this contention on the decision of the Gauhati High Court in Sonai River Tea Co. Ltd. v. CIT(1990) 182 ITR 162 and the decision 'of the Orissa High Court in Commercial Enterprisers v. State of Orissa (1991) 81 STC 84.- -
We have carefully considered the rival submissions. In this case, there is no dispute about the fact that the Income-tax Officer proposed to enhance the returned income .of tithe assessee by more than rupees one lakh and in that view of the matter, in accordance with the provisions of section 1448(1) of the Act, made a draft assessment order and forwarded the same to the assessee on April 4, 1977-. It is also clear that though originally the filing of objections by the assessee on April 6, 1977, was denied by the Income-tax Officer, later, on enquiry being made by him under the directions of the Commissioner (Appeals), it, was admitted that objections had been filed by the assessee to the draft order within the stipulated time on April, 6, 1977. The said objections were not forwarded to the Inspecting Assistant Commissioner and the assessment was completed by the Income-tax Officer himself on April 12, 1977, treating it as a ease of no objection from the assessee. The question that arises for consideration is whether in such a case, the Income-tax Officer had the jurisdiction to pass the order of assessment after the receipt of the objections from the assessee on April 6, 1977 and ii not, whether the assessment made by him is liable to be annulled. To decide this controversy, it may be expedient to set out the relevant provisions o1 the Act which have a bearing on the determination of the controversy, Section 251 of the Act deals with the powers of the Appellate Authority it disposing- of an appeal. Clause (a) of subsection (1) thereof deals with his powers in disposing of an appeal against an order of assessment, whereas clause (b) deals with the power in an appeal against an order imposing penalty. Clause (c) deals with powers in any other case. This section, so far as relevant, as it stood at the material time, reads:
"251. Powers of the Appellate Assistant Commissioner. ---(1) In disposing of an appeal, the Appellate Assistant Commissioner shall have the following powers-
(a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; or he may 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 and after making such further inquiry as may be necessary, and the Income-tax Officer shall thereupon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such fresh assessment;
(b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty;
(c) in any other case, he may pass such orders in the appeal as he thinks fit. "
It is clear from the above provision that the powers of the Appellate Authority are different in appeals against different types of orders. In an appeal against the order, of assessment, he has the power to "affirm, reduce, enhance or annul the assessment" or to set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment according to the directions given by him. In the case of an appeal against the order of penalty, the power is to "affirm or cancel such order" or vary it so as either to enhance or reduce the penalty. In other cases, he was power to pass such order as he thinks fit. It is clear from the above that in an appeal against the order of assessment, besides the power to reduce or enhance the assessment, he has the power to confirm or annul the assessment, or to set aside same and refer the case back to the. Assessing Officer for making a fresh assessment. There is no power to set aside the order in the case of penalty. In the case of a penalty order, the only power is to confirm or cancel the order or to vary it so as either to enhance or to reduce the penalty. The Legislature has thus used different expressions, such as, "annulling the assessment",. "setting aside the assessment", or "cancelling the order of penalty". The expression "cancellation of assessment" has been used in, section 146 of the Act, which deals with the power of the Assessing Officer to reopen a best judgment assessment under section 144 of the Act. It is, thus, clear that the Legislature has consciously and deliberately used the expression "annulment of assessment" in section 251 of the Act. The question that arises for consideration is in which case the order should be set aside and in which case "annulled" and what is the difference between "setting aside the assessment" and "annulment of the assessment". In our opinion, there is a material distinction between setting aside an assessment and, annulment of an assessment. In a case where the order of assessment is set aside, it is open to the Assessing Officer to make a fresh assessment in accordance with law: In the case of the annulment, the order becomes non-est.
This distinction assumes importance in view of the provisions of section 144B of the Act, which mandates the Income-tax Officer to make a reference to the Inspecting Assistant Commissioner in certain cases and to make the assessment in terms of the directions of the Inspecting Assistant Commissioner and section 153 of the Act, which prescribes the time limit for assessments and reassessments. Under section 144B, a special procedure has been laid down for assessment in cases falling thereunder and the power to decide the objections of the assessee to the draft order of the Income-tax Officer is vested in the Inspecting Assistant Commissioner only. -Under subsection (5) of section 144B, every direction issued by the Inspecting Assistant Commissioner under section 144B(4) is binding on the Income-tax Officer. This section, so far as is relevant, as it stood at material time, reads:
"144B. Reference to Inspecting Assistant Commissioner in certain cases.---(1)Notwithstanding anything contained in this Act, where, in an assessment to be made tinder subsection (3) of section 143, the Income-tax Officer proposes to make any variation in the income or Joss returned which is prejudicial to the assessee and the amount of such variation exceeds the amount fixed by the Board under sub section (6), the Income-tax 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 assessee.
(2) On receipt of the draft order, the assessee may forward his objections, if any, to such variation to the Income-tax Officer within seven days of the receipt by him of the draft order or within such further -period not exceeding fifteen days as the Income-tax 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 assessee intimates to the Income-tax Officer the acceptance of the variation, the Income-tax Officer shall complete the assessment on the basis of the draft order.
(4) If any objections are received, the Income-tax Officer shall forward the draft order together with the objections to the Inspecting Assistant Commissioner and the Inspecting Assistant Commissioner shall, after considering the draft order and the objections and after going through (wherever necessary) the records relating to the draft order, issue, in respect of the matters covered by the objection, such direction as he thinks fit for the guidance of the Income-tax Officer to enable him to complete the assessment ;
(5) Every direction issued by the Inspecting Assistant Commissioner under subsection (4) shall be binding on the Income-tax Officer..."
Section 153 of the Act, which prescribes the time limit for completion of assessments and reassessments, prescribes a special period of limitation for making a fresh assessment pursuant to an order under section 250, section 254, section 263 or section 264, setting aside the assessment or cancelling an assessment. It does not apply to an assessment made pursuant to order under -section 251 of the Act annulling the assessment. Section 153, so far as is relevant, reads: "
153. Time limit for completion of assessments and reassessments.- (1) No order of assessment shall be trade under section 143 or section 144 at any time after--
(a) the expiry of
(iii) two years from the end of the assessment year in which the income, was first assessable, where such assessment year is an assessment year commencing on or after the 1st day of April, 1969; or...
(c) the expiry of one year from the date of the filing of a return or a revised return under subsection (4) or subsection (5) of section 139, whichever is later.
(2A) Notwithstanding anything contained in. subsections (1) and (2), in relation to the assessment year commencing on the 1st day of April, 1971, and any subsequent assessment year, an order of fresh assessment under section 146 or in pursuance of an order, under section 250, section 254, section 263 or section 264, setting aside or cancelling an assessment, may be made at any titre before the expiry of two years from the end of the financial year in which the order under section 1,46 cancelling the assessment is passed by the Income-tax Officer or the order under section 250 or section 254 is received by the Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Commissioner.
(3) The provisions of subsections (1) and (2) shall not apply to the following classes of assessments, reassessments and recomputations, which may, subject to the provisions of subsection (2A) be completed at any time--
(i) where a fresh assessment is made under section 146;
(ii) where the assessment, reassessment or recomputations is made on the assessee be any person in consequence of or to give effect to any finding or direction contained in an order under sections 250, 254, 260, 262, 263, or 264 or in an order of any Court in a proceeding otherwise than by way of appeal or reference under this Act;
(iii) where in the case of a firm an assessment is made on a partner of the firm in consequence of an assessment made on the firm under section 147.
Explanation 1.-In computing the period of limitation for the purposes of this section...
(iv} the period (trot exceeding one hundred and eighty days) commencing from the date on which the Income-tax Officer forwards the draft order under subsection (1) of section 144B to the assessee and ending with the date on which the Income-tax Officer 'receives the, directions from the Inspecting Assistant- Commissioner 'under subsection (4) of that section, or, in a case where no objections to the draft order are received from the assessee, a period of thirty days, or;"
On a conjoint reading of sections 143, 144B, 251 and 153 of the Act, it becomes abundantly clear that if an assessment is set aside by the appellate authority, an extended time-limit is available for making a fresh assessment in pursuance of the direction of the appellate authority, but in the case of annulment, no such extended time is available. There are no guidelines in section 251 or any other provision of the Act as to when an order is to be set aside and when it is to be annulled.
An identical controversy came up before the Gaughati High Court in Sonai River Tea Co. Ltd. v. CIT (1990) 182 ITR 162. That was a case of an assessment under the Income-tax Act where a variation of Rs.3,05,735 was made in the income of the assessee by the Income-tax Officer without forwarding a draft order .to the assessee and inviting objections from the assessee as contemplated by section 144B of the Act. This issue before the Court was- whether the assessment made by the Income-tax Officer in ignorance of section 144B of the Act warrants the annulment of the assessment order under section 251 of the Act or it was sufficient to set aside the order. The High Court, on elaborate discussion of the various authorities, Indian as well as English, held that the assessment was liable to be annulled. The position was aptly summed up by Raghuvir, C. J. as under (page 171):
"The assessee in the instant case showed an income of Rs.72,288 in the return. The Income-tax Officer did not accept the return, He varied the income to the sum of Rs.3,05,735. Because of the -variation, the Income-tax Officer should have followed the procedure in section 144B. He did not give a draft order to, the ' assessee and invite objections from the assessee. Instead, lie arrogated to himself the mower to pass the assessment order when in law, he was not vested with the power to do so. In doing so, the Income-tax Officer transgressed the Board's notification and transgressed the statutory provision in section 144B. We are unable to hold that the omissions 'and transgressions of the Income-tax Officer are mere irregularities. We hold that such an assessment order is to be annulled."
The question as to when an assessment order should be set aside and whim it should be annulled also came to be considered by the Orissa High Court in 'Commercial Enterprisers v. State of Orissa (1991) 81 STC 84. It was held in that case: (page 85):
"Annulment of an assessment is permissible where the taxing authority would have no jurisdiction to assess. In all other cases, where there is jurisdiction to assess; the assessment order may be set aside- if there is any error, which requires further enquiry to be conducted by the Appellate Authority."
It is clear from the above decisions that if there is an irregularity in making an order of assessment, it may be set aside by the appellate authority with a direction to the assessing authority to make a fresh assessment in accordance with law But if the order happens to be without jurisdiction, it has to be annulled. The word "annul" is not a technical word and may be expressed in equivalent words. In Black's Law Dictionary (sixth edition), it has been defined to mean:
"To reduce to nothing; annihilate; obliterate; to make void or of no effect; to nullify; to abolish; to do away with. To cancel; destroy; abrogate. To annul a judgment or judicial proceeding is to deprive it of all force and operation, either ab intio or prospectively as to future transactions. "
An assessment should, therefore, be annulled where the assessment proceeding is a nullity, in the sense that the Assessing Officer had no jurisdiction to take the proceeding and/or to make a final order of assessment himself. Once the assessment is annulled, the order of assessment will cease to exist. The Income-tax Officer will be at the stage where the illegality supervened, which resulted, in the annulment of the assessment. It would be open to the Income-tax Officer to take up the matter from the point at which the illegality supervened and to pass a fresh order even in the case of annulment of the assessment, if it can be made according td the provisions of law and if the time-limit for taking further proceedings in the matter and making the assessment if is still available. In the instant case there is a time-limit for making an assessment. An extended time-limit has been provided for making fresh assessment in cases where the original assessment teas been set aside by the appellate authority under section 251 of the Act. No extended limitation is, however available under section 251 for making fresh assessment in a case where the original assessment is annulled. If the original time-limit is still available, the Income-tax Officer may proceed from the stage at which the illegality, which resulted in the annulment of the assessment supervened and to make the assessment afresh.
In the instant case, the illegality supervened at the time the obiections to the draft order were received by the Income-tax Officer from the assessee. The only function left with the Income-tax Officer thereafter, was to forward the draft order, together with the objections, to the Inspecting Assistant Commissioner. It was for the Inspecting Assistant Commissioner to consider the draft order and the objections and after considering the draft order and objections and after going through the record relating to the draft order, issue appropriate directions in respect of the matters covered by the objections for the guidance of the Income-tax Officer to enable him to complete the assessment. On receipt of the directions of the Inspecting Assistant Commissioner, he was obliged to pass a final order of assessment pursuant to and in accordance with the directions given by the Inspecting Assistant Commissioner. He had no power to very or depart from the directions given by the Inspecting Assistant Commissioner. It is, thus, clear that once the Income-tax Officer makes a draft order of assessment as required by section 144B of the Act and forwards the same to the assessee and the assessee files objections to the same, he ceases to-perform the powers and functions of the Assessing Authority. The power to consider the draft order and the objections of the assessee is thereafter, vested in the Inspecting Assistant Commissioner and he is the authority to determine the income of the assessee. The only remaining thing to be done by the Income-tax Officer is to pass a final order of assessment pursuant to and in accordance with the directions of the Inspecting Assistant Commissioner. If, in cases falling under section 144B of the Act, the Income-tax Officer arrogates to himself the power to pass an assessment order without referring the case to the Inspecting Assistant Commissioner, such an assessment will be without Jurisdiction and it will be liable to be annulled by the appellate authority.
We are supported in our above conclusion by the observations of the Supreme Court in a recent decision in Panchamahal Steel Ltd. v. U. A. Joshi, ITO (1997) 225.ITR 458, where on a reading of section 144B of, the Act, it was observed (headnote):
. . . once a draft assessment order is made and the matter is referred to the Inspecting Assistant Commissioner on receiving the assessee's objections, the function of the Income-tax Officer practically comes to an end. Thereafter, the only thing remaining for him to do is to pass a final order in accordance with the direction given by the Inspecting Assistant Commissioner. He cannot vary or depart from those directions."
In view of the above discussion, we are of the clear opinion that in cases falling under section 14413 of the Act, the quasi judicial function of the Income-tax Officer as an Assessing Authority comes to an end the moment the assessee files objections to the draft order. The power to determine the income of the assessee thereafter gets vested in the Inspecting Assistant Commissioner to whom the Income-tax Officer is required to forward the, draft order together with objections. The only thing that remained to he done by the Income-tax Officer is to pass a final order in accordance with the directions given by the Inspecting Assistant Commissioner. The function of the Income-tax Officer to make the final assessment under section 14413(5) of the Act is more in the nature of a ministerial function because he can pass the order only in a accordance with the directions of the Inspecting Assistant Commissioner. He cannot vary or depart from the directions given by the Inspecting Assistant Commissioner. Moreover, the requirements of section 14413 of the Act are mandatory. The Income-tax Officer has no option but to follow the same. He cannot make the final order on the basis of the draft order without forwarding the same to the Inspecting assistant Commissioner along with the objections and without obtaining the directions of the Inspecting Assistant Commissioner. An assessment made ' by the Income-tax Officer in violation of the provisions of section 14413 of the Act would be an assessment without jurisdiction. In the instant case, the admitted position is that on receipt of the draft order of assessment, the assessee did file objections and the Income-tax Officer completed the assessment himself on the basis of the draft order without forwarding the draft order and the objections to the Inspecting Assistant Commissioner and obtaining directions from him. Such an order, on the face of it, is beyond the powers of the Income-tax Officer under section 143 read with section 14413 of the Act and, hence, without jurisdiction. The Tribunal, in our opinion, was, therefore, justified in its conclusion that the assessment was liable to be annulled. It was right in holding that the assessment order passed by the Income-tax Officer in the instant case without reference to the Inspecting Assistant Commissioner had rightly been annulled by the Commissioner of Income-tax (Appeals). In view of the above, we answer the question referred to us accordingly in favour of the assessee and against the Revenue.
This reference indisposed of accordingly with no order as to costs. ,
M.B.A./3156/FCReference disposed.