COMMISSIONER OF INCOME-TAX VS N. KRISHNAN, 2000 PTD-KERALA-HIGH-COURT-INDIA 2214 (1997)

(a) Income-tax---

----General principles---Difference between irregular and invalid orders-- Waiver of irregularity.

There is a difference between irregularity and nullity. Irregularity is a deviation from a rule of law which does not take away the foundation or authority for the proceeding, or apply to its whole operation, whereas a nullity is a proceeding that is taken without any foundation for it or is so essentially defective as to be of no avail or effect whatever, or is valid and incapable of being validated. The safest rule to determine what is irregularity and what is nullity is to see whether the party can waive the objection; if he can waive it, it amounts to an irregularity; if he cannot, it is a nullity. A waiver is an intentional relinquishment of a known right, but obviously an objection to jurisdiction cannot be waived, for consent cannot give a Court jurisdiction, where there is none. Everyone has a right to waive and to agree to waive the advantage of a law or rule made solely for the benefit and protection of the individual in his private capacity, which may be dispensed with without infringing any public right or public policy.

(b) Income-tax---

--Assessment---Advocate---Appeal to Appellate Tribunal---Advocate engaged to appear in assessment proceedings and all proceedings connected therewith ---Assessee's Advocate filing petition signed by him for cancellation of ex parte assessment under 5.144---Order passed under S.146---Assessee participating in fresh assessment proceedings---No complaint that Advocate had .no authority to represent assessee. in proceedings under S.146 even at the stage of first appeal ---Assessee estopped from raising plea on appeal to Tribunal---Order under S.146 was valid-- Indian Income Tax Act, 1961.

For the previous year relevant to the assessment year 1982-83, the assessee filed a return of income on November 3, 1983, admitting a loss of Rs.58,216. The total loss returned was Rs.11,53,920. Since the assessee did not comply with the requirements of notices issued by the Income-tax Officer, an ex pane assessment -order was passed under section 144 of the Income Tax Act, 1961, on September 12, 1984. Notice of demand alongwith the assessment order was served on the assessee's Advocate. On the basis of a petition, dated September 15, 1984, filed in the name of the assessee but signed by his Advocate, the ex parte assessment was cancelled under section 146 on September 24, 1984, and fresh assessment was completed on March 27, 1987, making certain additions, etc. Thus, against the income initially assessed under section 144 at Rs.2,16,336 the income that was finally determined came to Rs.73,28,394. Aggrieved by the fresh-assessment order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) who confirmed the assessment with slight modifications. The assessee filed an appeal against the order. Additional grounds were subsequently filed. In these additional grounds, the assessee took up the contention that the Advocate who had filed the petition on behalf of the assessee under section 146 had no authority to present such a petition and hence the order passed by the Income-tax Officer setting aside the original assessment under section 144 should be treated as null and void and, therefore, the assessment order passed by the Income-tax Officer, dated March 27, 1987, was without jurisdiction. The Tribunal admitted all the additional grounds an it held that the cancellation of the ex parte assessment was vitiated by lack of jurisdiction. On a reference:

Held, that the material on record showed that the assessee had participated in the fresh assessment proceedings after the ex parte assessment order was set aside by the order under section 146. Aggrieved by the fresh assessment order, the assessee had filed an appeal before the Commissioner of Income-tax (Appeals). No complaint was raised before the first appellate authority where the assessee was represented by a chartered accountant that the assessee was not aware of the ex parte assessment proceedings under section. 144 and also the petition filed by the Advocate for the assessee under section 146. If the story put forward by the assessee was correct, a mere reading of assessment order, dated March 27, 1987, would have alerted him as it referred to the earlier proceedings in its first paragraph itself. Even if the assessee's Advocate had filed the petition under section 146 without his knowledge or consent, subsequent,, conduct of the assessee would show that he had ratified the action taken by his Advocate. Section 146 of the Income -tax Act enables an assessee assessed under section 144 to make an application to the Income-tax Officer, for the cancellation of the assessment on certain grounds. No specific form or procedure is prescribed in the application under section 146. No public interest is involved in this proceeding which would stand in the way of the assessee waiving his objection. The order passed by the assessing authority under section 146 on September 24, 1994, was not bad for any inherent lack of jurisdiction even if there was any irregularity in the manner in which the application was filed under section 146. The assessee was estopped by his conduct from raising an objection on that basis at the second appellate stage after having participated in the fresh assessment proceedings and after having failed to take any objection on that ground before the first appellate authority.

Dhrendra Nath Gorai v. Sudhir Chandra Ghosh .AIR 1964 SC 1300 and Byram Pestongi Gariwala v. Union of India (1992) 1 SCC 31 ref.

P.K.R: Menon and N.R.K. Nair for the Commissioner.

C. Kochunni Nair and M.A. Feroz for the Assessee.

JUDGMENT

MRS. K.K. USHA, J.---These references at the instance of the Revenue arise out of a common order passed by the Income-tax Appellate Tribunal, Cochin Bench, in I.T.As. Nos. 1299/Cock. of 1987 and 135/Coch. of 1988, and the cross-objections C.O. No.l l (Cock.) of 1988 in I.T.A. No.135/Coch. of 1988. The relevant assessment year is 1981-82. The .following is the question raised in I.T.R. No. 124 of 1994:

Whether, on the facts and in the circumstances of the case, and on concluding that it would be an academic exercise to decide the issues on additions and disallowances on merits and the issues are being left open:

(i) the Tribunal is right in law and fact in holding the Revenue's appeal against the relief s granted by the Commissioner of Income-tax Appeals) does not survive for consideration as the reassessment order itself is vacated in the appeal by the assessee; and

(ii) are not the observations contrary to one another?"

The following are the questions raised for opinion of this Court in I.T.R. No. 125 of 1994:

"(1) Whether, on the facts and in the circumstances of the case and also on a consideration of the vakalath, common law principle and the subsequent conduct of the assessee in the case, the Tribunal is right in. law and fact in holding,---

(i) the Advocate was, not authorised to or empowered to sign the petition praying for reopenment of the assessment order under section 146 of the Income-tax Act for and on behalf of the assessee?

(ii) reopenment of the assessment under the provisions of section 146 resulting in the cancellation of the original assessment made under section 144 giving rise to the impugned assessment is void ab initio?

(2) Whether, on the facts and in the circumstances of the case and since initiation of assessment proceeding starts either on issue of notice under section 139(2)/148 or on furnishing of return under section 139(1) the reopening of assessment under section 146 of the Income-tax Act,---

(i) is initiation of proceedings;

(ii) the Tribunal is right in law in characterizing and equating reopening under section 146 to initiation of proceedings;

(3) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding,---

(i) the Advocate was not authorised to file the application;

(ii) the application is invalid and non est in the eye of law?

(4) Whether, on the facts and in the circumstances of the case and considering the conduct of the assessee before the Income-tax Officer in and after section 146 proceeding, is not the assessee estopped from questioning the authority of the Advocate and jurisdiction of the officer before the Tribunal based on the principle of acquiescence and estoppel?

(5) Whether, on the facts and in the circumstances of the case the principle laid down in Byram. Pestonji (1992) 1 SCC 31 has been correctly applied?

(6) Whether, on the facts and in the circumstances of the case should not the Tribunal have examined the advocate and the assessee giving an opportunity to the Revenue to cross-examine them and is not the order vitiated for non-examination/violation of natural justice?"

The assessee is a cashew exporter. He had also business in foreign liquor and toddy and was deriving share income from certain firms. For the previous year relevant for assessment year 1982-83, the assessee filed a return of-income on November 3, 1983, admitting a loss of Rs.58,216. The total loss returned was Rs.11,53,920 Since the assessee did not comply with the requirements of notices issued by the Income-tax Officer, ex pane assessment was passed under section 144 of the Income-tax Act on September 12, 1984. Notice of demand alongwith the assessment order was served on the assessee's Advocate. On the basis of a petition, dated September 15, 1984, filed in the name of the assessee but signed by his Advocate, the ex pane assessment was cancelled under section 146 on September 24, 1984, and fresh assessment was completed on March 27, 1987, making certain additions, etc. Thus, against the income initially assessed under section 144 at Rs.2,16,336, the income that is finally determined came to Rs.23,28,394. Aggrieved by the fresh assessment order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) who confirmed the assessment with slight modifications. The assessee filed LT. A. No. 1299/Cock of 1987 before the Income-tax Appellate Tribunal and the Revenue filed I.T.A. No. 135/Coch of 1988 against that portion of the order of the first appellate authority where relief was granted to the assessee. The assessee had filed a cross-objection in I.T.A. No.135/Coch of 1988.

About four years after presentation of the appeal the assessee filed certain additional grounds of appeal on August 5, 1991. A second set of additional grounds was preferred on September 5, 1991, and a third set of additional grounds on January 2, 1992. In these additional grounds, the assessee took up the contention that the Advocate who had filed the petition. on behalf of the assessee under section 146 had no authority to present such a petition. The Income-tax Officer should not have entertained the petition nor allowed the same by setting aside the original assessment passed under section 144 of the Income-tax Act. The order passed by the Income-tax Officer 'setting aside the original assessment under section 144 should be treated as null and void and, therefore, the assessment order passed by the Income-tax Officer, dated March 27, 1987, is without jurisdiction. Certain other grounds on the merits were also taken as additional grounds. The tribunal admitted all the additional grounds and it held that the cancellation of the ex parte assessment was vitiated by lack of jurisdiction, since the proceedings under section 146 were initiated on the basis of a petition, even though in the name of the assessee, signed by his counsel who had no authority to submit such a petition. As a consequence of the above finding, the Tribunal held that fresh assessment order, dated November 11, 1987, cannot be sustained. The Tribunal did not go into the merits of the other contentions raised by the assessee as well as the Revenue. The assessee's appeal was allowed and it was held that the appeal filed by the Revenue did not survive for consideration cross-objection by the assessee was dismissed as infructuous. .

It is contended by learned standing counsel for the Revenue that the Tribunal has committed a grave error in holding that the order, dated September 24, 1984, passed by the Income-tax Officer under section 146 of the Income-tax Act was vitiated due to lack of jurisdiction. According to learned counsel a reference to the terms of the vakalath executed by the assessee in favour of the Advocate who appeared for him in the original assessment proceedings would clearly show that the Advocate had the authority to file any application connected with the order of assessment which would naturally take in an application under section 146 also. He also pointed out that the subsequent conduct of the assessee would make it clear that even if there had been any deficiency in the authorisation granted in favour of the Advocate to enable him to file a petition under section 146 signed by him, subsequent conduct of the assessee would clearly show that he had condoned such deficiency. Learned counsel would submit that the assessee is estopped from raising a contention regarding lack of authorisation of, counsel at the belated stage of second appeal that too in an additional ground taken four years after filing the appeal. Learned counsel for the assessee, on the other hand, would contend that the assessee had opportunity to know about the petition filed by his Advocate under section 146 of the Income-tax Act only at a later stage. Copy of the demand and original assessment order, dated September 12, 1994, were not served on the assessee but it was served only on his Advocate. Petition under section 146 was filed by the Advocate without consent and knowledge of the assessee and as a result of such action taken by his Advocate without consent, the assessee has suffered great loss.

Learned counsel further pointed out that even in the cross-objection filed to the appeal filed by the Revenue, this point has been. taken by the assessee before the Tribunal: Referring to the terms the vakalath, .learned counsel would contend that it has not specifically authorised the Advocate to file a petition under section 146 of the Income-tax Act on behalf of the assessee. If that be so, any proceeding taken by the assessing authority on the basis of such a petition cannot survive legal scrutiny and, therefore, the Tribunal was fully justified in holding that the order, dated September 24, 1984, was void in the eye of law so also further assessment, dated March 27, 1987.

The terms of authorisation as found in the vakalath executed by the assessee in favour of his Advocate who represented him in the assessment proceedings are quoted in paragraph 8 of its order as follows:

"to appear for me/us, in the above appeal/assessment proceedings/to conduct the same and all proceedings that may be taken in respect of any application connected with the same or order passed thereon, including all applications for return of documents, and applications for review; in appeals and in applications for leave to appeal to the High Court, Supreme Court and to draw any moneys payable to me/us in the said appeal/assessment proceedings. "

The argument put forward by the assessee that the above vakalath did not specifically authorise the Advocate to sign a petition for and on behalf of the assessee found favour with the Tribunal. We cannot agree with the above view. The authorisation would enable the Advocate to conduct the assessment proceedings and also all proceedings connected with the order of assessment including applications for review, appeals, etc. Such authorisation can take in an application to be filed under section 146 of the Income-tax Act also. But we find, it may not be necessary for us to enter a final finding on this aspect, since we are of the view that the assessee was estopped from raising such an objection at the second appellate stage by his own conduct. The original assessment proceeding under section 144 was passed on September 12, 1984. It was served on the assessee's counsel on September 13, 1984. The petition under section 146 was filed on September 15, 1984, in the name of the assessee but signed by counsel for the assessee. The order under section 146 was passed on September 24, 1984, and the final assessment order was passed on March 27, 1987. The first paragraph of fresh assessment order, dated March 27, 1987, refers to the ex parte assessment order passed under section 144 and the order passed under section 146 on the basis of the assessee's petition, dated September 15, 1984. A reference to the fresh assessment order would also show that the assessee had replied to a notice, dated February 23, 1987, issued by the assessing authority proposing to tax the amount utilised for purchasing the excess quantity of raw nuts as met out of undisclosed income of the assessee. By his letter, dated March 5, 1987, the assessee had agreed to file a reply on March 9, 1987, without further notice. Finally, the assessment was completed after hearing the Advocate who represented the assessee. The above would show that the assessee had participated in the fresh assessment proceedings after the ex pane assessment order was set aside by the order under section 146. Aggrieved by the fresh assessment order, the assessee had filed an appeal before the Commissioner of Income-tax (Appeals). No complaint was raised before the first appellate authority where the assessee was represented by a chartered accountant that the assessee was not aware of the ex pane assessment proceedings under section 144 and also the petition filed by the advocate for the assessee under section 146. If the story put forward by the assessee is correct, a mere reading of assessment order, dated March 27, 1987, would have alerted him as it referred to the earlier proceedings in its first paragraph itself. We, therefore, find it difficult to accept the contention raised by the assessee that he came to know about the ex pane assessment under section 144 and also the proceedings under section 146 only at a later stage that is after filing the appeal before the Income-tax Appellate Tribunal. We are of the view that the present complaint raised by the assessee is only the result of an afterthought.

Even if the assessee's advocate had filed the petition under section 146 without his knowledge or consent, the subsequent conduct of the assessee would show that he had ratified the action taken by his Advocate. The petition signed by the Advocate on behalf of the assessee without his consent, could not effect the jurisdiction of the assessing authority, since the assessee had waived the objection, if any, on his part for the action taken by the Advocate. In this connection, we would like to refer to a decision by the apex Court in Dhirendra Nath Gorai v. Sudhir Chandra Ghosh, AIR 1964 SC 1300, regarding the distinction between irregularity and nullity. It has been held that irregularity is a deviation from a rule of law which does not take away the foundation or authority for the proceeding, or apply to its whole operation, whereas a nullity is a proceeding that is taken without any foundation for it or is so essentially defective as to be of no avail or effect whatever, or is void and incapable of being validated. The safest rule- to determine what is meant by irregularity and what is nullity is to see whether the party can waive the objection; if he can waive it, it amounts to an irregularity; if he cannot, it is a nullity. A waiver is an intentional relinquishment of a known right, but obviously an objection to jurisdiction cannot be waived, for consent cannot give a Court jurisdiction where there is none. Every one has a right to waive and to agree to waive the advantage of a law or rule made solely for the benefit and protection of the individual in his private capacity, which may be dispensed with without infringing any public right or public policy. Statutory conditions inserted by the Legislature simply for the security or benefit of the parties to the action themselves, Where 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.

Section 146 of the Income-tax Act

enables an assessee assessed under section 144 to make an application to the Income-tax Officer, within one month from the date of service of notice of demand issued in consequence of the assessment, for the cancellation of the assessment on certain grounds delineated in the section. No specific form or procedure is prescribed in the application under section 146. In the present case an application under 146 was filed in the name of the assessee but signed by his counsel. The conduct of the assessee would clearly show that he had waived objection, if any, to counsel signing the petition on behalf of the assessee. We find no public interest involved in this proceeding which would stand in the way of the assessee waiving his objection. We are, therefore, of the view that the order passed by the assessing authority under section 146 on September 24, 1994, is, not bad for any inherent lack of jurisdiction even if there is any irregularity in the manner in which the application was filed under section 146. The assessee is estopped by his conduct from raising an objection on that basis at the second appellate stage after having participated in the fresh assessment proceedings and after having failed to take any objection on that ground before the first appellate authority.

We are, therefore, of the view that the Tribunal has erred in finding that the order, dated September 24, 1984, passed by the assessing authority under section 146 is bad in law and the consequential fresh assessment order, dated March 27, 1987, cannot also sustained. As mentioned earlier, the Tribunal had not gone into the merits of the other contentions raised by both sides. Since we are holding that the fresh assessment order is not vitiated by lack of jurisdiction, it is for the Tribunal to examine the other contentions raised by both sides on the merits.

In the light of the above discussion, we answer questions Nos. l(i) and 1(ii) in I. T. R. No. 125 of 1994 in the negative, in favour of the Revenue and against the assessee. In the light of the answer given to question No. 1 we decline to answer question No.2 as unnecessary. We decline to answer question No.3 also as unnecessary. Question No.4 is answered in the affirmative, in favour of the Revenue and against the assessee. We decline to answer questions Nos.5 and 6 as unnecessary. We decline to answer questions Nos. (i) and (ii) in I. T. R. No. 124 of 1994 as unnecessary.

A copy of this judgment under the seal of this Court and the signature of the Registrar will be sent to the Income-tax Appellate Tribunal, Cochin Bench.

M.B.A./4082/FC Order accordingly.