The recent decision of the apex court in the case of CIT v. Laxman Das Khandelwal [2019] 108 taxmann.com 183 (SC) has once again brought to fore the debate on validity of jurisdiction acquired by the income tax department to a proceedings under the Act due to express or implied consent of the assessee to such jurisdiction. The issue before the apex court was that the assessee had participated in the assessment proceedings even though he had not received a valid notice under section 143 (2) of the income tax act 1961. In appeal the assessee contended that issuance of a valid notice u/s143(2) of the Act is a sine qua non for valid assumption of jurisdiction by the assessing officer. The assessee for the first time raised an objection for non-issuance of the said notice before the appellate authority. The appellate authority held that the assessment proceedings undertaken without issuance of a valid notice is void ab initio.
The revenue preferred an appeal before the apex court placing reliance upon the provisions of section 292BB of the Act to emphasise that even if the notice was not issued, still since the assessee had participated in the assessment proceedings he was barred from claiming non-issuance of such notice.
The apex court after considering the arguments of both sides held that the provisions of section 292BB cannot apply in a situation where no notice at all has been issued by the department before assuming jurisdiction to carry out assessment. The apex court also held that participation in the assessment proceedings by the assessee in absence of such notice do not provide valid jurisdiction to the department to carry out the assessment.
The purpose and tenor of section 292BB is to regularise any irregularity in the issuance of notice with respect to the mode of service or any error in the spelling of the name of the assessee et cetera. However, it does not cover a situation where no notice at all has been issued by the department.
The above decision by apex court highlight the difference between patent jurisdiction and latent jurisdiction . The courts have in the past held that consent of the assessee does not confer jurisdiction where such a jurisdiction has been acquired in a patently illegal manner. The courts have held that where there has been some irregularity in the procedure or the manner in which the notice has been issued, then the acquisitions by the assessee in the assessment proceedings would come to the rescue of the department and the assessee would there after be barred from cleaning any irregularity in the notice.
In the case of Ashutosh Sikdar v. Bihari Lal Kirtania (1907) ILR 35 Cal (FB) at page 72, the court held that an 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 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 avoid and incapable of being-validated.
The law was further propounded by the apex court in the case of Supdt. of Taxes Vs. O.N. Trust.AIR.1975 (S.C) 2065 wherein the apex court held that “a distinction arises between the provisions which confers jurisdiction and provisions which regulate procedure. Jurisdiction can neither be waived nor created by consent. A procedural provisions may be waived by conduct or agreement”.
The law on procedural irregularity vs Illegality was elucidated by the Gujarat High Court in the case of P.V. Doshi Vs. CIT (Guj) reported in (1978) 113 ITR 22. The Court held that “…distinction between a mere procedural provision which could be waived and such jurisdictional provision or a mandatory provision enacted in public interest which could not be waived, because by consent no jurisdiction could be conferred on the authority unless the conditions precedent were first fulfilled. In Dasa Muni Reddy V.Appa Rao, AIR 1974 SC 2089, 2092, such a question of waiver was examined also in the context of the bar of estoppel or of res judicata. At page 2091, it was pointed out that want of jurisdiction must be distinguished from irregular or erroneous exercise of jurisdiction. If there is want of jurisdiction the whole proceeding is coram non judice. The absence of a condition necessary to found the jurisdiction to make an order or give a decision deprives the order or decision of any conclusive effect.
On the issue of jurisdiction acquired by consent the courts have not been very sympathetic to the cause of the department. In CIT Vs. Ramsukh Motilal (1955) 27 ITR 54 (Bom), Chidambaram Chettiar Vs. CIT (1956) 29 ITR 842 (Mad), R.K. Das & Co. Vs. CIT (1956) 30 ITR 439 (Cal) and CIT Vs. Maharaja Pratap Singh (1956) 30 ITR 848 (Pat), it was held that the issue of a notice is a condition precedent to the exercise of jurisdiction under s. 34(1) and that there can be no waiver of it. This view was affirmed by the Supreme Court in Narayana Chett Vs. ITO (1959) 35 ITR 388 (SC).
The Gauhati High Court full bench in the case of Smt. Sohani Devi Jain Vs. ITO (Guhati Full Bench) 109 ITR 130 provided for different types of jurisdictions to an income tax proceedings. The court held that Lack of jurisdiction of a court or Tribunal to decide a particular matter may be of many varieties. Lack of jurisdiction may be due to want of jurisdiction over the place, it may be due to want jurisdiction in respect of the person; it may be due to want of proper constitution of the Tribunal or court. It may also be due to lack of authority under the law under which the court or tribunal proceeds to decide the particular matter. A reading of the order of the Appellate Tribunal makes it clear that what was not pressed by the petitioner before it was the lack of territorial jurisdiction of the Income-tax Officer, Jorhat. But the lack of jurisdiction under the provisions of the Income-tax Act to make the order of reassessment was specifically raised by the petitioner before the Tribunal. It is that jurisdiction which is lacking in the present case. It is a well-known proposition of law that consent cannot confer jurisdiction. In Tansukhrai Bodulal V. Income-tax Officer(1962) 46 ITR 325 (Assam) (FB) a Full Bench of this court held that there cannot be waiver of the notice under section 34 of the Income-tax Act, 1922, as such a notice is a condition precedent for the exercise of jurisdiction to assess under that section and that the want of notice affects the jurisdiction of the Income-tax Officer to proceed with the assessment, as well as the validity of the proceeding for assessment.
The Income Tax Act in section 124 provides for validity of geographical jurisdiction where the assessee does not raise the objection before the officer concerned during the proceedings. Similarly section 292BB provides for obligation of the assessee to raise objection to a notice in the proceedings itself if it is irregularly issued. However, there is no provision in the Act which validates a proceeding where the patent jurisdiction is lacking due to non issuance of mandatory notice assuming the jurisdiction to commence such proceedings. Now the decision of Supreme Court in the case of CIT v. Laxman Das Khandelwal (supra) lay to rest the controversy over the scope of section 292BB of the Act in proceedings in absence of a valid notice.
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