Case Law Details

Case Name : Asstt. Commissioner of Income-tax Vs M/s. Sushila Milk Specialities Pvt. Ltd. (ITAT Delhi)
Appeal Number : I.T.(SS)A. No. 100/Del/2007
Date of Judgement/Order : 30/10/2009
Related Assessment Year :
Courts : All ITAT (4448) ITAT Delhi (984)

In view of the two decisions of the Hon ‘ble Supreme Court namely Rajesh Kumar & Others vs. DCIT, 287 ITR 91 and Sahara India (Firm), 300 ITR 403, the assessment is required to be set aside to the file of the Assessing Officer to pass a fresh assessment as held in the case of Shri Rajesh Kumar vs. DCIT by ITAT in its order dated 3rd June 2008 and do not hold the assessment as time barred as held in the case of ACIT Vs. Rakesh Kumar. We, therefore, approve the view taken by the Tribunal in the case of Shri Rajesh Kumar and do not approve the decision of Tribunal in the case of ACIT vs. Rakesh Kumar.

The assessment cannot be annulled in the present case but is required to be restored back to the file of the Assessing Officer for framing an assessment afresh after affording reasonable opportunity of being heard to the assessee.

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IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI SPECIAL BENCH ‘G’:NEW DELHI

BEFORE SHRI G.E. VEERABHADRAPPA, VICE PRESIDENT, SHRI R.P. TOLANI, ;JUDICIAL MEMBER AND SHR} DEEPAK R. SHAH, ACCOUNTANT MEMBER

 I.T.(SS)A. No. 100/Del/2007
Block Assessment Period: 1.4.1996 to 18.12.2002

Asstt. Commissioner of Income-tax

Central Circle-18, New Delhi.

Vs.

M/s. Sushila Milk Specialities Pvt. Ltd.,
216/218, Joshi Road, j New Delhi.

(Appellant)

(Respondent)

 Appellant by: Shri Gajanand Meena, CIT-DR & Shri Kishore B., Sr. DR.

Respondent by : Shri Anil Sharma, Advocate.

Intervener PHI Seeds Ltd. by : Shri S.D. Kapila, Advocate.

O   R   D   E   R

PER DEEPAK R. SHAH, ACCOUNTANT MEMBER.

This Special Bench was constituted to decide the following question:

“Whether on the facts and in the circumstances of the case, keeping in view two decisions of Hon’ble Supreme Court, namely, (i) Rajesh Kumar and Others vs. DCIT 287 ITR 91 and (ii) Sahara India (Firm) vs. CIT 300 ITR 403 (SC), assessment is required to be set aside to the file of assessing officer to pass a fresh assessment as held in the case of Shri Rajesh Kumar vs. DCIT by ITAT in its order dated 3 rd June, 2008 in IT( SS) No. 10(Del) of 2007 or the assessment is time barred as held by the ITAT in its order dated 25th August 2008 in IT(SS) No. 101(Del) of 2007 in the case of ACIT vs. Rakesh Kumar and also to decide the entire appeal of the revenue.

2. From the question referred itself it is clear that there were contrary decisions of the Tribunal, one in the case of Shri Rajesh Kumar vs. DCIT’ in IT (SS) No.10(Del) of 2007 and another in the case of ACIT vs. Rakesh Kumar in IT(SS) No.101(Del) of 2007. In the case of Rajesh Kumar vs. DCIT (supra) the Tribunal after considering the decision of Hon’ble Supreme Cour1 in the case of Rajesh Kumar & Others vs. DCIT, 287 ITR 91 and also the decision of the Larger Bench of the Hon ‘ble Supreme Court in the case of Sahara India (Firm) vs. CIT, 300 ITR 403 , held that though as per the decision of Hon’ble Supreme Court as reported in 287 ITR 91 have held that order passed under section 142(2A) directing special audit was bad in law because of non-observance of principle of natural justice but in view of the decision of Larger Bench of Supreme Court in the case of Sahara India (Firm) (supra), the law declared on the rule of audi alteram partem is applicable prospectively. Therefore, the assessment made after reference vvas made for special audit do not render the assessment bad in law but the assessee need to be given opportunity of being heard and therefore, the assessment was not annulled but was restored to the file of the Assessing officer with appropriate direction. This order was passed on 30th June, 2008. Later on in the case of ACIT vs. Rakesh Kumar (supra), the Tribunal was considering as to whether the assessment treated as annulled by the Commissioner (Appeals) is correct or not. Though the counsel appearing in the case of Shri Rakesh Kumar is the same as appearing in the case of Shri Rajesh Kumar (supra), the attention of Tribunal was not drawn to the decision of Tribunal in the case of Rajesh Kumar. The Tribunal in the case of Shri Rakesh Kumar held that assessment framed pursuant to extended limitation in view of special audit under section 142(2A) without affording opportunity of being heard to the assessee before directing special audit is beyond the limitation prescribed as the extension available due to direction of special audit under Explanation 1 (iii) to section 153(3) was not available to the Assessing Officer because of invalid order under section 142(2A) of the act. This order in the case of Rakesh Kumar was passed on 25.08.2008. When the case of present assessee was taken up, the Tribunal noted apparently two conflicting decisions of the Tribunal. It is to be noted that the assessee is one of the firm of the same group namely, Rajesh Kumar & Others as also Rakesh Kumar. Therefore, need arise to refer the matter to Larger Bench and accordingly the above mentioned question referred to the Special Bench as also the appeal of revenue on the following ground:-

“On the facts and circumstances of ‘the case, the Ld. CIT(A) has erred in annualizing the Block ssessment order passed by the A.O,”

3. At the time of hearing the counsel for the assessee Shri Anil Sharma has filed written representation. the contention of Shri Sharma is –

(i)         The issue involved before this Hon’ ble Special Bench is keeping in view the two judgments of the Hon ‘bie Supreme Court in the case of Rajesh Kumar & Others vs. DCIT 287 ITR 91 (SC) and in the case of Sahara India (Firm) vs. CIT 300 ITR 403 (SC), assessment framed in the instant case is, required to be set aside to the assessing officer to pass a fresh assessment or the assessment framed is held to be time barred.

(ii)        It is submitted that the present assessee i.e. M/s Sushila Milk Specialities (P) Ltd. was also a pm1y before the Hon’ble Supreme Court in the judgment delivered in the case of Rajesh Kumar & Others vs. DCIT reported as 287 ITR 91 (SC) and as such the judgment dated 1.11.2008 rendered by the Hon ‘ble Supreme Court is also a judgment rendered in assessee’s own case. In the said case, their Lordships have held that before passing an order u/s 142(2A) of the Act, directing the assessee to obtain a special audit of its accounts, principles of natural justice are required to be observed. The larger Bench of Supreme Court decided the matter in Sahara India (Fim) vs. CIT reported in 300 ITR 403(SC) and agreed with the decision of the Supreme Court m the case of Rajesh Kumar & Ors, vs. DCIT 287 ITR 91 (SC).

(iii)       In the light of the legal position, their Lordships in the cases Sahara India (Firm) and Sahara India Financial Corp. Ltd. held as under:

“The next crucial question is that keeping in view the fact that the time to frame fresh assessment for the relevant assessment year by ignoring the extended period of limitation in terms of Explanation l(iii) to sub-section (3) of section 153 of the Act is already over, what appropriate order should be passed. As noted above, the learned. Additional Solicitor General had pleaded that if we were not inclined to agree with him, ‘the interpretation of the provision by us may be given prospective effect, otherwise the interest of the revenue will be greatly prejudiced.

There is no denying the fact that the law on the subject was in a flux in the sense that till the judgment in Rajesh Kumar was rendered, there was divergence of opinion amongst various High Courts. Additionally, even after the said judgment, another two judge Bench of this court had expressed reservation about its correctness. Having regard to all these peculiar circumstances and the fact that on December 14, 2006, this court had declined to stay the assessment proceedings, we are of the opinion that this Court should be loathe to quash the impugned orders. Accordingly, we hold that the law on the subject, clarified by us, will apply prospectively and it will not be open to the appellants to urge before the appellate authority that the extended period of limitation under Explanation 1(iii) to section 153(3) of the Act was not available to the Assessing Officer because of an invalid order u/s 142(2A) of the Act.

However, it will be open to the appellants to question before the appellate authority, if so advised, the correctness of the material gathered on the basis of the audit report submitted under subsection (2A) of section 142 of the Act.”

 (iv)       It is submitted that on appeal against the order dated 30.06″2008 in IT (SS) No.10(Del)/07, the Hon ‘ble Delhi High Court vide its order dated 09.04.2009 in ITA No. 184/2009 has dismissed the appeal filed u/s 260A(l) of the Act holding that the appellant case is covered by the observations made by the larger Bench in Sahara India (Firm) and the order of the Appellate Tribunal based on Sahara India (Finn) to be valid. However, it is submitted that the aforesaid order dated 09.04.2009 has not been accepted by the assessee and an appeal is being filed before the Hon’ble Supreme Court.

(v)        It is further submitted that observations made by the Hon’ble Supreme Court in the case of Sahara India (Firm) ‘with regard to limitation, as is evident from the bare reading of the observations, are relevant and applicable only to the case of Sahara India (Firm) and would be applicable universally to the forthcoming cases and not to the decided cases.

(vi)       It is further submitted that the judgment rendered in assessee’s own case has to be read as it is in its own context and the observations relating to limitation made in the case of Sahara India (Firm) cannot be imported.

Reliance is placed on the judgment of Hon ‘ble Madhya Pradesh High Court in 216 CTR 153 National Textiles Corporation Ltd. (M.P) V. CIT wherein it has held that it is not permissible for the Tribunal to comment upon the manner in which a pm1icular decision was rendered by the Supreme Court /High Court. It is also not permissible for the Tribunal to side track the decision of the High Court on the ground that it did not take into consideration a particular provision of law.

(vii)      Shri Sharma also referred to some of the decisions relating to function of the Supreme Court and effect of its orders.

(vii)      In view of the above, it is submitted that in the light of the judgment rendered in assessee’s own case in 287 ITR 91, the assessment order u/s 158BC dated 03.06.2005 deserves to be held as barred by limitation within the meaning of the provisions contained in clause (ii) to Explanation 1 of Section 1588E of the Act.

4. Shri S.D. Kapila represented one of the Intervener in this appeal namely PHI Seeds Ltd. The counsel for Intervener fairly admitted that since the decision of Tribunal in the case of Rajesh Kumar (supra) has been carried in further appeal before the High Court and the Hon ‘ble Delhi High Court in the case of Shri Rajesh Kumar vs. err Central-3, New Delhi while deciding the appeal in ITA No.184/2009 by order dated 9.4.2009 have upheld the order of Tribunal. Therefore. in view of the decision of jurisdictional High Court, the issue no longer survives and is required to be decided against the assessee.

5. The learned DR submitted that Since the issue is settled by the jurisdictional High Court, nothing survives thereafter. Direction of conducting a special audit under section 142(2A) without affording opportunity of being heard to the assessee is merely an irregularity and not an illegality. Therefore, in such a situation, irregularity can be cured by restoring the matter to the point where irregularity occurred. The Tribunal in the case of Rajesh Kumar & Others (supra) have actually done so. The action of Tribunal in the case of Rajesh Kumar has been upheld by the jurisdictional High Court also. Therefore, in the present case also the annulment of assessment by the Commissioner (Appeals) was not correct and he should have restored the matter to the file of the Assessing Officer. He also relied upon the decision of Hon ‘ble Supreme Court in the case of Deepak Agro Food vs. State of Rajasthan & Others in Civil Appeal No.4327 & 4328 of 2008 dated 11.7.2008. He accordingly, pleaded that the answer to the question referred for the opinion of Special Bench be decided holding that the assessment is required to be set aside to the file of the Assessing officer to pass a fresh assessment and not to annul the assessment. He also pleaded that the appeal of the revenue be allowed and the matter be restored back to the file of the Assessing Officer,

6. We have carefully considered the relevant facts, arguments advanced and the case laws cited. The learned counsel for the assessee through his written submissions has made a fervor appeal that since the present assessee was also a party before the Hon ‘ble Supreme Court in the judgment delivered in the case of Rajesh Kumar & Others vs. DCIT, 287 ITR 91, the said decision is to be considered as rendered in assessee’s own case also. The decision rendered by the Division Bench of Hon’ble Supreme Court in the case of Rajesh Kumar, 287 ITR 91 has not been over ruled by the Larger Bench of the Supreme Court in the case of Sahara India (Firm), 300 ITR 403 and therefore, the assessment should be annulled. We are unable to accept such a contention. Firstly, it is to be noted that the Supreme Court itself has earlier raised a doubt about the correctness of its decision in the case of Rajesh Kumar & Others, 287 ITR 91, therefore, Larger Bench was constituted. Hon’ble Supreme Court while referring the matter to Larger Bench observed as under:-

“a close reading of the decision shows that the observation in this regard appears to have been made in the context of the assessment in terms of section 158BC (block assessment) of the Act. Such assessments are relatable to a case when raid has been conducted at the premises of an assessee. Had that being so, limited to the facts involved in that case, we would have negatived the contentions of the Ld Counsel for the petitioner. But certain observations of general nature have been made. The effect of these observations appears to be that in every case where the assessing officer issued a direction in terms of section 142( 2A) of the Act, the assessee has to be heard before such an order is passed. This does not appear to be the correct position of the law. Therefore, we refer the matter to a larger branch.” [Reported in 289 ITR 473 (SC)].

The larger bench of the Hon ‘ble Supreme Court had observed as under [reported in 300 ITR 399 (SC)]:

“An order under section 142(2A) of the Income Tax Act, 1961, directing the assessee to get the accounts audited by an accountant nominated in this behalf by the Chief Commissioner or the Commissioner and to furnish a report of such audit, does entail civil consequences. The special audit under section 142(2A) is not limited to the mere production of the books and vouchers before the auditor and verification thereof: it involves the submission of explanations and clarifications which may be required by the special auditor on various issues with relevant data, documents, etc., which, in the normal course, an assessee is required to explain before the Assessing Officer. Therefore, the special audit is more or less in the nature of an investigation and in some cases it may even turn out to be stigmatic. This is so even after the insertion of the proviso in section 142(2A) with effect from June 1, 2007. Even the auditor’s fees and incidental expenses have been taken over by the central government; civil consequences will ensue on the passing of an order for special audit

The exercise of power under section 142(2A) leads to serious civil consequences, and, therefore, even in the absence of any express provision for affording an opportunity of pre-decisional hearing to the assessee and in the absence of any express provision in section 142(2A) barring the giving of reasonable opportunity 10 the assessee, the requirement of observance of the principles of natural justice is to be read into the said provision.

Even an administrative order or decision in matters involving civil consequences has to be made consistently with the rules of natural justice. The concept of natural justice is invariably read into administrative actions involving civil consequences, unless the statute conferring the power excludes its applications by express language.”

In the said judgment the Hon ‘ble Apex Court upheld the principles laid down in the case of Rajesh Kumar (287 ITR 9] (SC) that an order passed under section 142(2A) directing the assessee to get his accounts audited entails civil consequences and therefore, rule of “audi alteram partem” is required to be observed and assessee has to be provided reasonable opportunity of being heard before passing an order under section 142(2A). However, Hon ‘ble Supreme Court in the same judgment clarified that though the orders in question were vitiated by the failure to observe the principle of “audi alter am partem” yet its ruling on the question of law would apply prospectively. (i.e. after 11/04/2008) and it would not be open to the appellant to urge before the appellant authorities that the extended period of limitation under explanations 1(iii) to section 153 of the Act was not available to the assessing officer because of an invalid order under section 142(2A) of the Income Tax Act thus the law laid down by the Hon’ble Apex Court will apply prospectively. This view has been approved by the jurisdictional High Court in ITA No.184/2009 dated 9.4.2009. For sake of gravity the order of the Hon’ble Delhi High Court is reproduced herein:-

“This Appeal preferred under Section 260A of the Income Tax Act, 1961 (‘Act’ for short) by the Assessee challenges the consolidated order dated 30.6.2008 of the learned ITAT in the cross appeal filed by the Appellant and the Revenue in IT(SS)No.10/Del/2007 and I1′(SS) No.17/Del/2007. Vide this Order, the learned Appellate Tribunal has held that the Assessment completed ‘was within the period of limitation · and in light of the Judgment of the Hon ‘ble Supreme Court in the case of Sahara India (Firms)-vs-CIT, [2008] 300 ITR 399.

The contention on behalf of the Appellant is that in his own case, that is, Rajesh Kumar-vs-CIT’, [2006] 287 OTR 91, the Apex Court had ruled in his favour, that opportunity of hearing has to be granted to the Assessee before proceeding under Section 142(2A). Thus, according to the Petitioner, the impugned assessment framed under Section 158BC of IT Act by the Assessing Officer is barred by limitation within the meaning of the provisions contained in Section 158BE read with Section 142(2A) of the Act.

The learned counsel for the Respondent has supported the Order of the learned Appellate Tribunal placing reliance on the judgment of Sahara India (Firms). The Hon ‘ble Apex Court in that case upheld the Judgment in Rajesh Kumar but held that although the Orders in question were vitiated by failure to observe the principle of audi alteram partem, its ruling on question of law would apply proportionately and that it would not be open for the Appellant to raise the question of limitation before the Appellate Authority. The relevant excerpts of the Judgment of Sahara India (Firms) are as under:-

There is no denying the fact that the law on the subject was in a flux in the sense that till the judgment in Rajesh Kumar was rendered, there was divergence of opinion amongst various High Courts. Additionally, even after the said judgment, another two-judge Bench of this court had expressed reservation about its correctness. Having regard to all these peculiar circumstances and the fact that on December 14, 2006, this coul1 had declined to stay the assessment proceedings, we are of the opinion that this court should be loathe to quash the impugned orders. Accordingly, we hold that the law on the subject clarified by us, will apply prospectively and it will not be open to the appellants to urge before the appellate ‘authority that the extended period ‘of limitation f under Explanation 1 (iii) to section 153(3) of the Act was not available to the Assessing Officer because of an invalid order under section 142(2A) of the Act. However, it will be open to the appellants to question before the appellate authority, if so advised, the correctness of the material gathered on the basis of the audit report submitted under sub-section 2(A) of section 142 of the Act.

The case of the Appellant is covered by the above stated observations made by the Larger Bench in Sahara India (Firms). The decision of the learned Appellate Tribunal based on Sahara India (Finns) is held to be valid.”

In view of the above as also in view of the decision of jurisdictional High Court the contention of the learned counsel for the assessee that in view of the decision of the Hon’ble Supreme Court in the case of Rajesh Kumar & Others, 287 ITR 91″ the assessment )s required to be annulled, is de void of merits.

7. It is also contended by the leamed counsel for the assessee that since the decision of Hon ‘ble Supreme Court in the case of Rajesh Kumar (supra) has not been over ruled by Larger Bench and since there are no observations or directions that the above proposition would be applicable in the case of Rajesh Kumar also, since the assessee herein is one of the parties before the Supreme Court in the case of Rajesh Kumar & Others, 287 ITR 91, the decision of Larger Bench of Supreme Court in the case of Sahara India (Firms) (supra) should not be applied. This contention is also unacceptable to us. Under Article 141 of the Constitution of India the law as laid down by the Hon ‘ble Supreme Court is binding on all. If a Larger Bench do not agree with the earlier view of Division Bench of Supreme Court, the law to be applied will be that as propounded by Larger Bench and not the Division Bench.

When a superior court declares the law, it is not making law on the date of judgment but merely declaring the law. The decision being on enunciation of the true and correct positions of law, becomes applicable from the date when the concession law cause into effect. Therefore, when Supreme Court or the High Court declared the true position on law, it relates back to the date of enactment itself. Hence the validity of the order will necessarily have to be examined with reference to the legal position as enunciated by the Supreme Court, even though such enunciation may be subsequent to the order of the assessment. If so done, it would be seen that the order to the contrary, suffers from an error apparent from the record. The law laid down by the Larger Bench of the Supreme Court is that prior to directing Special audit under section 142(2A) of the Act, the assessee needs to be heard. Not affording an opportunity leads to serious civil consequences. Hon’ble Supreme Court in the case of Sahara India (Firm) (supra) also made explicit that “it will not be open to the appellants to urged before the appellate authority that the extended period of limitation under Explanation 1 (iii) to section 153(3) of the Act was not available to the Assessing Officer because of a invalid order under section 142(2A) of the Act.” Therefore, the law to be applied will be propounded by the Larger Bench of the Supreme Court and not the Division Bench. Even the issue before the Division Bench of the Supreme Court is not whether the assessment framed after direction of special audit without affording opportunity of being hear to the assessee is bad in law. Directing special audit without affording reasonable opportunity of being heard to the assessee is merely an irregularity and not an illegality.

We also find that the decision relied upon by the learned DR in the case of M/s. Deepak Agro Foods (supra) squarely applies. In the said case the facts were that –

“The appellant, a proprietorship concern, is a dealer under the Act. For the assessment year 1995-96, an ex-parte assessment was framed on 19th May, 1998. On appeal, the order of assessment was set aside by the Deputy Commissioner (Appeals) vide order dated 8th June, 2000 on the ground that proper opportunity of hearing had not been granted to the appellant. In pursuance of the said order, a fresh notice was issued to the appellant for appearance on 12th February, 2002. On the said date at the request of the appellant, the case was adjourned to 14th March, 2002 and then to 23rd March, 2002, when the appellant again sought time for collecting the requisite, details/ information and he was granted three months’ time for the said purpose. The case was fixed on 25th June, 2002.

According to the appellant, he appeared before the Assessing Officer on 25th June, 2002 and requested for some more time to furnish the bank statements etc. and the case was accordingly kept for 29th June, 2002. However, on 29th June, 2002, when the appellant appeared before the Assessing Officer, he is said to have been told that the assessment order had already been passed on 7th June, 2002.

Being aggrieved, the appellant challenged the said order by preferring a writ petition. In the writ petition, it was alleged that the assessment order was anti-dated and in fact the same was passed on 29th June, 2002, by which date the period of I imitation was over. Interpolation in the order sheets dated 23rd March, 2002 and 25th June, 2002 was alleged and it was also stated that the appellant was coerced to countersign the cuttings and tempering in the order sheets. However, the writ petition was dismissed by the learned Single Judge in limine, inter alia, on the ground that if the writ petitioner had any grievance that the proceedings had not been recorded correctly, he could have drawn the attention of the Presiding Officer towards such errors while the matter was still fresh to his mind. Accordingly, the learned Single Judge directed the appellant to bring the alleged anomalies to the notice of the Assessing Officer and simultaneously, if so advised he could challenge the assessment order by filing appeal before the Appellate Authority.

The correctness of the order passed by the learned Single Judge was questioned by the appellant before the Division Bench. On perusal of the original records, particularly order sheets dated 23rd March, 2002 and 25th June, 2002, the learned Judges felt convinced that some over-writings and interpolations in the order sheets had taken place. They observed thus:

“In these circumstances. the assertions made by the assessee in his petition about tempering i with the record of the proceedings dated 23.3.2002 and 25.6.2002 is apparent, which makes the assessment order as an outcome of these mechanisations, by anti dating the proceedings and pass the order by anti dating it and in the allegation of assessee cannot be reasonably ruled out. The assertion of assessee stands fully corroborated by the record of the proceedings which speaks eloquently about its tempering with. Obviously, the assessee would not be a party to it to suffer anti dated ex-pm1e order to his detriment. It can reasonably be attributed to the Assessing Officer, who had chosen this path for the reasons best known to him. More so the Assessing Officer having been impleaded as party respondent by name has not chosen to appeal and answer the assertions. It is a case in which it can very well be said that the record speaks for itself. In the aforesaid circumstances, an order alleged to have been passed on 7.6.2002 in the absence of the assessee by tempering with the record of the proceedings dated 23.3.2002 and 25.6.2002 cannot be sustained.”

The Division Bench strongly felt that it was a fit case in which arm of the Court in exercise of its extraordinary jurisdiction must reach to remedy the breach of principles of natural justice, arising from breach of code of conduct, by officer acting against all canons of fair play and transparency in discharging its duties as statutory functionary. Accordingly, as stated supra, the appeal was allowed; assessment order dated 7th June, 2002 was set aside and demands raised consequent thereto were quashed, with a direction to the Commissioner of Commercial Taxes, Rajasthan to nominate another Assessing Officer, not below the rank of a Senior Commercial Taxes Officer, for making fresh assessment.”

Before the Hon ‘ble Supreme Court the appellant contended that —

“In the light of its afore-extracted observations and a clear finding that the assessment order for the assessment year 1995-96 had been anti-dated, the order was null and void. It was urged that assessment proceedings after the expiry of the period of limitation being a nullity in law, the High Court should have annulled the assessment and there was no question of a fresh assessment. Thus, the nub of the grievance of the appellant is that in remanding the matter back to the Assessing Officer, the High Court has not only extended the statutory period prescribed for completion of assessment, it has also conferred jurisdiction upon the Assessing Officer, which he otherwise lacked on the expiry of the said period.

Hon’ble Supreme Court held-

“11 .Having given anxious consideration to the rival stands, we are satisfied that the appeal is misconceived and is liable to be dismissed.

12. Chapter IV of the .Act lays down the procedure for payment of tax, filing of returns and assessments. Section 29 prescribes the procedure and time limits for completion of assessment. Clause (b) of sub-section 8 of Section 29, relevant for our purpose, reads as follows:

“(8)(b) Notwithstanding anything contained in sub-clause (a), where an assessment order is passed in consequence of or to give effect to, any order of an appellate authority or the Tribunal or a competent court, it shall be completed within two years of the communication of such order to the assessing authority; however, the Commissioner may for reasons to be recorded in writing, extend in any particular case, such time limit by a period not exceeding six months.”

On a bare reading of the provision, it becomes abundantly clear that if an assessment order is set aside by an Appellate Authority, fresh assessment has to be completed within a 10 period of two years from the date of communication of the order in appeal to the Assessing Authority and not from the date f of order in appeal; as is pleaded by the appellant.

13. As afore-stated, in the counter-affidavit as well as in the written submissions filed on behalf of the respondents, it is stated that the order of the Appellate Authority, dated 8th June, 2000, was received by the Assessing Authority on 13th July, 2000 and, therefore, fresh assessment, pursuant to the said order, could be completed by 12th July, 2002 (ignoring further period of six months, which could be extended by the Commissioner).

That being so, even if it is assumed that the assessment order, for the assessment year 1995-96, had, in fact, been passed on 29th June, 2002, as alleged by the appellant, it was still very much within the time limit prescribed under the afore-noted provision i.e. 12th July, 2002. We are, therefore, unable to accept the stand of the appellant that the assessment having been made after the expiry of the time limit, it was null and void and should have been annulled.

14. Having come to the above conclusion, the next question which requires consideration is whether in the light of the observations of the Division Bench in the afore-extracted paragraph on the irregularities as also the conduct of the assessing officer, the assessment orders could be said to be null and void, as pleaded on behalf of the appellants?

15. All irregular or erroneous or even illegal orders cannot be held to be null and void as there is a fine distinction between the orders which are null and void and orders which are irregular, wrong or illegal. Where an authority making order lacks inherent jurisdiction, such order would be without jurisdiction, null, non est and void ab initio as defect of jurisdiction of an authority goes to the root of the matter and strikes at its very authority to pass any order and such a defect cannot be cured even by consent of the parties. (See: Kiran Singh & Ors. V s. Chaman Paswan & Ors.1 ). However, exercise of jurisdiction in a wrongful manner cannot result in a nullity it is an illegality, 1 AIR 1954 SC 340 capable of being cured in i a duly constituted legal proceedings..

16. Proceedings for assessment under a fiscal statute are not in the nature of judicial proceedings, like proceedings in a suit inasmuch as the assessing officer does not adjudicate on a lis between an assessee and the State and, therefore, the law on the issue laid down under the civil law may not stricto sensu apply to assessment proceedings. Nevertheless, in order to appreciate the distinction between a “null and void” order and an “illegal or irregular” order, it would be profitable to notice a few decisions of this Court on the point.

17. In Rafique Bibi (Dead) By LRs. Vs. Sayed Waliuddin (Dead) By LRs. & O1’s.2, explaining the distinction between “null and void decree” and “illegal decree”, this Court has said that a decree can be said to be without jurisdiction, and hence a nullity, if the Court passing the decree has usurped a jurisdiction which it did not have; a mere wrong (2004) 1 see 287 exercise of jurisdiction does not result in a nullity. The lack of jurisdiction in the court passing the decree must be patent on its face in order to enable the executing court to take cognisance of such a nullity based on want of jurisdiction. The Court further held that a distinction exists between a decree passed by a court having no jurisdiction and consequently being a nullity and not executable and a decree of the court which is merely illegal or not passed in accordance with the procedure laid down by law. A decree suffering from illegality or irregularity of procedure cannot be termed in executable.

18. 1n view of the above. in the present case, apart from the fact that on a plain reading of Section 29( 8 )(b) of the Act, it is manifestly clear that fresh assessment for the assessment year 1995-96, framed pursuant to the order passed by the appellate authority on 8th June, 2000, was well within the prescribed time. even otherwise, in the light of the afore-stated settled law, the assessments orders in question could not be held to be null and void on account of the stated irregularities committed by the assessing officer during the course of assessment proceedings. In our opinion, therefore, despite scathing observations by the Division Bench on the conduct of the assessing officer, it was a case of an irregularity in ‘assessment proceedings by the officer, who was not bereft of authority to assess the appellant. At best, it was an illegality, which defect was capable of and has been cured by the High Court by setting aside the orders and by granting consequential relief.

19. In the conspectus of the circumstances aforesaid, we do not find any infirmity in the impugned directions given by the Division Bench of the High Court warranting interference in the exercise of our jurisdiction under Article 136 of the Constitution. The appeals are devoid of any merit and are dismissed accordingly with costs throughout.

Applying the principle in the present case, we hold that even if direction of special audit under section 142(2A) without affording an opportunity of being heard was not correct, the Assessing Officer was not lacking the jurisdiction for framing assessment thereafter. The only requirement was to afford reasonable opportunity while framing assessment also. Since the Tribunal in the case of Rajesh Kumar have upheld the validity of assessment but as remanded the matter back to the Assessing Officer which decision of Tribunal has been approved by the jurisdictional High Court in the present case also the assessee cannot seek annulling of the assessment as done by the Commissioner (Appeals). Constitution Bench of the Hon ‘ble Supreme Court in the case of Guduthur Bros. Vs. ITO, 40 ITR 298 held –

“Held, that as the Appellate Assistant Commissioner pointed out only to an illegality which vitiated the proceedings after they were lawfully initiated, the notice issued under section 28(1)(a) did not cease to be operative and it was open to the Income-tax Officer to take up the matter at the point at which the illegality supervened and to correct his proceedings. The notice under section 28(1)(a) having remained still to De disposed of, the proceedings started after the order passed by the Appellate Assistant Commissioner could be described as during the course of the assessment proceedings, because the action would relate back to the time when the first notice was issued. The Income-tax Officer had jurisdiction to continue the proceedings from the stage at which the illegality had occurred. “

Applying the decisions of Hon ‘ble Supreme Court in the case of ‘Guduthur Bros. (supra) as also in the case of Deepak Agro Foods (supra) and in view of the observations of the Hon ‘ble Delhi High Court in the case of Shri Rajesh Kumar vs. CIT by order dated 9th April, 2009 (supra), we answer the question referred for the opinion of Special Bench as under:-

In view of the two decisions of the Hon ‘ble Supreme Court namely Rajesh Kumar & Others vs. DCIT, 287 ITR 91 and Sahara India (Firm), 300 ITR 403, the assessment is required to be set aside to the file of the Assessing Officer to pass a fresh assessment as held in the case of Shri Rajesh Kumar vs. DCIT by ITAT in its order dated 3rd June 2008 and do not hold the assessment as time barred as held in the case of ACIT Vs. Rakesh Kumar. We, therefore, approve the view taken by the Tribunal in the case of Shri Rajesh Kumar and do not approve the decision of Tribunal in the case of ACIT vs. Rakesh Kumar.

8. In view of the findings above, the learned CIT(A) erred in annulling the block assessment order passed by the Assessing Officer. Therefore, we hold that the assessment cannot be annulled in the present case but is required to be restored back to the file of the Assessing Officer for framing an assessment afresh after affording reasonable opportunity of being heard to the assessee.

9. In the result, the appeal of the revenue is allowed.

Pronounced in the open court on 30th October, 2009.

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Category : Income Tax (25534)
Type : Judiciary (10284)
Tags : ITAT Judgments (4628) section 142 (14)

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