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Kimtee Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 97 of 1981
Judge
Reported in(1984)40CTR(MP)105; [1985]151ITR73(MP)
ActsIncome Tax Act, 1961 - Sections 144B
AppellantKimtee
RespondentCommissioner of Income-tax
Appellant AdvocateNone
Respondent AdvocateR.C. Mukati, Adv.
Cases ReferredBanarsidas Bhanot & Sons v. Commissioner of Income
Excerpt:
.....and in the circumstances of the case, the tribunal was right in holding that failure to follow the procedure laid down in section 144b of the act did not invalidate the assessment order datedmarch 26, 1977, passed by the income-tax officer for the assessment year 1974-75 and it was only an irregularity and, as such, the appellate assistant commissioner was justified in only setting aside and not annulling the assessment. the scheme of section 144 of the act clearly envisages that the jurisdiction to pass an order even when there is a variance of rupees one lakh and more between the income returned and the income assessed, is with the income-tax officer, though section 144b provides for a machinery for the service of a draft order on the assessee and a consultation with a superior officer......and in the circumstances of the case, the tribunal was right in holding that failure to follow the procedure laid down in section 144b of the act did not invalidate the assessment order datedmarch 26, 1977, passed by the income-tax officer for the assessment year 1974-75 and it was only an irregularity and, as such, the appellate assistant commissioner was justified in only setting aside and not annulling the assessment.'2. the material facts giving rise to this reference briefly are as follows : for the assessment year 1974-75, the assessee filed a return declaring loss of rs. 25,667. the ito, however, completed the assessment by assessing the total income of the assessee at rs. 84,000 but before doing so he did not send a draft order to the assessee as required by section 144b of the.....
Judgment:

Sohani, J.

1. By this reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), the Income-tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion:

' Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that failure to follow the procedure laid down in Section 144B of the Act did not invalidate the assessment order datedMarch 26, 1977, passed by the Income-tax Officer for the assessment year 1974-75 and it was only an irregularity and, as such, the Appellate Assistant Commissioner was justified in only setting aside and not annulling the assessment.'

2. The material facts giving rise to this reference briefly are as follows : For the assessment year 1974-75, the assessee filed a return declaring loss of Rs. 25,667. The ITO, however, completed the assessment by assessing the total income of the assessee at Rs. 84,000 but before doing so he did not send a draft order to the assessee as required by Section 144B of the Act. The assessee went up in appeal and by his order dated October 30, 1978, the AAC allowed the appeal and setting aside the order passed by the ITO directed the ITO to follow the procedure prescribed by Section 144B of the Act. On further appeal by the assessee, who contended that the assessment should have been annulled by the AAC as being void-abinitio, the Tribunal dismissed the appeal. Aggrieved by the order passed by the Tribunal, the assessee sought a reference and it is at the instance of the assessee that the aforesaid question of law has been referred to this court for its opinion.

3. None appeared on behalf of the assessee. The short question for consideration is whether the assessment order is totally invalid or non est on account of non-compliance with the procedure laid down by Section 144B of the Act. A similar question came up for consideration before another Division Bench of this court in H.H. Maharaja Raja Pawer v. CIT : [1982]138ITR518(MP) . In that case, the court observed as follows (p. 523):

' Besides, the argument, that the assessment order was totally invalid or non est on account of non-compliance with the procedure laid down under Section 144B of the Act, is not correct. There was no jurisdictional error even though the procedure under Section 144B of the Act was not complied with. The scheme of Section 144 of the Act clearly envisages that the jurisdiction to pass an order even when there is a variance of rupees one lakh and more between the income returned and the income assessed, is with the Income-tax Officer, though Section 144B provides for a machinery for the service of a draft order on the assessee and a consultation with a superior officer. This is only a procedural matter not involving jurisdiction and, therefore, if there is a non-compliance or an irregular compliance with this provision, it is only a procedural irregularity which can be cured by directing the Income-tax Officer to frame an assessment after following the correct procedure. The Madhya Pradesh High Court in Banarsidas Bhanot & Sons v. Commissioner of Income-tax : [1981]129ITR488(MP) has considered this question and held that non-compliance with the provisions of Section 144B of the Act is only a procedural irregularity and no question of jurisdiction is involved in such cases.'

4. We respectfully agree with the aforesaid observations. The Tribunal was right in holding that if there was non-compliance with the provisions of Section 144B of the Act, it was a procedural irregularity which could be cured by directing the ITO to follow the procedure laid down in that provision.

5. Our answer to the question referred to this court by the Tribunal is, therefore, in the affirmative and against the assessee. In the circumstances of the case, parties shall bear their own costs of this reference.


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