1. The petitioner is a dissolved firm. It was doing business as an abkari contractor in Hosdrug. For the assessment year 1977-78, the 2nd respondent; ITO, A-ward, Cannanore, assessed the petitioner-firm to income-tax under Section 144 of the Act. This is evidenced by Ex. P-1 dated March 25, 1980. The petitioner filed a revision, Ex. P-2, from the aforesaid order. By Ex. P-3 order dated March 6, 1981, the 1st respondent allowed the revision in part and reduced the total income , by Rs. 50,000. This O.P. is filed praying to quash Exs. P-1 and P-3 orders, passed by the respondents.
2. On behalf of the petitioner-assessee, learned counsel, Mr. T. L. Viswanatha Iyer, contended that the ITO erred in passing Ex. P-1 assessment order without giving sufficient opportunity to the petitioner. It is the petitioner's case that as a result of a search of the business premises on November 11, 1976, the account books and other documents were taken away by the Department and so the petitioner was not able to file the profit and loss account and balance-sheet along with the return of income. That also disabled the petitioner from attending the hearing when the matter was posted for finalisation of the assessment. Without reckoning this fact, the 2nd respondent passed the order of assessment, Ex. P-1 to the best of his judgment under Section 144 of the Act. In revision, the Commissioner erred in law in not adjudicating upon the question regarding the validity of the best judgment assessment but gave only quantum relief. The procedure adopted by the Commissioner is also illegal. In this view of the matter, Exs. P-1 and P-3 deserve to be quashed.
3. On the other hand, counsel for the Revenue, Mr. N.R.K. Nair contended that Ex. P-1 order of assessment was passed under Section 144 of the Act and the assessee-petitioner should have filed a petition under Section 146 of the Act to cancel the assessment and it is not open to the petitioner-assessee to urge the question 'regarding the validity of the assessment in the revision filed by him from Ex. P-1 order passed under Section 144 of the Act and Exs. P-1 and P-3 orders are valid and tenable in law.
4. Since the entire controversy centres round the interpretation placed on the relevant provisions of the I.T. Act, it will be useful to extract the said provisions.
' 144. If any person-
(a) fails to make the return required by any notice given under Sub-section (2) of Section 139 and has not made a return or a revised return under Sub-section (4) or Sub-section (5) of that section, or
(b) fails to comply with all the terms of a notice issued under Sub-section (1) of Section 142 or fails to comply with a direction issued under Sub-section (2A) of that section, or
(c) having made a return, fails to comply with all the terms of a notice issued under Sub-section (2) of Section 143,
the Income-tax Officer, after taking into account all relevant material which the Income-tax Officer has gathered, shall make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment.
146(1). Where an assessee assessed under Section 144 makes an application to the Income-tax Officer, within one month from the date of service of a notice of demand issued in consequence of the assessment, for the cancellation of the assessment on the ground-
(i) that he was prevented by sufficient cause from making the returnrequired under Sub-section (2) of Section 139, or
(ii) that he did not receive the notice issued under Sub-section (1) of Section 142 or Sub-section (2) of Section 143, or
(iii) that he had not a reasonable opportunity to comply, or was prevented by sufficient cause from complying, with the terms of any notice referred to in Clause (ii),
the Income-tax Officer shall, if satisfied about the existence of such ground, cancel the assessment and proceed to make a fresh assessment in accordance with the provisions of Section 143 or Section 144.
(2) Every application made under Sub-section (1) shall be disposed of within ninety days from the date of receipt thereof by the Income-tax Officer :
Provided that in computing the period of ninety days aforesaid, any delay in disposing of the application which is attributable to the assessee shall be excluded. '
' 264. (1) In the case of any order other than an order to which section 263 applies passed by an authority subordinate to him, the Commis sioner may, either of his own, motion or on an application by the assessee for revision, call for the record of any proceeding under this Act in which any such order has been passed and may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Act, may pass suchorder thereon, not, being an order prejudicial to the assessee, as he thinks fit.
(2) The Commissioner shall not of his own motion revise any order under this section if the order has been made more than one year previously.
(3) In the case of an application for revision under this section by the, assessee, the application must be made within one year from the date on which the order in question was communicated to him or the date on which he otherwise came to know of it, whichever is earlier :
Provided that the Commissioner may, if he is satisfied that the assessee was prevented by sufficient cause from making the application within that period, admit an application made after the expiry of that period.
(4) The Commissioner shall not revise any order under this section in the following cases-
(a) where an appeal against the order lies to the Appellate Assistant Commissioner or to the Commissioner (Appeals) or to the Appellate Tribunal but has not been made and the time within which such appeal may be made has not expired, or, in the case of an appeal to the Commissioner (Appeals) or to the Appellate Tribunal, the assessee has not waived his right of appeal; or
(b) where the order is pending on appeal before the Appellate Assistant Commissioner ; or
(c) where the order has been made the subject of an appeal to the Commissioner (Appeals) or to the Appellate Tribunal.
(5) Every application by an assessee for revision under this section shall be accompanied by a fee of twenty-five rupees.
Explanation 1.--An order by the Commissioner declining to interfere shall, for the purposes of this section, be deemed not to be an order prejudicial to the assessee.
Explanation 2.--For the purposes of this section, the Appellate Assistant Commissioner shall be deemed to be an authority subordinate to the Commissioner.'
5. It is common ground that the assessee did not produce all the books of account and documents required of him by the 2nd respondent-ITO. Ex. P-1 order of assessment effected under Section 144 of the Act is, therefore, valid and legal. The only serious question that was urged by counsel for the petitioner, Mr. Viswanatha Iyer, is that the Commissioner of Income-tax, the 1st respondent, erred in not adjudicating upon the validity ofEx. P-1 order. In Ex. P-3, the Commissioner, the 1st respondent, has stated thus :
' Admittedly no application under Section 146 had been filed and accordingly it will not be open to the petitioner to question the validity of a best judgment assessment. The plea that the assessment order was received by a partner who was not aware of the provisions of Section 146 is to say the least idle. There is no suggestion that the partner who received the assessment order kept it with himself without informing the other partners about the receipt of the assessment order. That the petitioner firm is aware of the provisions oj Section 146 is borne out by the fact thai an application under Section 146 had been filed for the assessment year 1976-77 when the said assessment was completed to the best of the Income-tax Officer's judgment under Section 144. Accordingly it is too late in the day for the petitioner to question the validity of the best judgment assessment as he has not availed himself of the remedy provided by Section 146.'
6. Counsel for the Revenue contended that if an appeal is maintainable from Ex. P-1 order, in such appeal, the assessee can only question the quantum fixed in the assessment, but cannot question the validity of the assessment. There is no jurisdiction or authority to go into the validity of the assessment itself. Reliance was placed on the decisions reported in Naba Kumar Singh Dudhuria v. CIT : 12ITR327(Cal) , Chhotelal Gobardhan Das v. CIT : 23ITR272(All) , Sir Padapat Singhania v. CIT : 24ITR141(All) and Mauladin Ayub Firm v. CIT : 35ITR449(Bom) . If the validity of an assessment cannot be gone into in an appeal, a fortiori, it cannot be canvassed in a revision filed under Section 264 of the Act as well. According to counsel for the Revenue, however wide the powers of the Commissioner may be under Section 264 of the Act, he can exercise the same 'subject only to the provisions of the Act' and Section 146 being one such provision which contains the necessary provision for cancelling an assessment made under Section 144 of the Act, it is not open to the Commissioner to go into the validity of the assessment in the exercise of the powers under Section 264 of the Act. According to counsel for the assessee, Mr. Viswanatha Iyer, the best judgment assessment in this case ensued due to the non-production of account books and other documents and in such cases if an appeal is filed against the best judgment assessment, it is open to the assessee to canvass the validity of the assessment itself in view of the decision of the Madhya Pradesh High Court in Suganchand Kanhaiyalal Rathi v. CIT : 34ITR152(MP) , and that of the Andhra Pradesh High Court reported in Sundermul and Co. v. CIT : 66ITR277(AP) . Says counsel, if the position that even in an appeal the validity of an assessment can be gone into, it can be so done in the revision filed under Section 264 of theAct also. Alternatively, the petitioner's counsel contended that reading Section 264 as a whole, it can be seen that the power of the Commissioner to revise any Order is not subject to the provisions of this Act. The first part proyides for the revision of any order. But it is only the factual passing of a particular order, which is in the latter part of the section, which will be subject to the other provisions of the Act. In this view of the matter, according to the petitioner's counsel, there is no bar under Section 264 of the Act for the Commissioner to go into the question of the validity of the assessment effected under Section 144 of the Act.
7. After hearing elaborate arguments on the rival contentions raised by the parties, it appears to me that the question as to whether in an appeal filed under Section 144 of the Act, it is open to the appellate authority to go into the question of the validity of the assessment, does not directly arise in this case. In cases where the best judgment assessment ensued due to non-production of books of account; etc., there seems to be a conflict of opinion among the High Courts. Whereas according to the Bombay High Court in the decision in Mauladin Ayub Firm v. CIT : 35ITR449(Bom) , it is not open to question, according to the Madhya Pradesh High Court in the decision in Suganchand Kanhaiyalal Rathi v. CIT : 34ITR152(MP) , it can be questioned. It is foreign to the scope of the controversy raised in this proceeding and so need not be adjudicated. The further question whether the fetter imposed by Section 264 of the Act is confined to 'from passing an order' and not regarding the powers 'to revise' need not be considered in this case, as it may not be necessary. We may assume, and it is true, that the powers of the Commissioner under Section 264 of the I.T. Act are very wide. However wide it may be, since the jurisdiction to pass orders under Section 264 of the Act is a discretionary one, the Commissioner is entitled to see only whether the order complained of is according to law. It is a discretionary jurisdiction. No doubt the Commissioner should exercise the discretion in a judicial manner. In O.P. No. 2415 of 1978-D (Parekh Brothers v. CIT, decided on 17-8-83-- : 150ITR105(Ker) a Division Bench of this court, to which I was a party, has dealt with the scope and content of the power of revision vested in the Commissioner under s, 264 of the Act. He should take into account relevant and material factors and ignore irrelevant and immaterial factors. He should pose the correct question and arrive at a decision fairly and in accordance with the principles of natural justice. Reading Ex. P-3 as a whole, I have no doubt in my mind that the Commissioner in exercising the power of revision, adverted to the fact that the assessee had a statutory remedy to cancel the best judgment assessment under Section 146 of the Act, that such a remedy was not invoked in the instant case, and that the assessee itself had filed a petition (under Section 146) for the previous year 1976-77, and was aware of such provisions and in the light of the abovecircumstances, the assessee is not entitled to question the validity of the assessment, in the revision filed under Section 264 of the Act, for the first time. I do not find any error of law or error of jurisdiction in the aforesaid order, Ex. P-3, passed by the Commissioner. In exercising the discretion vested in him under Section 264 of the Act, the Commissioner has adverted to a relevant fact, namely, that the assessee, petitioner, had not resorted to the alternative remedy provided by the Act under Section 146 to cancel the best judgment assessment (Ex. P-1). The Commissioner declined jurisdiction on that basis. It cannot be said that the 1st respondent, Commissioner, acted illegally or without jurisdiction or committed any jurisdictional error in passing Ex. P-3 order and in refusing to go into the validity of the best judgment assessment which was raised before him for the first time. I am of opinion that Ex. P-3 is proper, fair and valid in law and is not open to any atack as alleged by the petitioner. There is no material to assail Ex. P-1 either. Both Exts. P-1 and P-3 orders are valid and legal.
8. The O.P. is without force. It is dismissed with costs.