Pathak J. - (1.) THE Income-tax Appellate Tribunal has referred the following question : " Whether, on the facts and circumstances of the case, the Tribunal was justified in upholding the order of the Appellate Assistant Commissioner directing the Income-tax Officer to make a fresh assessment after issuing a proper notice under Section 23(2) of the Income-tax Act, 1922, for the assessment year 1960-61 ? "
(2.) THE assessee is Sant Baba Mohan Singh. He has been assessed as an individual for the assessment year 1960-61 for which the relevant account year ended on March 31, 1960. In response to a notice under Section 22(2) of the Income-tax Act, 1922, he filed a return showing his income as nil. In the return he made a note saying that he was engaged in the service of the public for religious and charitable purposes and therefore had no personal income. THE Income-tax Officer, however, estimated the assessee's net income at Rs. 1,00,000 and made an assessment order accordingly. On appeal by the assessee, the Appellate Assistant Commissioner found that the assessment was completed under Section 23(3) without the issue of a notice under Section 23(2). He set aside the assessment and directed the Income-tax Officer to make a fresh assessment after issuing notice under Section 23(2). In second appeal before the Income-tax Appellate Tribunal, the assessee contended that the Appellate Assistant Commissioner should have annulled the assessment and it had no power to set aside the assessment and direct a fresh assessment. THE appeal was dismissed by the Tribunal. Learned counsel for the assessee contends that the case fell for disposal by the Appellate Assistant Commissioner under Section 31 (3)(a) and not under Section 31(3)(b), and the direction of the Appellate Assistant Commissioner to the Income-tax Officer to make a fresh assessment is without jurisdiction. The submission is that a notice under Section 23(2) is a jurisdictional notice, and reliance is placed on Rajmani Devi v. Commissioner of Income-tax, 1937 5 ITR 631 where it has been held that such a notice is imperative or mandatory in character. The notice being imperative or mandatory, the argument goes on, the Income-tax Officer had no jurisdiction in the absence of such notice to complete the assessment under Section 23(3). It is urged that the power conferred under Section 31(3)(b) to set aside the assessment and direct the Income-tax Officer to make a fiesh assessment is a power exercised when the assessment is a valid proceeding. It seems to us that the contention that the Appellate Assistant Commissioner should have made an order under Section 31(3)(a) must be negatived. Section 31(3)(a) speaks of the power of the Appellate Assistant Commissioner to annul an assessment. That is a power to be exercised where the assessment proceeding is a nullity in the sense that the Income-tax Officer had no jurisdiction ab initio to take the proceeding. A proceeding is a nullity when the authority taking it has no jurisdiction either because of want of pecuniary jurisdiction or of territorial jurisdiction or of jurisdiction over the subject-matter of the proceeding. A proceeding is a nullity when the authority taking it has no power to have seisin over the case. The omission of the Income-tax Officer to issue a notice under Section 23(2) does not affect the ab initio jurisdiction enjoyed by the Income-tax Officer in respect of the proceeding. The Income-tax Officer had seisin over the case, he had overall jurisdiction over the case and in that sense had power to initiate the proceeding. The omission to issue a notice under Section 23(2) merely prevents the Income-tax Officer from making an assessment order under Section 23(3), and after he rectifies the omission by issuing that notice he can proceed further to the next stage, that is, to exercise the power of completing the assessment under Section 23(3). All these are steps within the overall jurisdiction vested in the Income-tax Officer over the entire assessment proceeding. We are of definite opinion that the failure of the Income-tax Officer to issue a notice under Section 23(2) does not call for an order by the Appellate Assistant Commissioner annulling the assessment. The Appellate Assistant Commissioner was right in merely setting aside the assessment. Learned counsel for the assessee, however, contends that while setting aside the assessment the Income-tax Officer could have directed a fresh enquiry only if an enquiry had already been made before the impugned assessment order was passed and not where no enquiry had at all been made. In our opinion, the language of Section 31(3)(b) does not warrant such a narrow interpretation. It seems to us wide enough to include a case where no enquiry has been made and an assessment order has been made arbitrarily. In any event, we find from a perusal of the assessment order that the Income-tax Officer when making it took into consideration a number of documents, including two registered deeds, the reply of the assessee to certain queries, an affidavit filed by the assessee as well as the bank pass book of the account maintained by the assessee. All this material was before the Income-tax Officer and he considered it, and it cannot be said that no enquiry was made by him before he completed the assessment. Clearly, when the Appellate Assistant Commissioner set aside the assessment and directed the Income-tax Officer to frame a fresh assessment the latter was bound to issue a notice under Section 23(2), something he had omitted to do earlier and then to make an enquiry into the matter.
(3.) LEARNED counsel has relied on Commissioner of Income-tax v. Devidayal Metal Industries Pvt. Ltd., [I968]:68 I.T.R. 50 (Bom.). In that case it was held that while the Appellate Assistant Commissioner had the power to set aside an assessment and direct the Income-tax Officer to make a fresh enquiry that power should be exercised in accordance with judicial principles. In the present case, inasmuch as the notice under Section 23(2) had not been issued by the Income-tax Officer the assessment order had to be quashed by the Appellate Assistant Commissioner and thereafter a fresh assessment had to be framed. Reliance has also been placed on Periannan Chettiar v. Commissioner of Income-tax, 1960 39 ITR 159. Here again, it was merely held that the Tribunal was confined to the points in dispute raised in the appeal and could not give a finding on a question which was not in dispute and which did not form the subject-matter of the appeal.;