- (1.) AT the instance of the assessee, the Income -tax Appellate Tribunal (Allahabad Bench), Allahabad referred to this Court the following questions relating to the asst. year 1969 -70 under S. 256(1) of the INCOME TAX ACT, 1961 (for short, the Act) for opinion : 1. "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the provisions of S. 144B appear in Chapter XIV dealing with procedure for assessment and are, therefore, procedural in nature and non -compliance thereof would be a procedural lapse ?" 2. "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in upholding the order of the AAC in restoring the case back to the ITO directing him to consider afresh from the stage where the irregularity intervened ?"
(2.) THE facts, briefly stated are that the assessee filed a return declaring income of Rs. 57,811. The assesssing authority, however, assessed the income of the assessee at Rs. 3,61,270. The dispute was then carried in appeal to the AAC by the assessee. It was contended before the appellate authority that no draft order having been served on the assessee and no reference having been made to the IAC, assessment at Rs. 3,61,270 was a nullity in view of S. 144B of the Act which enjoined upon the assessing authority to forward a draft order to the assessee, inasmuch as the variation in the income returned by the assessee and sought to be assessed by the assessing authority, exceeded more than rupees one lakh and then refer the same with the objections of the assessee, if any filed, to the IAC. The contention before the appellate authority was that the provisions as contained in S. 144B of the Act having not been complied with by the assessing authority, the assessment order was a nullity and that deserved to be annulled. The AAC having verified the facts from the assessing authority was satisfied that the provisions of S. 144B of the Act were altogether omitted by the assessing authority. However, he took the view that non - compliance of the S. 144B was merely a procedural irregularity on the part of the assessing authority and, therefore, he set aside the assessment order and sent the matter back to the assessing authority directing him to redo the assessment after complying with the provisions of s. 144B of the Act. Not satisfied with the decision of the appellate authority, the assessee went up in appeal to the Appellate Tribunal which affirmed the order of the AAC holding that the provisions of S. 144B appearing in Chapter XIV in the Act are procedural in nature, non -compliance thereof would be a procedural irregularity capable of being rectified and that S. 144B not giving rise to a jurisdictional question, the AAC was right in setting aside the assessment order and sending the matter back to the assessing authority to redo the assessment observing the special procedure, as contained in s. 144B of the Act.
(3.) THE short question for consideration in this reference is whether S. 144B is procedural in nature and whether non -compliance thereof will render an assessment order a nullity. Sec. 144B falls in Chapter XIV which bears the caption. "Procedure for Assessment". It is, therefore, manifest that ss. 139 to 158 falling in Chapter XIV relate to procedure for making assessment. Sec. 144B is, therefore, procedural in nature, non -compliance of which cannot render an assessment to be a nullity. In Sant Baba Mohan Singh vs. CIT (1973) 90 ITR 197 (All), this Court held that 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 nullity when the authority taking it has no power to have seisin over the case. The case in hand is not one where the ITO lacked territorial or pecuniary jurisdiction or that he had no power to have seisin over the case. It is not disputed that the ITO who issued notice under S. 143(2) of the Act had no power to do so. The only contention of the counsel for the assessee is that provisions of S. 144B having not been complied with by the ITO, the assessment completed by him was rendered void and, therefore, that should have been annulled by the AAC. Sec. 144B does not confer jurisdiction on the assessing authority to make assessment. The ITO, undoubtedly, had jurisdiction to make the assessment on the assessee. Sec. 144B merely sets out a special procedure to be followed in the cases where the ITO proposes to make any variation in the income or loss shown in the return by the assessee which is more than rupees one lakh. The rationale behind S. 144B(1) is that if the income returned by the assessee is sought to be assessed with a variation by more than rupees one lakh then greater precaution should be taken and that is why it is stated that if the variation entails the amount of more than rupees one lakh then a draft order should first be prepared and that should be served on the assessee to enable him to file objection and when the objections are filed then the draft order together with the objections of the assessee, should be referred to the IAC for seeking his assistance in the matter and all these precautions have been taken by the Legislature to prevent the arbitrariness, if any, on the part of the ITO. Sec. 144B was enacted with a view to ensuring that the assessment made by the assessing authority is not arbitrary, whimsical, capricious or unreasonable. It does not confer jurisdiction on the assessing authority to make the assessment and, therefore, non -compliance of it cannot render the assessment to be void, liable to be annulled. It is trite that procedural irregularity is always curable, but surely where the assessing authority lacks jurisdiction in making an assessment then the order will be a nullity. We are supported in regard to the view we have taken by a catena of authorities, namely, Des Raj Kul Bhushan vs. CIT (1989) 79 CTR (P&H) 98 : (1989) 180 ITR 297 (P&H); G.R. Steel and Alloys Pvt. Ltd. vs. CIT (1984) 42 CTR (Kar) 107 : (1985) 152 ITR 220 (Kar); H.H. Maharaja Raja Pawer Dewas vs. CIT (1982) 138 ITR 518 (MP); Banarsidas Bhanot & Sons vs. CIT (1981) 21 CTR (MP) 161 : (1981) 129 ITR 488 (MP).;