GOKAL CHAND MITAL, J. - (1.) FOR the asst. year 1973 74, the assessee filed return declaring income of Rs. 2,77,264. The ITO considered the matter under S. 143(3) of the IT Act, 1961 (for short 'the Act') in great detail and computed the income at Rs. 3,96,168. Since the assessee was a registered firm, the share allocation amongst partners was also made. Finally, the following words were added in the assessment order dt. 29th March, 1976 : "Penalty notices under ss. 271(1)(c) and 273 have already been issued. Assessed. Issue documents." The assessment order was duly signed by the ITO, and below the assessment order there was added a depreciation chart and certain annexures. This was also signed by the ITO. A copy of the assessment order is Annexure 'A' in the paper book. However, at the top of the order 'draft order' is written. The ITO communicated the order dt. 7th April, 1976 passed under S. 144B(3) of the Act, to the assessee. It is in the following terms: "The draft assessment order served on 30th March, 1976 on you should be treated as final as statutory period of one week has already lapsed and no objection has been filed. Demand notice, challan and penalty notices have already been issued and served. However, copies of the same are again enclosed for necessary action." The aforesaid order shows that the ITO considered order dt. 29th March, 1976 as a draft order under S. 144B, although a reading of the order dt. 29th March, 1976 shows that it was a complete order duly signed by the ITO and that was served on the assessee on 30th March, 1976 together with the demand notice and challan, although notice for imposition of penalty was yet to be issued.
(2.) THE assessee filed appeal against both the orders dt. 29th March, 1976 and 7th April, 1976 and the CIT(A) consolidated both the appeals and came to the conclusion that order dt. 29th March, 1976 was final order and since he (ITO) had not followed the procedure laid down in S. 144B of the Act, the same was illegal, the matter was thus set aside and was remanded to the ITO for passing a fresh order after following the procedure laid down by law. In view of the above, order dt. 7th April, 1976 passed by the ITO was cancelled. The assessee's effort to challenge the remand order remained unsuccessful before the Tribunal, Amritsar, and at the instance of the assessee, it has referred the following questions for opinion: "1. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the assessment framed is not null and void ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the provisions of S. 144B of the IT Act, 1961 are not mandatory but are only advisory and that the ITO is not bound to conform to the provisions of S. 144B in case the addition to be made to the declared income of the assessee exceeds prescribed amount and further that he is not bound by the directions of the IAC, if given under S. 144B ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the jurisdiction of the ITO to frame assessment does not cease when he finds that the addition to be made to the declared income of the assessee exceeds prescribed amount ? 4. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the failure of the ITO to follow the procedure laid down in S. 144B does not violate the principles of statutory and of natural justice and is not fatal to assessment order's validity ? 5. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the appellate order of the CIT(A) setting aside the assessment for framing the same afresh was correct and did not amount to circumventing the time limit prescribed for completion of assessment ? After going through the order dt. 29th March, 1976 passed by the ITO we are of the opinion that the Tribunal and CIT(A) were right in coming to the conclusion that it was not a draft order under s. 144B of the Act, but was a final order under S. 143(3) of the Act and since the ITO had made additions of more than a lac of rupees, although he had the jurisdiction to add more than a lac of rupees, this he could do by following the procedure laid down in S. 144B of the Act and not in the manner he has done in this case. Once order dt. 29th March, 1976 was not a draft order and was a final order, the assessee was not obliged to file objections within 7 days of the receipt of the order and thus the order dt. 7th April, 1976 passed by the ITO also could not be allowed to stand. Whether provisions contained in S. 144B of the Act, are called mandatory or statutory, the result is the same, namely, that if the ITO wants to add more than a lac of rupees in the returned income, he has to follow the procedure contained in S. 144B of the Act, before doing so.
(3.) THE next question is what is the power of the CIT(A) in such a situation. Sec. 251(1)(a) of the Act authorises the CIT(A) to annul or set aside the assessment order and refer the case back to the ITO for making a fresh assessment in accordance with the directions and if necessary to make further enquiry, and thereupon the ITO shall proceed to make fresh assessment. The CIT(A) exercised his power under the aforesaid provision for setting aside the illegal order of the ITO and rightly remanded the case to the ITO for fresh determination in accordance with law.;