1980 (11) TMI 33 - HC - Income Tax

High Court affirms Tribunal decision on assessment year 1973-74; defective draft order not nullity

The High Court upheld the Tribunal's decision in a case involving an assessment year of 1973-74. The Court ruled that the defective draft order did not ... Assessment Issues involved: The issues involved in this case are whether the assessment was a nullity due to a defective draft order and if the Tribunal was justified in directing the Income-tax Officer to frame a fresh assessment in compliance with section 144B of the Income-tax Act, 1961.Issue 1 - Assessment Nullity: The case involved an assessment year of 1973-74 where the Income-tax Officer (ITO) assessed the total income at Rs. 6,97,136, following the procedure under section 144B of the Income-tax Act. The Appellate Assistant Commissioner (AAC) set aside the assessment order due to a defective draft order that did not quantify the total income. However, the Income-tax Appellate Tribunal held that there was substantial compliance with section 144B(1) as the draft order contained proposed additions and disallowances separately under different heads. The Tribunal concluded that the defect in the draft order did not render the assessment a nullity, and a fresh assessment could rectify the issue.Issue 2 - Fresh Assessment: The Tribunal directed the ITO to frame a fresh assessment after complying with the provisions of section 144B. The argument presented was that the ITO must complete the assessment within two years from the end of the assessment year, including issuing a draft order within this period. The High Court clarified that the issuance of a draft order under section 144B is not necessary to confer jurisdiction on the ITO for assessment. The section provides a special procedure for cases where variations in income exceed a specified amount, ensuring the assessee has an opportunity to object. In this case, the draft order provided ample opportunity for the assessee to object to proposed variations, and the defect in quantifying total income did not prejudice the assessee. The Tribunal's decision to set aside the assessment and allow for a fresh assessment was deemed appropriate, as any procedural defect could be rectified by sending the case back to the ITO.In conclusion, the High Court upheld the Tribunal's decision, ruling that the assessment was not a nullity and there was substantial compliance with section 144B. The Tribunal was justified in setting aside the previous assessment order and directing the ITO to conduct a fresh assessment.