1976 (10) TMI 17 - HC - Income Tax

Court: Tax Determination in Assessment Orders Mandatory. Invalid Assessment if Tax Not in Order.

The court determined that Section 144 of the Income-tax Act is procedural and mandatory in nature. It is obligatory for the Income-tax Officer to ... Assessment Order, Best Judgment Assessment Issues Involved:1. Whether the provisions of sections 144 and 156 are procedural or substantive.2. Whether the provisions are directory or mandatory.3. Whether it is obligatory for the Income-tax Officer to determine the tax payable in the assessment order itself.4. Whether the assessment becomes invalid if the tax determined is shown in a notice of demand issued u/s 156 instead of the assessment order.5. Whether the service of the assessment order u/s 144 and the notice of demand u/s 156 constitutes sufficient compliance for the assessment year 1963-64.Summary:Issue 1: Procedural or Substantive Nature of Sections 144 and 156The court held that section 144 of the Income-tax Act, 1961, is procedural. This conclusion is based on the fact that section 144 is contained in Chapter XIV of the Act, which is titled 'Procedure for Assessment.'Issue 2: Directory or Mandatory Nature of Section 144The court determined that section 144 is mandatory in nature. The language of the section does not justify distinguishing between the determination of income and the determination of tax payable. Both are mandatory requirements.Issue 3: Obligation to Determine Tax Payable in the Assessment OrderThe court affirmed that it is obligatory for the Income-tax Officer to determine the tax payable by the assessee in the assessment order itself. The failure to do so invalidates the assessment order.Issue 4: Validity of Assessment if Tax is Shown in Notice of DemandThe court held that if the tax determined on the basis of total income assessed u/s 144 is not shown in the assessment order itself but is shown in a notice of demand issued u/s 156, the assessment becomes invalid. The notice of demand cannot be treated as part of the assessment order.Issue 5: Compliance with Sections 144 and 156 for Assessment Year 1963-64The court concluded that the service of the assessment order u/s 144 showing the computation of total income and the notice of demand u/s 156 showing the tax payable does not constitute sufficient compliance for the assessment year 1963-64. The assessment order must itself determine the tax payable.Conclusion:The court answered the questions as follows:1. Section 144 is procedural.2. Section 144 is mandatory in nature.3. It is obligatory for the Income-tax Officer to determine the tax payable in the assessment order itself.4. The assessment becomes invalid if the tax determined is shown in a notice of demand issued u/s 156 instead of the assessment order.5. The service of the assessment order u/s 144 and the notice of demand u/s 156 does not constitute sufficient compliance for the assessment year 1963-64.There shall be no order as to costs.