V.K. Singhal, J.
1. The Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, has referred the following question of law arising out of its order dated July 24, 1981, in respect of the assessment year 1976-77 under Section 256(1) of the Income-tax Act, 1961 :
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the order of the Commissioner of Income-tax (Appeals) in not cancelling the assessment in terms of Section 129 of the Income-tax Act, 1961 ?”
2. The brief facts of the case are that while finalising the assessment for the accounting period ending on March 31, 1976, i.e., assessment year 1976-77, a draft order under Section 144B of the Act was sent by the Income-tax Officer to the Inspecting Assistant Commissioner, for his
approval. The Inspecting Assistant Commissioner gave certain directions and returned the draft order to the Income-tax Officer. After the draft order was sent, there was a change of incumbent and by the successor-Income-tax Officer, who received the directions under Section 144B, assessment was framed. The change of the Income-tax Officer was not communicated to the assessee and, therefore, the assessee failed to exercise its option as to whether it wanted to get the case reopened on any one or more issues. The assessment was framed by the Income-tax Officer, on the basis of the directions given by the Inspecting Assistant Commissioner, and in appeal, the Commissioner of Income-tax (Appeals) set aside the assessment order as he was not satisfied with regard to the directions given by the Inspecting Assistant Commissioner. The Income-tax Officer was directed to frame the assessment de novo. In second appeal before the Income-tax Tribunal, it was challenged that the Commissioner of Income-tax (Appeals) should have cancelled the assessment order instead of setting it aside, but, this contention was not accepted and the Tribunal observed that the directions given by the Inspecting Assistant Commissioner were binding under Section 144B(5) and, therefore, the question of any reopening of the proceedings does not arise. Since the directions given by the Inspecting Assistant Commissioner were considered not satisfactory by the Commissioner of Income-tax (Appeals), the assessment itself was set aside. The assessment was not considered to be void ab initio. The provisions of Section 129 of the Act were also taken into consideration and an observation was made that the Income-tax Officer will proceed from the stage from which he took over and give the assessee an opportunity of exercising his option within the meaning of the proviso to Section 129. Since the entire assessment was set aside, the Tribunal refused to interfere with the order passed by the Commissioner of Income-tax (Appeals). The provisions of Section 292B and the fact that, in respect of three similar appeals for the years 1973-74, 1974-75 and 1975-76 directions were same and the ground as raised in this appeal was given up (sic).
3. The submission of learned counsel for the petitioner is that the Income-tax Officer has not followed the directions of the Commissioner of Income-tax (Appeals) wherein it was observed that the Assessing Officer will redo the assessment as per law and after observing the principles of natural justice, providing adequate opportunity to be heard ensuring that no additions or disallowances of expenses are made without any basis. Directions were also given to the Inspecting Assistant Commissioner (Assessment) to ensure that due justice is done while dealing with a public
undertaking like the appellant contributing several crores of rupees to the Department.
4. We have considered the arguments of both learned counsel. The provisions of Section 129 are as under :
” Whenever in reject of any proceeding under this Act an income-tax authority ceases to exercise jurisdiction arid is succeeded by another Who has and exercises jurisdiction, the income-tax authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor :
Provided that the assessed concerned may demand that before the proceeding is so continued the previous proceeding or any part thereof fee reopened or that before any order of assessment is passed against him, he be reheard.”
5. The above section has taken complete care of the situation When there is a change of incumbent of an office. Under the proviso, it has been provided that the assessee concerned may demand that before proceedings are so continued, the previous proceedings or any part thereof be reopened or that before any order of assessment is passed against him, he be reheard. The provisions of this proviso are also based on the principles of natural justice. The Commissioner of Income-tax (Appeals) has already given directions to the Assessing Officer to proceed from the stage at which the proceedings were left to his predecessor. Under Section 144B (since deleted with effect from April 1, 1989) a draft order is required to be sent by the Income-tax Officer to the Inspecting Assistant Commissioner, so that no injustice is done to him. The assessee has to submit his objections with regard to the variations proposed by the Income-tax Officer within seven days of the receipt of the draft order. The Inspecting Assistant Commissioner considers the draft order and the objections on record arid no prejudicial orders can be passed against the assessee without hearing him. The directions given by the Inspecting Assistant Commissioner are binding on the Income-tax Officer. Thus, if there is any change of the Income-tax Officer, during the period the draft assessment order was framed and sent to the Inspecting Assistant Commissioner and the directions which were given by the Inspecting Assistant Commissioner, the Income-tax Officer has only to frame the assessment order in accordance with the directions given by the inspecting Assistant Commissioner, which are binding on him. As a matter of fact, the succeeding Income-tax Officer, is not expected even to apply his mind after the directions under Section 144B(5) are received by him and the provisions of Section 129 are not contemplated
to apply in such a situation. It could be in relation to the matter of assessment or penalty or other matters, but, where after hearing the assessee, the draft order is framed and then the same is forwarded to the Inspecting Assistant Commissioner along with objections which the assessee may raise at that stage or may make further submissions before the Inspecting Assistant Commissioner, the Income-tax Officer has limited jurisdiction of framing assessment. If the assessee is aggrieved by such an assessment order, he can challenge the order by way of appeal to the Commissioner of Income-tax (Appeals).
6. In the present case, the Commissioner of Income-tax (Appeals) found that the assessment order suffers from several infirmities, (1) it is one where adequate opportunity has not been provided to the appellant to be heard under Section 144B before the Inspecting Assistant Commissioner; (2) it is one where several additions and disallowances of enormous amounts have been made without understanding the issues involved and without any basis whatsoever. This observation of the Commissioner of Income-tax (Appeals) makes it clear that the directions given by the Inspecting Assistant Commissioner (Assessment) have to be given afresh as the assessee was not given adequate opportunity by him. The order by way of directions, therefore, was found not to be in accordance with law. The various additions proposed in the draft order were without any basis, and, therefore, even the draft order was not in accordance with law. Thus, the draft order and the directions no longer survive and fresh assessment has to be made in accordance with law. The direction to set aside the assessment order and framing the assessment afresh cannot be considered to be contrary to any provisions of law in such a situation. The Income-tax Tribunal has also correctly come to the conclusion that the assessment order was not a nullity or void ab initio, but suffers from procedural irregularity, and in such a situation, the principles of natural justice require that steps are to be taken to remove the irregularity and to proceed from that stage. The submission of learned counsel for the petitioner, that the directions given by the Commissioner of Income-tax (Appeals) have not been followed, may give him the right to challenge the order which has been passed in pursuance of the directions given by the Commissioner of Income-tax (Appeals) in the present case and it cannot be examined in the present proceedings as that would be a separate cause of action for the assessee to challenge the order, if it is not in accordance with law or the directions given by the Commissioner of Income-tax (Appeals). The prayer for cancellation of the assessment order cannot be accepted looking
to the facts and circumstances of the present case. The Income-tax Tribunal, therefore, was right in law in upholding the order of the Commissioner of Income-tax (Appeals) and in not cancelling the assessment. The reference is, therefore, answered in favour of the Revenue and against the
assessee. No order as to costs.