ORDER
R.L. Segel, Judicial Member
1. The assessee in appeal is Mrs. Jasobahen Desai of New Delhi, the legal heir of the deceased assessee, Mr. I.D. Desai of New Delhi, an individual. The year of the assessment involved is 1974-75, for which the previous year ended 31-3-1974.
2. For the year, the deceased assessee filed the original return on 25-7-1974 declaring a loss of Rs. 5,834. Subsequently, a revised return was filed withdrawing the capital gains of Rs. 35,405 shown in the original return and so the loss returned was shown at Rs. 41,239. The ITO -vide the assessment order dated 30-10-1976, however, determined the total income at Rs. 62,901, without complying with the provisions of Section 144B of the Income-tax Act, 1961 ('the Act').
3. On appeal by the assessee, the AAC, instead of annulling the assessment as sought for by the assessee has set aside the assessment with a direction to the ITO to make the assessment afresh in accordance with law.
4. In the appeal before the Tribunal, the learned counsel for the legal heir of the deceased assessee, Mr. SB. Gupta, highlighted the revised loss returned by the deceased assessee of Rs. 41,239 and the total income determined of Rs. 62,901. Since, the difference between the loss returned and the total income assessed was more than Rs. 1 lakh, the provisions of Section 144B, aceording to Mr. Gupta, were attracted. Since, the ITO did not comply with the provisions of Section 144B, which was mandatory, the AAC ought to have annulled and not set aside the assessment order made by the ITO. Mr. Gupta also highlighted the fact that prior to the incorporation of Section 144B, the IAC could not have intervened in the assessment to be made in the case of the deceased assessee. After Section 144B was incorporated, it has been provided therein that if the ITO in the assessment of an assessee like the one before us proposes to make any variation in the income or loss returned which is prejudicial to the assessee and the amount of such variation exceeds the sum of Rs. 1 lakh which is the amount fixed by the CBDT under Section 144B(6), the ITO shall, in the first instance, forward a draft of the proposed order of assessment to the assessee. On the receipt of the said draft order, the assessee may forward his objections, if any, to such variation to the ITO within the period prescribed which in turn have to be forwarded along with the draft assessment order to the IAC, who has been empowered to give directions, if any, in respect of the objections, if any., filed by the assessee to the draft assessment order. Since the IAC, according to Mr. Gupta, has the jurisdiction to make the directions, the ITO when he proceeded to make the assessment against the deceased assessee without complying with the provisions of Section 144B, he lacked the jurisdiction to make the assessment and the assessment so made was void ab iniiio. In support of his arguments, Mr. Gupta relied on the ratio of the following decisions: Banwarilal Agarwalla v. State of Bihar [1962] 1 SCR 33, Jagdish Chandra Gupat v. Union of India AIR 1965 Punj. 129 at pages 161-163, Ratilal Bhogilal Shah v. State of Gujarat AIR 1966 Guj. 244 at pages 246-247, Jai Prakash Singh v. CIT [1978] 111 ITR 507(Gaubati) and CIT v. Sumantbhai C. Munshaw (Deed.) [1981] 128 ITR 142 (Guj.).
5. These arguments were controverted by the departmental representative, who has relied on the orders of the tax authorities. According to the departmental representative, Mr. Kapila, the view taken by the AAC finds support from the ratio of the following decisions: Guduthur Bros. v. ITO [1960] 40 ITR 298 (SC), S.S. Gadgil v. Lal & Co. [1964] 53 ITR 231 (SC), Director of Inspection of Income-tax (Investigation) v. Poor an Mall & Sons [1974] 96 ITR 390 (SC), Kapurchand Shrimal v. CIT [1981] 131 ITR 451 (SC) and Ram Gopal Neotia v. ITO [1982] 1 ITD 160 (Cal.) (SB).
6. We have given consideration to the above arguments. There can be no dispute that the ITO assessing the deceased assessee had pursuant to the returns filed by him, the jurisdiction when those returns were filed and the same were processed by him. Even though under Section 144B a procedure has been laid down for forwarding the draft assessment order together with the objections, if any, against that draft order, in cases where the ITO in the assessment of the assessee, like the one before us, proposes to make any variation in income or loss returned which is prejudicial to the assessee and the amount of such variation exceeds the sum of Rs. 1,00,000, for directions of the IAC, yet the ITO continues to have the jurisdiction to make the assessment because he and he alone after the directions are received from IAC, makes the assessment keeping in mind those directions of the IAC. It is not correct, as has been urged by Mr. Gupta, the learned counsel for the legal heir of the deceased assessee, that the ITO though he validly had initially the jurisdiction will cease to have that jurisdiction in a case which fell within the four corners of Section 144B in the manner described above. The Special Bench of the Tribunal at Bombay in the case of Rex Cinema Co-owners v. Sixth ITO [1983] 3 ITD 633 has held that the provisions of Section 144B touch the procedural law.
7. There is no quarrel with the proposition of law urged by the legal heir of the deceased assessee as to the true meaning which the words ‘nullity’, ‘illegality’ and ‘irregularity’ bear in the eye of law. A nullity results from an error which is incurable and, therefore, fatal to the proceeding and an illegality occurs when there is a breach of some provision of law and an irregularity, which is usually amendable, occurs when some error of procedure is committed in the course of a proceeding. When there is a contravention of some provision of law, the question often arises is as to whether the act done in the breach of such provision is perforce a nullity, If the provision is only directory, an act done in contravention thereof is manifestly not a nullity. However, if the provision is couched in a mandatory form, prima facie, it would be a nullity. Every act done in breach of a mandatory provision, however, is not necessarily a nullity. It is also well established that no hard and fast line can be drawn between a nullity and an irregularity ; but this much is clear that an irregularity is a deviation from a rule of law which does not take away the foundation or authority for the proceeding, or apply to its whole operation, whereas a nullity is a proceeding that is taken without any foundation for it or is so essentially defective as to be of no avail or effect whatever, or is void and incapable of being validated. [See in this connection, the decision of the Full Bench of the Calcutta High Court in Ashutosh Sikdar v. Behari Lal Kirtania [1907] ILR 35 Cal. 61 which has been approved by the Supreme Court in the case of Dhirendra Nath Gorai v. Sudhir Chandra Ghosh AIR 1964 (SC) 1300.] In the said Supreme Court decision, their Lordships at page 305 have observed that “where the court acts without inherent jurisdiction, a party affected cannot by waiver confer jurisdiction on it, which it has not. Where such jurisdiction is not wanting, a directory provision can obviously be waived. But the mandatory provision can only be waived if it is not conceived in the public interest, but in the interest of the party that waives it”.
8. At this stage, we will also like to refer to the decision of the Supreme Court in the case of Kapurchand Shrimal (supra). Therein, their Lordships of the Supreme Court have held that under Section 25A of the 1922 Act, the ITO is bound to hold an inquiry into the claim of partition in a HUF if it is made by or on behalf of any member of the HUF which is being assessed hitherto as such and record a finding thereon. If no such finding is recorded, Sub-section (3) of Section 25A becomes clearly attracted. When a claim of partition in the HUF is made in time and the assessment is made on the HUF without holding an enquiry as contemplated by Section 25A(1), the assessment is liable to be set aside in appeal, as it is in clear violation of the procedure prescribed for that purpose. When the Tribunal holds that such an assessment is liable to be set aside, the duty of the Tribunal does not end with making a declaration that the assessment is illegal. The proper order to be passed in such a case would be to set aside the assessment and to direct the ITO to make a fresh assessment in accordance with the procedure prescribed by law. It would not be correct merely to uphold the assessment and direct the ITO to make appropriate modifications. According to the Supreme Court, it is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh, unless forbidden from doing so by statute.
9. Applying the above principles of law to the facts of the present case, we are of the considered view that the order passed by the AAC is in order. The ITO had the jurisdiction when the return was filed and he acted on it. He, under the law including the provisions of Section 144B, continues to have jurisdiction to make the assessment. Section 144B contains procedural law as held by the Special Bench of the Tribunal in the case of Rex Cinema (supra). The procedure contemplated by Section 144B has not been followed. The ITO completed the assessment of the deceased assessee without complying with the procedure laid down in Section 144B. The AAC in the appeal filed by the deceased assessee noticed the violation of procedure prescribed by Section 144B. In these circumstances, the AAC was competent to set aside and not annul the assessment, in view of the ratio of the decision of the Supreme Court in the case of Kapurchand Shrimal (supra). Rather, the AAC was under the statutory obligation to pass such an order. This view of ours also finds support from the ratio of the decision of the Supreme Court in Guduthur Brothers (supra) as also the ratio of the Special Bench of the Tribunal in the case of Ram Gopal Neotia (supra). We hold likewise.
10. The cases relied upon by the learned counsel for the legal heir of the deceased assessee do not run counter to our above conclusion. They are also distinguishable on facts.
11. In the result, the appeal by the legal heir of the deceased assessee fails and is hereby dismissed.