V RAJU Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) SINCE the assessee is the same in all these cases and the points involved are also the same, they are dealt with together.The assessee is a lorry body builder. For the assessment years 1968-69 to 1970-71, the assessee had made investments in his own name as well as in the name of his wife. He had also borrowed money from outsiders. The ITO completed the assessments in respect of those years without a through probe and investigation regarding the genuineness of the loans claimed by the assessee. Long after the completion that the assessment, the commissioner of Income -tax came to the conclusion that the assessment orders passed by the ITO were erroneous and prejudicial to the interests of the Revenue and, therefore, in exercise of his power of suo motu revision under s. 263 of the I.T. Act, 1961, hereinafter referred to as the Act, set aside the assessments and directed the ITO to pass fresh assessment orders after looking into all the borrowals made by the assessee.Against the said order of the Commissioner, the assessee filed appeals before the Income-tax Appellate Tribunal contending that he was served with the notice of the suo motu revisional proceedings initiated by the Commissioner only on March 1, 1975, fixing the date of hearing on February 27, 1975, that the Commissioner had passed the order on March 1, 1975, without giving an opportunity to the assessee of being heard and that, therefore, the order passed by the Commissioner was void ab initio and non set in law.

(2.) THE contention of the Revenue before the Tribunal was that though the non-compliance with the principles of natural justice can make the order passed by the Commissioner as erroneous or illegal, it cannot be said that the order of the Commissioner is ab initio void. It was further contended that in view of the procedural irregularity, the order may be set aside with a direction to the Commissioner to give fresh opportunity to the assessee before passing the order under s. 263 of the Act. THE Tribunal, after considering the rival contentions referred to above, held that, in the circumstances of the case, the Commissioner was justified in initiating suo motu proceedings under s. 263 of the Act, that the procedure contemplated by the statute of giving an opportunity to the assessee before passing an order under s. 263 of the Act had not been complied with that, therefore, as there was non-compliance with the statutory provision, the order passed by the Commissioner was only erroneous and not void, as there had been a valid assumption of jurisdiction over the subject-matter and the non-compliance was only on a matter of procedure.

(3.) HOWEVER, it is necessary to refer to all the decisions on that point and it will suffice if the following two decisions alone are considered, viz., (1) Collector of Customs v. A. H. A. Rahiman, 1957 AIR(Mad) 496 and (2) Anisminic Ltd. v. Foreign Compensation Commission.In Collector of Customs v. A. H. A. Rahiman, 1957 AIR(Mad) 496 Rajamanner C.J., speaking for the Bench, held that an order of confiscation or penalty passed under the Sea customs Act without notice and without any enquiry contravened the principles of natural justice and was, therefore, void ab initio.