A. Raghuvir, C.J:— This reference is made under the Income Tax Act, 1961 at the instance of the assessee—a tea company called Sonai River Tea Company Ltd. The assessee for the assessment year 1975-76 returned the income of Rs. 72,288/-. The Income Tax Officer after inquiry varied the amount and held the income was Rs. 3,05,735/-. The assessee successfully appealed. The assessment order was set aside. The ITO was ordered to reframe the order. The assessee filed a further appeal against the order of remand as the assessee sought annulment of the ITO's order. The Tribunal followed a decision in ITA.-No. 211 (Gau) of 1976-77 of M/S. Mahatta Construction Company, Tezpur and dismissed the appeal. Thereupon following four questions are referred to this Court at the instance of the assessee. The questions read as under:

“1. Whether the provisions of Section 144B of the Income Tax Act, 1961 are procedural or substantive?

2. Even if it be conceded that the provisions are procedural, whether these are directory or mandatory?

3. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the Appellate Asstt. Commissioner was right in setting aside the assessment and directing the Income-tax Officer to make a fresh assessment in accordance with law, as the assessment proceeding could not be considered to be null and void, but duly vitiated by a supervening irregularity?

4. Whether the Income-tax Appellate Tribunal was bound to follow its earlier decision which was rendered on identical facts in the case of an other assessee when the interpretation of a provision of law, viz. Section 144B of the Act, was at issue ?”

2. The assessee sought for the annulment of ITO's order under Section 251 of the Income Tax Act of 1961 and in none of the four questions there is reference to that section. The first appellate authority in the instant case found the ITO while passing the assessment order was ignorant of Sec. 144B and did not follow the procedure incorporated in that provision therefore set aside the assessment order and remitted the inquiry back to the ITO to follow the procedure set out in Sec. 144B. The assessee sought annulment of the ITO's order in precise terms. The assessee was not satisfied when the assessment order was set aside. The case of the assessee is as the ITO did not accept the income shown in the return and varied to show the income is Rs. 3,05,735/- therefore, the I???O had no jurisdiction to continue the proceedings. Further it is contended such orders which are passed in violation of Sec. 144B are non est in law. Therefore such orders warrant to be annulled or quashed. To support the contention clause (1) of Sec. 251 is relied on by the assessee. In answering the questions perforce it is required to consider whether Sec. 144B prescribed a mere procedure and further what are the consequences of not following the procedure laid in that Section. What is the character of such orders. Are they void or irregular orders. The words like irregular order, void order as on today are not terms of art. Since some of these aspects are not covered by the questions referred therefore we reframed the four questions in one which reads as follows:

“Whether on facts of the case the assessment order passed by the ITO in ignorance of Section 144B of the Income Tax Act, 1961 warrant the annulment of the ITO's order under Sec. 251 of the Act or on the facts of the case is it sufficient in law to set aside the ITO's order as has been done in the instant case.

3. The Parliament in the Taxation Laws (Amendment) Act, 1975 desired to strengthen the administration and to achieve that object incorporated the scheme in Sec. 144B. The Scheme in Sec. 144B when proved to be counter productive was repealed with effect from April 1, 1989 under the Direct Tax Laws (Amendment) Act, 1987. In the relevant period of 1975-76 all assessments involving one lakh of amount were required to follow the procedure in Sec. 144B.

4. The scheme in Sec. 144B shows whenever Income Tax Officer finds income returned is to be varied and the variation involves one lakh of rupees the assessee is to be informed thereafter. Sec. 144B procedure will be followed. If the assessee protests and files objection, draft assessment order is prepared by the ITO and along with the objections of the assessee the record is sent to the Inspecting Assistant Commissioner for “directions”. On receipt of the directions the ITO finalises the assessment order. This in nut shell is the scheme incorporated in Sec. 144B.

5. All orders under Sec. 144B are appealable under Clause (d) of Sec. 246. The C.I.T (Appeals) will dispose of appeal under Sec. 251 of the Act. A second appeal as in Sec. 254 to the Tribunal is further provided. A special rule of limitation is prescribed in clause 2-A of Sec. 153. For facility of reference the above referred provisions are extracted hereunder)

“246. (1) Subject to the provisions of sub-section (2) any assessee aggrieved by any of the following orders of an (Assessing Officer) may appeal to the Deputy Commissioner (Appeals) against such order—

251. Powers of the Deputy Commissioner (Appeals), or, as the case may be, the Commissioner (Appeals);

(1) In disposing of an appeal, the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) shall have the following powers—

(a) in an appeal against an order of assessment he may confirm, reduce, enhance or annul the assessment; or he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment in accordance with the directions given by the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) and after making such further enquiry as may be necessary, and the Assessing Officer shall there upon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such fresh assessment;

(b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty;

(c) in any other case, he may pass such orders in the appeal as he thinks fit.

(2)* ** ** *

254. Orders of Appellate Tribunal.

(1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such order thereon, as it thinks fit.

(2) * ** ** *

153. * ** ** *

2(A) Notwithstanding anything contained in sub-sections (1) and (2), in relation to the assessment year commencing on the 1st day of April, 1971, and any subsequent assessment year, an order of fresh assessment under section 146 or in pursuance of an order, under section 250, section 254, Section 263 or section 264, setting aside or cancelling an assessment, may be made at any time before the expiry of two years from the end of the financial year in which the order under section 146 cancelling the assessment is passed by the Assessing Officer or the order under section 250 or Section 254 is received by the Chief Commissioner or Commissioner or, as the case may be, the order under Section 263 or section 264 is passed by the Chief Commissioner or Commissioner.”

6. In this case the appellate authority set aside the assessment order as the I.T.O did not accept the income was Rs. 72,288/-. He held the income was Rs. 3,05,735/-. In such a case the procedure in Sec. 144B should have been followed. The Issue raised is when procedure in Sec. 144B is not followed whether the order of the I.T.O is to be set aside or such an order be annulled. The appellate authority in its power can annul an order and can set aside the order appealed. The two are specified as powers of the appellate authority in Sec. 251. There are no guidelines to the appellate authority when an order is to be set aside and when an order is to be annulled. In the absence of guidelines what course is to be adopted became arduous and difficult for decision. In search of an answer we traversed powers of appeal courts in criminal law in that discipline when orders passed without the compliance of statutory provisions such orders are termed irregular orders and the effect of such orders is treated from the standpoint of curability of the orders. In Constitutional law orders passed per incuriam are quashed or annulled. There is no settled practice as on today in that discipline what orders are to be annulled or quashed and what orders to be set aside. There is also no settled practice as to when an order is annulled whether further inquiry can be held or not. In Civil law appellate authorities do confirm or modify orders under appeal. The expressions like quash and annul have a constitutional flavour and generally the flavour is not shared by civil and criminal courts though in recent days to quash proceedings is a rage in criminal proceedings. Fiscal appeals share their meal with civil authorities and ordinarity assessment orders are not quashed.

7. The answer in the instant case turns on Sec. 251. Clause (1) of that Section deals with appeals against (a) assessment orders, (b) appeals against orders of penalties, (c) appeals other than of (a) and (b) like appeals against order where a firm was refused registration etc. In the case of appeal under Clause (a) the appellate authority may confirm, reduce, the liability of the assessee. We may say assessment orders may be annulled or set aside. While in appeals pertaining to penalties the orders can only be cancelled or confirmed, the appellate authority in (c) can pass orders as ‘it thinks fit’.

8. As we see in some appeals the orders can only be cancelled. Certain appeals orders can be annulled and in certain appeals orders can be set aside. While second appellate authority can pass orders as it thinks fit, it is seen the whole subject matter is arranged with meticulous care by the parliament but no guidelines are there in the Act of 1961 when to annul or quash an order. The subject matter is left incohate for court??? to grapple with the issues. The Courts as on today have not drawn lines to divide the subject except in one case of United Kingdom and the other in Australia. The issue we see is entrenched in many legal difficulties.

9. In this case the learned counsel for the Revenue argued the appellate authority on the facts of the case rightly set aside the assessment order for not following Sec. 144B. The Counsel also argued there is no vice in the remand order. The learned counsel for the assessee argued the appeal should Jhave been annulled and the consequential order of remand is not legal.

10. Before the issue is considered one or two collateral aspects that have emerged may be noted from the decided cases. The Madhya Pradesh High Court in 129 ITR 488, Banarsidas Bhanot & Sons v. CIT (M.P) found Sec. 144B was deviated. In answering a similar question as in the instant case the Tribunal's power in second appeal under Section 254 was pressed into service in that it was held the Tribunal can pass orders as it thinks fit. The words as it thinks fit were interpreted in 1984 Supp SCC 128 : AIR 1984 SC 1164 (Babulal Nagar v. Shree Synthetics Ltd.) to mean to pass orders as per the statute whicn mean again as per Sec. 251 of the Act. This is to run on a circle without a destination or an end. With great respect such a reasoning does not answer the issue.

11. In a case from Andhra Pradesh High Court in 171 ITR 214, H.S Imam v. C.I.T the assessment order was found passed without following the procedure in Sec. 144B. That court observed: “Ends of justice would be met adequately by setting aside the assessment and giving a fresh opportunity to the assessee to make appropriate representations in a de novo assessment enquiry before the officer. It may be true that in so doing, the period of limitation is enlarged. But this is a hazard associated with the direction to make a fresh assessment and it cannot be] avoided….” Questions in limitation cannot be equated with hazards in litigation nor ends of justice warrant avoidance of statutory provisions and for that reason we cannot follow the ratio laid down in that case.

12. There is the case of Madhya Pradesh High Court in 138 ITR 518, H.H Maharaja Raja Pawer Dewas v. CIT (M.P) where in face of deviation of Sec, 144B it was concluded no prejudice was caused. We cannot hold the test of prejudice-either is relevant or determinative of the issue raised in the instant case.

13. Two cases of Karnataka High Court where there is discussion about invalidating an assessment order while considering the question incidently in 152 ITR 220, G.R Steel & Alloys P. Ltd. v. C.I.T (Kar) and in the case 162 ITR 543, Ashok Kumar v. C.I.T (Kar). In both the cases the assessment orders were not invalidated. In more than one sense the instant issue was not considered in all its aspects as the issue arose incidentally in the two cases. Now there are numerous cases where High Courts have held deviation of Sec. 144B leads-only to the procedural irregularity. But no case has been cited to hold the deviation of the procedure in Sec. 144B warrants-annulment of the order.

14. There are cases where the issue was whether assess ment order is to be annulled when legal representative were not given notice under Section 143 of the Act. These cases are cited to show how courts have viewed when statutory provisions are deviated. We take the case of this court in 111 ITR 507, Jai Prakash Singh v. CIT where notices under Sec. 143(2) of the Income Tax Act were not served on nine out of ten legal representatives of the assessee. Among the three widows, three sons, four daughters, one son was served with notice. The question arose whether non-service of notices to nine of the legal representatives was an irregularity to warrant cancellation of the assessment order or whether it was sufficient: to set aside the order so that further proceedings be continued. This court held “principles of natural justice take away the jurisdiction of the authority to proceed with the proceedings”. Thus further proceedings were stopped. There are cases of other High Courts wherein this point was followed. There are also cases where this view point was not followed. In 165 ITR 501, C.I.T v. Gyan Prakash Gupta, the Rajasthan High Court did not follow this case. It was held non-service of notices to all legal representatives does not make the assessment order void ab initio. The assessment order was not annulled. In a Gujarat case the relevant legal representative was not served notice— 80 ITR 360, Chooharmal Wadhuram v. CIT (under section 24B(2), 34(1)(a) of 1922 Act). In that case under Code of Civil Procedure were considered. It was held when after enquiry certain legal representatives were discovered who were earlier not served notices it was field earlier orders are not nullified and it was observed: “If this principle was rejected in its application to assessment proceedings, it would in many cases frustrate the proceedings for assessment of income of a deceased person and result in escapement of such income from taxation without any fault on the part of the revenue authorities”. We have earlier referred to two Karnataka cases where more or less on the same reasoning assessment orders were not invalidated. In 152 ITR 220, G.R Steel & Alloys P. Ltd. v. CIT and 162 ITR 53 Ashok Kumar v. CIT.

15. We may point out that under Code of Civil Procedure the effect of not bringing all the legal representatives on record was considered in AIR 1962 SC 753, R.M Paranjype v. A.M Mali, AIR 1965 SC 1049, Daya Ram v. Shyam Sundari, and 1984 Supp SCC 128 : AIR 1984 SC 1164, Babulal Nagar v. Shree Synthetics Ltd. These three authorities show when all the legal representatives are not brought on record and decrees are passed such decrees in law are not nullities. The expressions curable irregularity and non-curable irregularity are elucidated in criminal law. There is an illuminating discussion in the case of AIR 1956 SC 116, Willie (William) Slaney v. The State Of Madhya Pradesh what consequences follow in criminal proceedings when statutory provisions are not followed.

16. In cases arising under Article 226 there is no settled opinion to date. The concepts are incohate on the question when it is to annul an order and when it is to set aside an order. Since expressions “quashing”, “annulment” are as yet not treated as terms of art. We may cite an example of a case where the affected party was not beard in 226. Such a person when he approaches the court which passed the order, the order is not quashed. The order is set aside. What is of importance is the subject matter is re-heard after the order is set aside. In United Kingdom in Ridge v. Baldwin, (1964) AC 40 it is noticed that when an order is void, absolutely void or voidable did not get a settled meaning. It was held in that case—“Every case must depend upon the willingness of the court to grant a remedy rather than upon any logic to be extracted from ‘absolutely void’ and ‘voidable’. “Three years later commenting on a case (1967) 2 AC 337, Daruyappah v. Fernando (which to-day it is held to have been wrongly decided)’ the Privy Council in that case considered void and voidable aspects of orders. Professor Wade, who is the author of the leading book on Administrative Law, in two articles one in 80 Law Quarterly Review at page 328 in the context of that decision wrote “quashing means something more than a declaration in setting aside the decision the Court is, in effect, exercising an indirect appellate jurisdiction on a point of law apparent on the record, and in going beyond the sphere of jurisdictional control.” In another article in 90 Law Quarterly Review 154 the same author stated the key to the questions when void or voidable is not in “absolutism but relativity.” He propounded the same view point in his Sixth Edition of Administrative Law at page 353. Impelled by these ramifications we state the subject matter as on today is incohate.

17. Before parting with the subject we may refer to a case cited by the Revenue in this regard, AIR 1947 PC 78 Releigh Investment Co. v. G.G in Council. The Revenue laid great stress on the following passage in that case: “An assessment made under the machinery provided by the Act, if based on a provision subsequently held to be ultra vires, is not a nullity like an order of a court lacking jurisdiction. Reliance on such a provision is not as excess of jurisdiction but a mistake of law made in the course of its exercise.” (Para 14). Indian Supreme Court did not follow this case on the issue of ouster of jurisdiction of Civil Courts. What is laid down in the above passage is more relevant when orders are declared ultra vires. The last line in the passage suggests jurisdiction is different from the concepts of ultra vires. Even as to that aspect more will be stated in an appropriate case when an order is declared ultra vires. As it is we are entrenched in jurisdiction in the instant case and searching for a solution in the fields not relevant to ultra vires concepts. The instant subject was considered in an Australian case Hinton Demolitions Pvt. Ltd. v. Llwer (No. 2), (1971) 1 S.A.S.R 512. The Australian High Court wrestled with the Problems created by the Privy Council decision in Durayapp???h v. Fernande, (1967) 2 AC 337 and helplessly raised hand and said “the whole thing is in a state of flux and confirm.”

18. Now in a large number of cases a case decided under section 31(3) of the Repealed Act of 1922 was considered. The case is 90 ITR 197 (Sant Baba Mohan Singh v. CIT). In that case the Allahabad High Court held: Section 31(3) speaks of of the powers of the Appellate Assistant Commissioner that is a power to be exercised where the assessment proceeding is a nullity in the sense the Income-tax Officer has no jurisdiction ab initio to take the proceeding. The learned judge explained the proceeding is a nullity when the authority taking it has no jurisdiction either because of want of pecuniary jurisdiction or of territorial jurisdiction or of jurisdiction over the subject matter of the proceeding. Questions arising from territory and pecuniary value do not necessarily lead to annulment. See the case in AIR 1954 SC 340 (Kiran Singh v. Chaman Paswan) in that case there is discussion on the subject. What is decided thus in 90 ITR 197 does not furnish any solution. Finally we return to facts. The assessee in the instant ease showed the income of Rs. 72,288/- in the return. The I.T.O did not accept the return. He varied the income in the sum of Rs. 3,05,735/-. Because of the variation the I.T.O should have followed the procedure in Sec. 144B. He did not give draft order to the assessee nor did he invite objections from the assessee. Instead he arrogated himself the powers to pass assessment order when in law he was not vested with power to do so. In doing so the ITO transgressed the Board's notification, transgressed the statutory provision in Sec. 144B. We are unable to hold the omissions and transgressions of the ITO are mere irregularities. We hold such an assessment order is to be annulled.

19. In that view we answer the question reframed in the negative in favour of the assessee and against the Revenue. No costs. Oral leave to Supreme Court refused.