Income Tax Appellate Tribunal - Allahabad
Income-Tax Officer vs Sri Ganga Prasad Jaiswal on 22 August, 1991
Equivalent citations: [1991]39ITD444(ALL)
ORDER
L.N. Aggarwal, Judicial Member
1. It is an appeal filed by the Revenue against an order of the learned CIT(A) dated 10-1 -1991 for the assessment year 1968-69. The following grounds have been taken up:-
1. The learned CIT(A) erred in law in annulling the assessment merely because of the fact that the notice was not issued in the names of the legal heirs of the assessee when as per provisions of Section 292B it was a technical mistake. He also did not give due consideration to the fact that this notice was duly complied with and the return was filed by the legal heir.
2. The learned CIT(A), while deciding the appeal, has relied upon the ratio of decisions of different Hon'ble Courts which had no occasion to consider the provisions of Section 292B because it was on the status when the relevant cases were decided. Therefore, placing reliance on such decisions was also not correct in law.
3. That the order of the CIT(A) being erroneous in law and on facts may be set aside and the order of the ITO may be restored.
2. Although the grounds have been split up into three, but the basic issue involved is as to whether the notice issued in the name of the deceased assessee was valid or not and this irregularity can be cured under Section 292B or not. The brief facts are that Shri Ganga Prasad Jaiswal was assessed for the assessment year 1968-69. Subsequently certain informations came to the notice of the Department which indicated that certain income of Shri Ganga Prasad Jaiswal had escaped assessment. Consequently, proceedings under Section 147/148 of the Income-tax Act, 1961 were initiated. A notice dated 28-3-1985 was issued under Section 148 and served on 29-3-1985 on Shri Kesho Ram Munib of the firm. Shri Kesho Ram has written on the notice itself that Shri Ganga Ram Jaiswal had died on 20-3-1985 and his legal representative is Smt. Tara Devi. It is also alleged that the Inspector, who had personally gone to serve the notice, was duly informed that Shri Ganga Prasad had expired 8 days back. Despite this information, no fresh notice was issued to the legal heirs and the proceedings continued on the earlier notice issued. The assessment was completed. In appeal, preferred by the legal heirs of the assessee before the learned CIT(A), the plea was raised that the entire proceedings were a nullity as no proper notice had been issued under Section 148 of the Income-tax Act, 1961. The learned CIT(A), after hearing the parties, at length, accepted the contention of the assessee and allowed the appeal holding that the entire assessment stood vitiated by not issuing a proper notice under Section 148. The Revenue being aggrieved has come up in appeal before the Tribunal.
3. The learned Departmental Representative has very vehemently argued out that the issue of the notice is covered by the provisions of Section 292B. Section 292B reads as under:
292B. Return of income, etc. not to be invalid on certain grounds. No return of income, assessment, notice, summons or other proceeding furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.
4. It has been pointed out that this section has been inserted by the Taxation Laws (Amendment) Act, 1975 with effect from 1-10-1975. He has pointed out that any defect in notice or mistake which, in substance, and effect, is in conformity and is according to the intent and purpose of the Act, will not be treated as invalid and the said mistake or defect will be treated to have been cured under Section 292B. He has thus made out a case that the notice issued to the deceased, although received by the Munib and complied by the legal heirs, in substance amounts to proper service and the order of the learned CIT (A) holding the whole proceeding of assessment as null and void not being in conformity with the provisions of law should be set aside and that of the ITO be restored.
5. On the other hand, the learned counsel for the respondent has stressed that issue of a valid notice under Section 148 within the period specified under Section 149 is a condition precedent for the validity of any reassessment to be made against an assessee under Section 147. For that he has relied upon the decision of the Hon'ble Allahabad High Court in the case of Madan Lal Agarwal v. CIT [1983] 144 ITR 745 and another case of Hon'ble Allahabad High Court in the case of CIT v. Smt. Phoolrmti Devi [1983] 144 ITR 954. He had also cited various other decisions which are in CIT v. Kurban Hussain Ibrahimji Miihiborwala [1971] 82 ITR 821 (SC), CIT v. Thayaballi Mulla Jeevaji Kapasi [1967] 66 ITR 147 (SC), Y. Narayana Chetty v. ITO [1959] 35 ITR 388 (SC), CIT v. Ishwar Singh & Sons [1981] 131 ITR 480 (All.), 120 ITR 76 (Mad.) (sic), 124 ITR 181 (AIL) (sic), B.K. Gooyee v. CIT [1966] 62 ITR 109 (Cal.) and Smt. Indu Barua v. CWT [1980] 125 ITR 436 (Gauhati). The facts in the case of Madan Lal Agrawal (supra) were that for the assessment year 1946-47, the ITO, Aligarh, is issued notice to the assessee under Section 148 of the Income-tax Act, 1961 on the ground that he had reason to believe that the income of the assessee had escaped assessment. On the receipt of the notice, the assessee filed a return in the status of an individual. The ITO thereupon informed the assessee that a notice was issued to the assessee in the status of a HUF and, hence, the assessee should file the return in the status of a HUF instead of an individual. It was held by their Lordships that the notice was intended to be issued to the assessee in the status of a HUF but the notice was not addressed to the assessee which was a HUF, and an entity different from the assessee (individual). The notice issued to the assessee was vague and, as such, invalid. Therefore, the proceedings initiated under Section 147(a) of the Act, on the basis of an invalid notice, were invalid.
6. Likewise, in the case of Smt. Phoolmati Devi (supra), the Hon'ble Allahabad High Court had held that when a statute requires that something shall be done in a particular manner or form, without expressly declaring what shall be the consequences of non-compliance, not doing that in the manner or form prescribed will be fatal to its validity.
7. The Hon'ble Allahabad High Court also in the case of Ishwar Singh & Sons (supra) has held that the issue of a valid notice under Section 148 is a condition precedent for the validity of an assessment under Section 147 of the Income-tax Act. If no notice was issued or the notice issued is invalid or is not served in accordance with law, the assessment will be bad. It is the jurisdictional issue and unless such a notice is issued, the ITO does not get jurisdiction to make an assessment on a particular assessee.
8. Thus, on the basis of the above decisions, the learned counsel for the assessee has stressed that the very assessment on the basis of an invalid notice in the present case was void ab initio and invalid in the eyes of law and thus the order of the learned CIT in declaring the said assessment order as such was perfectly correct and justified.
9. We have heard the parties at length and we are of the opinion that the order passed by the learned CIT(A) was perfectly correct and justified. The Hon'ble Allahabad High Court in the case of Madanlal Agrawal (supra) and in the case of Smt. Phoolmati Devi (supra) had very clearly held that the notice should be properly and legally issued and if the very issue of the notice is not in accordance with law or the notice itself is bad in the eyes of law, then no assessment framed thereafter can be said to be a proper assessment. The Hon'ble Allahabad High Court in the case of Ishwar Singh & Sons (supra) has also held that issue of valid notice under Section 148 is a condition precedent for the validity of an assessment under Section 147 of the Income-tax Act, 1961. It further goes to suggest that it is a jurisdictional issue and unless such a notice is issued, the ITO does not get jurisdiction to make an assessment. In fact, even the Hon'ble Supreme Court in the case of Y. Narayana Chetty (supra) has held that the notice prescribed by Section 34 of the Income-tax Act for the purpose of initiating reassessment proceeding is not a mere procedural requirement, the services of the prescribed notice on the assessee is a condition precedent to the validity of any reassessment made under Section 34 (now Section 147/148 is analogous to Section 34 of the old Act). If the notice issued is shown to be invalid, then the proceedings taken by the ITO in pursuance of invalid notice will be illegal and void.
10. The Hon'ble Supreme Court has reiterated the same in a subsequent decision in Thayaballi Mulla Jeevaji Kapasi's case (supra) and held that service of notice prescribed by Section 34 of the Indian Income-tax Act for the purpose of commencing proceedings for reassessment is not a mere procedural requirement, it is a condition precedent to the initiation of proceedings for the assessment under Section 34. If the notice issued is shown to be invalid, then the proceedings taken by the ITO in pursuance of an invalid notice will be illegal and void.
11. The Hon'ble Madias High Court in the case of Jayanthi Talkies Distributors v. C!T [1979] 120 ITR 576 has also held the same view and held that the ITO will have no jurisdiction to make an assessment under Section 147 unless the notice under Section 148 is validly issued to and served on the assessee.
12. With these decisions in the background, if we analyse the facts of the present case, we have no option but to hold that the notice issued in this case was invalid. Admittedly, the notice was issued in the name of Ganga Prasad Jaiswal on 28-3-1985 and Shri Ganga Ram Jaiswal had admittedly died on 20-3-1985. Secondly, the notice was served on Kesho Ram Munib, who had no authority to receive the notice. In this way, the very issue of notice in the name of a dead person was an invalid notice and, secondly, the very service of the said notice on Munib was invalid. Thirdly, the Munib had written on the very notice itself that Shri Ganga Ram had expired 8 days back and his legal heir was his widow Smt. Tara Devi. The notice was served by the Inspector and thus the knowledge of the said information now cannot be denied by the Department as it had been received and communicated to the Inspector who had gone to effect the service on 29-3-1985 itself, while there was still three days left to amend the mistake and issue a fresh notice on the legal heir within the limitation prescribed under the law. Despite this information, no action was taken by the Department and now the Revenue tries to take shelter under Section 292B. Section 292B does not protect the assessments which are void ab initio. It is an enabling provision just to condone the mistake, defect or omission in the return of income, assessment or notice or summons or other proceeding if they are in substance and effect in conformity with the law. The very wordings of the Section suggests that it has been introduced just to remove the technical difficulties that arose due to human error but it does not help the revenue in situations as that of the present case. Here the issue of the notice is a condition precedent and its proper service is equally important to bestow jurisdiction on the ITO to re-frame the assessment under Section 147 of the Income-tax Act, 1961. In absence of the proper and valid notice and in absence of proper service, the entire proceedings for reassessment and the assessment order framed thereafter, in our opinion, becomes void and invalid in the eyes of law. The various decisions of the Hon'ble Supreme Court and of Hon'ble Allahabad High Court, cited above and relied upon by the learned counsel for the assessee, in our opinion, apply with full force to the present case. Hence, taking all those decisions into consideration, we are of the opinion that the order passed by the learned CIT(A) was perfectly correct and does not call for any interference. The issues are decided accordingly.
13. As a result, the appeal is dismissed.