Calcutta High Court
Commissioner Of Income-Tax vs Bibhuti Bhusan Mallick. on 27 January, 1986
Equivalent citations: (1987)55CTR(CAL)33, [1987]165ITR107(CAL)
JUDGMENT
M. G. MUKHERJI J. - The question of law referred to this court in this reference under section 256(1) of the Income-tax Act, 1961 ("the Act") for its opinion is as follows.
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the notices issued under section 148 of the Income-tax Act, 1961, for the assessment years 1959-60 and 1960-61 were invalid and as such the reassessment proceedings made in pursuance of the said invalid notices were illegal and void ?"
The assessee, Bibhuti Bhusan Mallick, is assessed as a Hindu undivided family. The Income-tax Officer sought to reopen the assessments for the years 1959-60 and 1960-61 under section 147(a) of the Act. He issued notices under section 148 of the Act in the name of Panchanan Mallick and Bibhuti Bhusan Mallick for both the Years.
Pursuant thereto, returns were thereafter filed by the assessee who took objection to the validity of the notices and the procedure of reopening contending, inter alia, that notices were not issued in the proper nomenclature of the assessee, viz., "Bibhuti Bhusan Mallick", and that the sanction of the Commissioner for reopening the assessments was also not obtained in the proper name of the assessee. It was also urged that all the primary facts were fully and truly disclosed before the Income-tax Officer at the original assessment and the reopening under section 147(a) had been resorted to only because the Income-tax Officer took a different view and formed a different opinion.
The Income-tax Officer overruled the objections holding, inter alia, that since the notices under section 148 were served on Bibhuti Bhusan Mallick, the Karta, who accepted the same without any protest, the assessee was debarred from contesting the validity of the notices. It was also held that the description of the name in the notices was a bona fide mistake for which the entire proceedings would no be vitiated. The status of the assessee was, however, shown correctly in the reassessment and no illegality resulted. The Income-tax Officer also held that the material facts were not fully and truly disclosed by the assessee at the time of original assessments with regards to The loans from some parties and the assessee concealed material facts which warranted the reopening.
The assessee preferred two appeals before the Appellate Assistant Commissioner against the two assessments. In the appeal against the assessment for 1959-60, the Appellate Assistant Commissioner accepted the assessees contention that no valid notice under section 148 had been served and that the proceedings were, therefore, not validly initiated in the correct name of the assessee. The acceptance by the karta of the notice did not cure the lacuna and the reassessments were invalid.
In the other appeal against the assessment for the year 1960-61, another Appellate Assistant Commissioner took a contrary view and held that since the assessment for a subsequent assessment year 1962-63 was made in the name of Panchanan Mallick and Bibhuti Bhusan Mallick, a registered firm, whose address was the same as that of the Hindu undivided family which continued to be assessed at the same address up to 1961-62, the notice under section 148 issued in the name of Panchanan Mallick and Bibhuti Bhusan Mallick and the return filed in the correct name, i.e., Bibhuti Bhusan Mallick, duly signed by the karta of the Hindu undivided family, were valid and legal. He held that the business was carried on in the name and style of Panchanan Mallick and Bibhuti Bhusan Mallick and the balance-sheet disclosed the capital account of the Hindu undivided family in the business in its correct name. It was held that there could be no misgiving or ambiguity in the assessees name and that the proposal to reopen the assessment under section 147(a) had been sanctioned by the Commissioner in the name of Panchanan Mallick and Bibhuti Bhusan Mallick was the correct name of the assessee. Accordingly, it was held that there was no invalidity or illegallity in the initiation of the proceedings on the notices. From a bunch of discharged hundis filed by the assessee, it was noted that the drawers and drawees were both named Panchanan Mallick and Bibhuti Bhusan Mallick on which the conclusion was draawn that the names Panchanan Mallick and Bibhuti Bhusan Mallick and the naame of the Hindu undivided family were identical. The appeal of the assessee was rejected.
The Revenue preferred an appeal against the order of the Appellate Assistant Commissioner for the assessment year 1959-60 and the assessee preferred an appeal against the order of the appellate court for the assessment year 1960-61. The Tribunal disposed of both the appeals by a consolidated order. The Tribunal rejected the appeal filed by the Revenue and allowed the appeal preferred by the assessee. The Tribunal held that the service of a valid notice on the assessee was a condition precedent to the validity of the reassessment under section 147 and if the notices were held to be invalid, the assessment proceedings, in their entirely, would be void and illegal. Notices under section 148 for both the years were issued in the name of Panchanan Mallick and Bibhuti Bhusan Mallick and the sanction of the Commissioner was also obtained to reopen the assessment of the assessee described in that name. The said name was admittedly not the correct name of the assessee and the notices were, therefore, bad and illegal. The fact that the assessee had filed returns in pursuance of such invalid notices would not render the assessments made on the basis of such returns valid in law. The entire proceedings were invalid and void. The sanction of the Commissioner was also not taken by disclosing the proper name of the assessee.
At the hearing before us, a number of decisions were cited from the Bar by the learned advocates for the respective parties noted hereinbelow : Y. Narayan Chetty v. ITO [1959] 35 ITR 388 (SC), R. K. Das & Co. v. CIT [1956] 30 ITR 439 (Cal), CIT v. K Adinarayana Murthy [1967] 65 ITR 607 (SC), Sewlal Daga v. CIT [1965] 55 ITR 406 (Cal), B. K. Gooyee v. CIT [1966] 62 ITR 109 (Cal), Marghabhai Babarbhai Patel v. R. M. Parikh, ITO [1970] 78 ITR 418 (Guj) and CIT v. Kurban Hussain Ibrahimji Mithiborwala [1971] 82 ITR 821 (SC).
In the above cases where notices were found to be invalid, proceedings for assessment initiated were also found void and illegal.
In Marghabhai Babarbhai Patels case [1970] 78 ITR 418, the Gujarat High Court held that the proceeding for reassessment against a Hindu undivided family were without jurisdiction as the notice under section 34 of the Indian Income-tax Act, 1922 ("the 1922 Act"), was against one of the legal representatives only and not on the Hindu undivided family, the assessee.
In Kurban Hussain Ibrahimji Mithiborwalas case [1971] 82 ITR 821 (SC), a notice under section 36 of the 1922 Act was found to be invalid as referring to a wrong year by the Supreme Court and the entire proceedings were held to be void for want of jurisdiction.
In K. Adinarayana Murthys case [1967] 65 ITR 607 (SC), the notice for reassessment was issued showing the status of an assessee as "individual" instead of its real status of a Hindu undivided family. This was held to be illegal and without jurisdiction by the Supreme Court and it was observed that the Income-tax officer could not have validly acted on the return filed by the assessee pursuant to an illegal and invalid notice, notwithstanding that the return was made in the status of a Hindu undivided family since such assessment made on such a return would also be invalid as all proceedings taken under such notice would be ultra vires and without jurisdiction. In Sewlal Dagas case [1965] 55 ITR 406, a Division Bench of this court found that a notice for reassessment was served on the son of the assessee, Chandrabhan Johurmull misdescribing the name of the assessee as Chandrahan Johurmull (karta Sewlal Daga)" and not clearly stating that it was being issued on Sewlal Daga as a legal representative of Chandrabhan Johurmull, the deceased. It was held that the notice as served was invalid and all proceedings before the Income-tax Officer were, consequently, illegal and void. It was made clear that the jurisdiction could not be conferred by consent.
In B. K. Gooyees case [1966] 62 ITR 109, a Division Bench of this court held, inter alia, that the objection as to the invalidity of a notice for reassessment and all proceedings thereunder can be taken in appeal by an assessee even though he had submitted a return in response to the to the notice and had not taken such objection before the Income-Tax Officer.
In R. K. Das & Cos case [1956] 30 ITR 439 (Cal), Chakravarti C.J., observed, inter alia, that the principle that the validity of an assessment would not depend on the issue of a valid notice, was not applicable to a case where the issue of a notice as prescribed by law was a condition precedent to the commencement of proceedings in exercise of the jurisdiction to assess.
Law on the point is well settled and in that view, we are of the opinion that the Tribunals finding that the notices under section 148 were invalid is correct. We also hold that the notices being defective, even if the assessee filed returns, the irregularity would not stand cured and reassessment proceedings, if continued, would not result in a valid reassessment.
The question is, therefore, answered in the affirmative and in favour of the assessee.
There will, however, be no order as to costs.
D K SEN J - I agree.