Income Tax Appellate Tribunal - Amritsar
Ashok Kumar vs Income Tax Officer on 3 December, 2001
Equivalent citations: [2002]80ITD33(ASR)
JUDGMENT
R.K. Bali, A.M. April 1993
1. These six appeals relating to the same assessee involve similar points and are, therefore, disposed of by a common order for the sake of convenience.
2. Briefly the facts are that Sh. Gurbax Lal (Deed.) in his life-time was being assessed as an Individual in respect of the share of profits from the various firms, in which he was a partner. The details of income returned and income assessed originally in relation to the assessment year under appeal are as under:
Asst. yr Income returned Dt. of filing return Dt. of Asst.
order Income assessed Remarks Rs.
Rs.
1979-80 (-) 37,489 24-1-1981 29-1-1982 25,080 1980-81 (-) 3,10,760 3-2-1982 19-3-1983 (-) 2,41,590 1981-82 1,605 10-1-1983 18-11-1983 1,605 1983-84 1984-85 No returns filed 1985-86
3. Subsequently the AO received information from the ITO, Central Circle-II, Amritsar that the assessee had purchased FDRs amounting to Rs. 7,02,000 with Punjab & Sind Bank, Hall Bazar, Amritsar, whose details are as under :
No. & dt. of FDR Amount of FDR 804311 26-9-1978 40,000 804312
-do-
40,000 804313
-do-
40,000 804314
-do-
5,17,000 814793 6-3-1979 65,000 7,02,000
4. Since, according to the ITO, the source of these FDRs was not properly explained by the assessee and the interest earned on these FDRs had also not been disclosed by the assessee in the returns originally filed, proceedings for the asst. yrs. 1979-80, 1980-81 and 1981-82 were reopened under Section 147 and the assessments were completed by making addition to the income already assessed for the entire interest accrued on the fixed deposits alleged to be belonging to Sh. Gurbax Lal (Deed.).
In the asst. yrs. 1983-84, 1984-85 and 1985-86, only the interest income on FDRs, assumed to be accrued in the relevant assessment years, has been assessed under Section 147 r/w Section 143.
5. During his life-time Sh. Gurbax Lal was a partner in the following firms :
(i) M/s Gurdas Ram & Co. at Saharanpur;
(ii) M/s. Gurdas Ram & Co. at Amritsar;
(iii) M/s Nanak Singh, MES Contractor; and
(iv) M/s S.N. Jaiswal, Kirtinagar, New Delhi.
The firm M/s S.N. Jaiswal, Kirti Nagar, New Delhi had 3 branches, namely M/s Manoranjan Jaiswal, Gandhinagar, Delhi; M/s Shiv Narain, Seelampur, Delhi and M/s Gurbax Lal, Badarpur.
6. Sh. Gurbax Lal died on 24th May, 1980, i.e., in the previous year ending on 31st March, 1981 and as such he could have income only for two months in the asst. yr. 1981-82. The estate duty assessment of Sh. Gurbax Lal (Deed.) was made on 27th March, 1986 when a statement of account of his estate was filed on 27th July, 1982 declaring net estate at Rs. NIL was accepted by the Asstt. CED, Amritsar vide his order dt. 27th March, 1986.
7. During the course of assessment proceedings before the AO, it was explained on behalf of the assessee that the FDRs purchased by the assessee from Punjab & Sind Bank, Hall Bazar., Amritsar, actually belonged to the firm M/s S.N. Jaiswal and M/s Gurdas Ram & Co. from where the amounts had been withdrawn. The AO, however, held that since the FDRs were purchased in the name of Sh. Gurbax Lal (Deed.) interest income on the FDRs was required to be assessed in the hands of Sh. Gurbax Lal and he accordingly completed the assessments by making addition on account of interest accrued on the FDRs to the income already assessed in the hands of the assessee. The reassessment proceedings initiated were finalised in the name of Sh. Ashok Kumar, legal heir of Sh. Gurbax Lal (Deed.) C/o M/s Gurdas Ram & Co., Rani Ka Bagh, Amritsar.
8. As already mentioned, for the asst. yrs. 1979-80, 1980-81 and 1981-82, the income finally assessed consisted of share income from the various firms already assessed plus interest income accrued on the Fixed Deposits in the name of Sh. Gurbax Lal (Deed.). However, for the asst. yr. 1982-83 no return was filed and no proceedings were initiated. For the asst. yrs. 1983-84, 1984-85 and 1985-86, only interest income on the Fixed Deposits, assumed to be accruing in the relevant assessment years, has been assessed.
9. The assessee filed appeals against the orders passed by the AO, wherein the assessments were challenged on factual as well as legal grounds. The first challenge on legal grounds was that the order passed by the AO under Section 143(3)/147 was illegal, unjust, arbitrary and opposed to the facts and circumstances of the case, and there was no justification before the AO to initiate proceedings under Section 147(a) as the source of alleged FDRs in the name of Sh. Gurbax Lal (Decd.) was on account of withdrawals from the firms, in which the deceased Sh. Gurbax Lal was a partner and the FDRs in fact represented the margin money against the excise duty liability of Rs. 17,97,803 due from the firm M/s S.N. Jaiswal to the Collector of Excise and this fact was apparent from the Bank Certificate dt. 27th Feb., 1986 and this explanation given by the assessee in the estate duty proceedings of the deceased was accepted and the estate duty assessment was accordingly framed on 27th March, 1986 determining the net estate at Rs. Nil.
10. It was explained before the learned first appellate authority that the deceased left behind seven legal heirs at the time of his death on 24th May, 1980 and this fact was known to the AO, who should have issued notices to all the legal heirs. It was pleaded before the learned Dy. CTT(A) that the Asstt. CED in fact had issued notice to Sh. Bharat Bhushan making him the accountable person for the estate and sometimes notices were issued to Sh. Ashok Kumar. However, the AO, in the income-tax proceedings issued notice to Sh- Ashok Kumar only, who has not inherited anything from the estate, because, as per estate duty record, Sh. Gurbax Lal died with more liabilities than assets. It was submitted that since notices under Section 148 were issued and served only on one of the legal heirs i.e., Sh. Ashok Kumar, the same were invalid and bad in law and as such the assessments framed have to be annulled, particularly so as the AO who issued the notices was aware of the existence of Sh. Bharat Bhushan, brother of Sh. Ashok Kurnar, who had filed the account of the estate in connection with the estate duty assessment of Sh. Gurbax Lal (Deed.) wherein Sh. Bharat Bhushan signed as the accountable person.
11. The learned first appellate authority, however, did not annul the assessments framed but directed the AO to make enquiries to ascertain all the legal heirs of the deceased so that notices could be issued to all the legal heirs.
On the question of merits, relating to the interest accrued on the Fixed Deposits also, the matter was set aside by the learned first appellate authority the Dy. CIT(A) to the file of the AO with the directions to find out as to whether the amount invested in the Fixed Deposits in the name of Sh. Gurbax Lal (Deed.) actually belonged to the deceased in his individual capacity or it was out of the withdrawals from the various firms, in which the deceased was a partner.
12. For the asst. yr. 1980-81, on account of the assessed income being more than Rs. 1 lac, the appeal was heard by the learned CIT(A) as first appellate authority who confirmed the order of the AO in including the interest income on the FDRs in the hands of the assessee as the assessee failed to furnish any evidence as to whether the firm M/s S.N. Jaiswal had filed any return with the ITO, Distt. VII(4), Delhi or whether any assessment has been framed in the case of S.N. Jaiswal at Delhi.
13. The assessee is in second appeal before us in respect of all the six assessment years. Sh. G.C. Sharma, Advocate, learned representative of the assessee assailed the assessments on the ground that notices issued under Section 148 for the five assessment years i.e., asst. yrs. 1979-80. 1981-82, 1983-84, 1984-85 and 1985-86 are bad in law. It was submitted that to appreciate the legal arguments, the reassessments made for the asst. yrs. 1979-80 and 1981-82 are to be treated as belonging to one group and the reassessments made for the asst. yrs. 1983-84. 1984-85 and 1985-86 are to be treated as another group.
14. It was submitted that the notices issued under Section 148 for the asst. yrs. 1979-80 and 1981-82 are invalid on the ground that they were served only on Sh. Ashok Kumar treating him to be the sole legal heir of the deceased whereas in fact there are seven legal heirs, list of which has been furnished to us at p 3 of the paper book, which are as under :
(i) Smt. Kaushalaya Devi Wife (11) Sh. Ashok Kumar Son (iii) Sh. Bharat Bhushan Son (iv) Sh. Ramesh Kumar Son (v) Smt. Usha Rani Daughter (vi) Smt. Pushpa Rani Daughter (vii) Smt. Vandana Daughter
As regards asst. yr. 1980-81 is concerned, it was submitted by Sh. Sharma that notice under Section 143(2) should also have been served on all the legal heirs and not solely on Sh. Ashok Kumar.
15. In respect of notices issued under Section 148 for the asst. yrs. 1983-84, 1984-85 and 1985-86 it was pleaded that they were equally invalid as these ought to have been served on all the legal heirs. It was further submitted that the assessment orders for the last three assessment years i.e., asst. yrs. 1983-84, 1984-85 and 1985-86 have been made on Sh. Ashok Kumar in the capacity of legal heir as even during the last three assessment years, income accrued only to Sh. Gurbax Lal individually and absolutely. It was submitted that this is also illegal because after the death of Sh. Gurbax Lal on 24th May, 1980, no income could accrue to the deceased and income, if any, had accrued to the legal heirs individually, to the extent each one of them was entitled to inherit the property of the deceased, which was represented by the alleged fixed deposits in his name. Sh. G.C. Sharma, Advocate, accordingly submitted that assessments for these years have to be quashed on this count alone, assuming but not admitting that the Fixed Deposits belonged to Sh. Gurbax Lal individually and absolutely till his death.
15.1. It was further submitted that income accrued after 24th May, 1980, the date of death of Sh. Gurbax Lal, assessable in the asst. yr. 1981-82 could also not have been assessed in the hands of the single legal heir and that too in his representative capacity. It was argued that all income accrued after 24th May, 1980 could be assessed only in the hands of the seven legal heirs separately in proportion to their respective shares, assuming but not admitting that the Fixed Deposits were the absolute property of the deceased. 15.2. Sh. Sharma, in this regard, relied on the following decisions :
(i) Jai Prakash Singh v. CIT (1978) 111 ITR 507 (Gau);
(ii) Chooharmal Wadhuram v. CST (1971) 80 ITR 360 (Guj);
(iii) First Addl. ITO v. Mrs. Suseela Sadanandan (1965) 57 ITR 168 (SC)
(iv) 79 ITR 324(sic) and
(v) E. Alfred v. first Addl. ITO (1951) 32 ITR 401 (Mad).
16. Sh. B.L. Razdan, learned senior Departmental Representative, supported the order of the Dy. CIT(A) in relation to asst. yrs. 1979-80, 1981-82, 1983-84, 1984-85 and 1985-86 and relied on the order of the CIT(A) for the asst. yr. 1980-81. It was submitted that out of the five FDRs, totalling Rs. 7,02,000, the first three FDRs of Rs. 40,000 each were purchased by Sh. Gurbax Lal after withdrawing the amount from the firm M/s Gurdas Ram & Co., Arnritsar, in which he was a partner and these FDRs were in his own name and as such they belonged to him in his individual capacity. It was stated that similar is the position with regard to the FOR of Rs. 65,000 which was also withdrawn from the firm M/s Gurdas Ram & Co., Amritsar. Regarding FDR of Rs. 5,17,000 it was submitted that Sh. Gurbax Lal withdrew an amount of Rs. 5 lakhs on 13th March, 1978 from M/s Gurbax Lal, Delhi and deposited this amount in FDR again for Rs. 5 lakhs with Punjab & Sind Bank, Hall Bazar, Amritsar. This amount of Rs. 5 lakhs was debited to the personal account of Sh. Gurbax Lal and interest of Rs. 17,000 was earned on this FDR and it was renewed for Rs. 5,17,000 on 26th Sept., 1978.
16.1. Sh. Razdan, accordingly, submitted that since this FDR was in the personal name of Sh. Gurbax Lal, any interest on this was assessable in the hands of Sh. Gurbax Lal. Accordingly, it was submitted that the AO was perfectly justified in reopening the assessments in the case of Sh. Gurbax Lal (Deed.) and making additions on account of interest accrued on the FDR standing in the name of Sh. Gurbax Lal (Deed.) in the Punjab & Sind Bank, Hall, Bazar, Amritsar.
16.2. Coming to the legal argument of Sh. G.C. Sharma, Advocate, learned representative of the assessee, it was submitted that the estate of late Sh. Gurbax Lal was administered by Sh. Ashok Kumar-son-one of the legal heirs with the help of Sh. Mast Ram, manager/accountant who represented the deceased before the IT authorities even prior to the death of Sh. Gurbax Lal. It was submitted that notices have been received by Sh. Ashok Kumar, Sh. Bharat Bhushari and Sh. Mast Ram in various proceedings and returns of income have been filed by Sh. Ashok Kumar for all the assessment years beginning from 1979-80, except for asst. yr. 1980-81, which was filed by Sh. Bharat Bhushan as legal heir and on behalf of the family members. It was submitted that notices for reopening of exparte assessment completed under Section 144, on an application made under Section 146, for asst. yr. 1980-81 was served on Sh. Bharat Bhushan and all the proceedings have been attended by Sh. Ashok Kumar and/or Sh. Mast Ram and all appeals are filed by Sh. Ashok Kumar.
16.3. It was submitted by Sh. Razdan, learned senior Departmental Representative, that Sh. Ashok Kumar was doing all this on behalf of the family members and the estate of late Sh. Gurbax Lal with the full knowledge and implied consent of all other legal heirs who had a constructive notice of the various income-tax proceedings pending against the estate.
16.4. It was submitted by Sh. Razdan that reliance of Sh. G.C. Sharma, Advocate, learned counsel of the assessee that the order of the Asstt. CED estimating the estate of the deceased at Rs. NIL is irrelevant, because even on assuming but not admitting, the assessee's version that the liability exceeded the assets, the estate had to be administered to settle the accounts, which has not been done even till this date. He accordingly submitted that the assessments having been validly made deserve to be upheld.
16.5. Sh. Razdan, learned Sr. Departmental Representative, relied on the decision of Hon'ble Supreme Court as in Mrs. Suseela Sadanandan's case (supra); Hon'ble Gujarat High Court in 80 ITR 373 (sic) as well as the cases in Vijay Kumar Kedia v. CED(W76) 104 ITR 302 (All), CTT v. Smt. Rahima Bi (1977) 107 ITR 810 (Mad), Rajinder Mohan Bhandari v. ITO (1978) 111 ITR 407 (Cal), (1980) 123 ITR 970 (Cal) (sic), CIT v. Sumantbhai C. Munshaw (1981) 128 ITR 142 (Guj) and V. Ramanathan v. CTT (1963) 49 ITR 881 (Mad).
17. We have considered the rival submissions. The legal position with regard to the framing of assessment in relation to an assessee, who dies intestate leaving behind himself more than one legal heirs is that the AO has to proceed to assess the total income of the deceased against all the legal heirs individually and he cannot choose any one of them to the exclusion of others and he must serve all notices, including notice under Section 148, on all the legal representatives.
However, there are exceptions to the above general principle of law and if in a given case, it is shown that the legal representatives (which term would include plurality of persons) of a deceased-assessee, who was present before the ITO either voluntarily or in response to a notice issued against the deceased but served upon him or his agent, allows the assessment proceedings to continue against the deceased without any objection and lets the ITO make an assessment order against the deceased, albeit, after affording to him a full opportunity of being heard it would not be open to him to take up a plea at the appellate stage, as a last resort or as an afterthought, that the proceedings taken and the assessment orders made against the deceased are a nullity, especially when the consequence of permitting him to raise such a plea would be to debar a fresh assessment on him and in such a situation though gross irregularity is involved, the assessment would still be valid and effective qua the legal representative as held by the Hon'ble Gujarat High Court in the case of Sumantbhai C. Munshaw (supra) (Decd).
The Hon'ble Gujarat High Court, in the above noted case, further went on to observe that :
"Sec. 158 of the IT Act, 1961, which merely prescribes the method for making an assessment of tax in a special case, does not bear upon the initial jurisdiction of the taxing authority but deals with matters incidental to it. If the assessing authority, in the exercise of its jurisdiction, omits to take one or more of the various procedural steps therein laid down or in taking any of such steps commits an error or even deviates from the statutory mandate, the assessment would be null and void only if the omission, error of breach, as the case may be, is so fundamental as could not be waived because it affects the inherent jurisdiction. The legal representatives has a right to waive the advantage of any of the statutory provisions made solely for his protection or benefit and not conceived in the public interest. Therefore, if the legal representative is present before the taxing authority in some capacity or voluntarily appears in the proceedings without service of notice or upon service of a notice not addressed to him but to the deceased assessee, and does not object to the continuance of the proceedings against the deceased person and is heard by the ITO, in regard to the tax liability of the deceased, and invites an assessment on merits, such a legal representative must be taken to have exercised the option of abandoning the technical plea that the proceeding has not been continued against him, . although, in substance and reality, it has been so continued. If and when an assessment order is consequentially made in such a proceedings in the name of the deceased assessee, that would not be a nullity qua the legal representative, not only because he was afforded a full opportunity of being heard in respect of it but also because he, having not raised an objection at the appropriate time with regard to the continuance of the assessment proceeding against the deceased person, must be taken to have known the inevitable outcome of the assessment being made in the name of the deceased and to have opted to treat such an assessment as having been made as the legal representative against him and to waive any objection as its nullity on the said ground."
Similar is the view of Hon'ble Madras High Court in the case of V. Ramanathan (supra) at p. 889, wherein it is held that :
".......... in respect of proceedings for or against the estate the ordinary and normal rule is that all of them should join or be joined together or at least all of them should be parties to the proceedings. But it may so happen that a third party suing the estate may not know or be aware of the existence of several heirs together constituting the legal representatives of the estate against which relief is sought. Any action against the estate by a third party impleading only one of the several legal representative cannot be said to be incompetent by the mere omission to implead all the legal heirs. If in such a case the person impleaded puts forward the plea that there are other legal representatives who ought to be joined in the action, and that he alone cannot represent the estate the default on the part of the person suing in not taking note of the plea, and not taking the proper steps to have all of them before the Court may be fatal to the maintainability of the action. But if the legal representative impleaded does not put forward any such plea but merely contends himself by saying that he is not the legal representative and the person suing bona fide believes that he is the legal representative and prosecutes the action the proceedings would be valid."
18. Applying the above interpretation of Section 159 of the IT Act, 1961 [corresponding Section 24B(2) of the IT Act, 1922] to the facts of the present case, it is seen that here also although there were seven legal heirs of the deceased, yet in effect the proceedings were initiated against Sh. Ashok Kumar as legal heir of Sh. Gurbax Lal (Decd.) who attended the proceedings and was allowed full opportunity to explain the source of FDRs amounting to Rs. 7,02,000 belonging to the deceased and who had filed explanation is relation to the FDRs. Ashok Kumar, legal heir, never objected to these proceedings before the AO and no such plea that all the legal heirs should be impleaded was taken before the AO. Accordingly, we are of the opinion that the proceedings under s. 148 were validly initiated against Sh. Ashok Kumar as legal heir of late Sh. Gurbax Lal (Deed.) and the assessments consequent to assuming jurisdiction by issue of notice under Section 148 were validly made.
19. Coming to the merits of the case, it is seen that a plea was raised by the assessee before the AO that the above FDRs were acquired by Sh. Gurbax Lal (Deed.) on behalf of the firms, in which the deceased was a partner and these represented the margin money against the excise duty liability due from the firm M/s S.N. Jaiswai to the Collector of Excise. However, the case of the Department is that out of the five FDRs, four were taken by the deceased in his individual name after withdrawals from the firm M/s Gurdas Ram & Co., Amritsar and the 5th FDR of Rs. 5,17,000 was also in the name of Sh. Gurbax Lal (Deed.) although the same represented withdrawal of Rs. 5 lakhs by the assessee from the firm M/s Gurbax Lal, Delhi, but this was debited to the account of Sh. Gurbax Lal and as such it also represented the personal property of Sh. Gurbax Lal (Decd.). This FDR was renewed for an amount of Rs. 5,17,000. Subsequently after including interest of Rs. 17,000.
19.1. It is also seen that the firm M/s S.N. Jaiswai, Delhi has claimed to have filed return for the asst. yr. 1978-79 on 30th March, 1978, which is apparently incorrect as the return for the asst. yr. 1978-79 could not have been filed on 30th March, 1978 and the photocopy of receipt furnished might be in connection with application in Form No. 11 along with partnership deed, which was required to be filed before the close of the financial year. It was under these circumstances that the learned Dy. CIT(A) set aside the assessments to the file of the AO after recording his reasons in paras 15 to 18 of the impugned appellate order relating to asst. yrs. 1979-80, 1981-82, 1983-84, 1984-85 and 1985-86.
19.2. In this connection we are in agreement with the reasoning of the Dy. CIT(A), Amritsar, wherein the learned first appellate authority has directed the AO to find out from the Collector, Central Excise as to what happened to these FDRs and as to whether these were adjusted against the excise duty liability of the firm M/s S.N. Jaiswai. The learned first appellate authority has also directed the AO to make enquiries from the ITO, Distt. VII(4), Delhi to find out as to whether the FDR of Rs. 5,17,000 belonged to the firm M/s S.N. Jaiswai or the deceased Sh. Gurbax Lal and then process the assessments de novo in accordance with law after affording reasonable and proper opportunity of being heard to the assessee and after bringing the other legal heirs on record.
19.3. Accordingly, we will uphold the action of learned Dy. CIT(A) in setting aside the assessments for the asst. yrs, 1979-80, 1981-82, 1983-84, 1984-85 and 1985-86 and for these very reasons we will set aside the order of CIT(A) for the asst. yr. 1980-81 also to the file of the AO to be re-processed again in the light of the directions of learned Dy. CIT(A) in the impugned order for the asst. yrs. 1979-80, 1981-82 and 1983-84 to 1985-86, whose action in setting aside the assessments, we have upheld.
20. In the result, the appeals filed by the assessee in ITA Nos. 387 to 391/ Asr./1991 are dismissed whereas the appeal for the asst. yr. 1980-81 in ITA No. 345/Asr./1988 is treated to have been allowed for statistical purposes.
S. Grover, J.M. 31st May, 1993
21. I have closely perused the proposed order of my learned brother but find myself unable to agree with his approach. According to me, on the admitted facts, the assessments framed on one of the legal heirs when the Department was aware of there being seven legal heirs were nullity. For facts, paras 1 to 13 of the proposed order of my learned brother may be referred to. However, at the cost of repetition, it is considered necessary to bring in close focus paras 9, 10, 14 and 15 of the proposed order of my learned brother because it has been clearly brought out that even before the first appellate authority it had been explained that the deceased Shri Gurbax Lal had left behind seven legal heirs at the time of his death on 24th May, 1980 and such fact was known to the AO:
"9. The assessee filed appeals against the orders passed by the AO, wherein the assessments were challenged on factual as well as legal grounds. The first challenge on legal ground was that the order passed by the AO under Section 143(3J/147 was illegal, unjust, arbitrary and opposed to the facts and circumstances of the case, and there was no justification before the AO to initiate proceedings under Section 147(a) as the source of alleged FDRs in the name of Shri Gurbax Lal (Deed.) was on account of withdrawals from the firms, in which the deceased Shri Gurbax Lal was a partner and the FDRs in fact represented the margin money against the excise duty liability of Rs. 17,97,803 due from the firm M/s S.N. Jaiswal to the Collector of Excise and this fact was apparent from the Bank Certificate dt. 27th Feb., 1986 and this explanation given by the assessee in the estate duty proceedings of the deceased was accepted and the estate duty assessment was accordingly framed on 27th March, 1986 determining the net estate at Rs. Nil.
10. It was explained before the learned first appellate authority that the deceased left behind seven legal heirs at the time of his death on 24th May, 1980 and this fact was known to the AO, who should have issued notices to all the legal heirs. It was pleaded before the learned Dy. CIT(A) that the Asstt. CED in fact had issued notice to Sh. Bharat Bhushan making him the accountable person for the estate and sometimes notices were issued to Shri Ashok Kumar. However, the AO, in the income-tax proceedings issued notice to Shri Ashok Kumar only, who has not inherited anything from the estate, because, as per estate duty record, Sh. Gurbax Lal died with more liabilities than assets. It was submitted that since notices under Section 148 were issued and served only on one of the legal heirs i.e., Shri Ashok Kumar, the same were invalid and bad in law and as such the assessments framed have to be annulled, particularly so as the AO who issued the notices was aware of the existence of Sh. Bharat Bhushan, brother of Shri Ashok Kumar, who had filed the account of the estate in connection with the estate duty assessment of Shri Gurbax Lal (Decd.) wherein Sh. Bharat Bhushan signed as the AM.
14. It was submitted that the notices issued under Section 148 for the asst. yrs. 1979-80 and 1981-82 are invalid on the ground that they were served only on Shri Ashok Kumar treating him to be the sole legal heir of the deceased whereas in fact there are seven legal heirs, list of which has been furnished to us at p. 3 of the paper book, which are as under :
(i) Smt. Kaushadalya Devi Wife (ii) Sh. Ashok Kumar Son (iii) Sh. Bharat Bhushan Son (iv) Sh. Ramesh Kumar Son (v) Smt. Usha Rani Daughter (vi) Smt. Pushpa Rani Daughter (vii) Smt. Vandana , Daughter
As regards asst. yr. 1980-81 is concerned, it was submitted by Shri Sharma that notice under Section 143(2) should also have been served on all the legal heirs and not solely on Shri Ashok Kumar.
15. In respect of notices issued under Section 148 for the asst. yrs. 1983-84, 1984-85 and 1985-86 it was pleaded that they were equally invalid as these ought to have been served on all the legal heirs. It was further submitted that the assessment orders for the last three assessment years i.e., asst. yrs. 1983-84, 1984-85 and 1985-86 have been made on Shri Ashok Kumar in the capacity of legal heir as even during the last three assessment years, income accrued only to Shri Gurbax Lal individually and absolutely. It was submitted that this is also illegal because after the death of Shri Gurbax Lal on 24th May, 1980, no income could accrue to the deceased and income, if any, had accrued to the legal heirs individually to the extent each one of them was entitled to inherit the property of the deceased, which was represented by the alleged fixed deposits in his name, Shri G.C. Sharma, Advocate, accordingly submitted that assessment for these years have to be quashed on this count alone, assuming but not admitting that the Fixed Deposits belonged to Shri Gurbax Lal individually and absolutely till his death.
15.1 It was further submitted that, income accrued after 24th May, 1980, the date of death of Sh. Gurbax Lal assessable in the asst. yr. 1981-82 could also not have been assessed in the hands of the single legal heir and that too in his representative capacity. It was argued that all income accrued after 24th May, 1980 could be assessed only in the hands of the seven legal heirs separately in proportion to their respective shares, assuming but not admitting that the Fixed Deposits were the absolute property of the deceased.
15.2 Shri Sharma, in this regard, relied on the following decisions :
1. Jai Prakash Singh v. CIT (1978) 111 ITR 507 (Gau)
2. Chooharmal Wadhuram v. CIT (1971) 80 ITR 360 (Guj)
3. First Additional ITO v. Mrs. Suseela Sadanandan (1965) 57 ITR 168 (SC)
4. 79 ITR 324 (sic)
5. E. Alfred v. First Addl. ITO (1951) 32 ITR 401 (Mad)"
22. In addition to the above, estate duty assessment in respect of Shri Gurbax Lal was made on 27th March, 1986 in relation to Statement of Account of his estate submitted on 27th July, 1982 declaring net estate at Rs. Nil. Date of death of Shri Gurbax Lal is already mentioned as 24th May, 1980. The Statement of Account was accepted by the Asstt. CED hereinafter referred as the Asstt. CED, on 27th March, 1986 itself. The Asstt. CED has issued a letter dt. 3rd Dec., 1985 which was at the instance of the ITO, who had come to know about the Fixed Deposits. Reply to the said notice was given on 24th Dec., 1985 and that is very material because it was categorically stated that the Fixed Deposits of Rs. 7,02,000 were owned by M/s Gurbax Lal, shop at Badarpur, which was a branch officer of a distinct firm of M/s S.N. Jaiswal, Kirti Nagar, New Delhi. However, this aspect is being mentioned as a fact though I am considering the assessments as nullity on legal grounds stated hereunder.
23. Brother Ball has dealt with the contentions for the Revenue in para 16 and have expressed his opinion in para 17 wherein he has sought to rely on the judgment of the Hon'ble Gujarat High Court in the case of Sumantbhai C. Munshaw (supra) and that of the Hon'ble Madras High Court in the case of V. Ramanathan (supra) for his inference that notices issued in the name of Shri Ashok Kumar and consequent assessments framed against him did' not result in invalid assessments.
24. Brother Bali has not analysed the judgment of the Hon'ble Gauhati High Court in the case of Jai Prakash Singh (supra) in which more or less similar facts as prevailing in the present case were there and non-issue of notice under Section 143(2) of the Act to all the legal representatives was held to be fatal to the assessment, which followed. The Hon'ble High Court in the said case held that if the estate of a deceased assessee is to be assessed to income-tax, the estate must be fully represented by impleading all the legal representatives and serving notices under Section 143(2) on all of them who represent the entire estate. If this were not done, the assessment proceedings and assessment orders passed therein would cease to be valid proceedings and valid orders in the eye of the law. In such a case it is the legal duty of the AAC and the Tribunal to annul the assessment.
25. Amritsar Bench of the Tribunal in the case of Devinder Pal, Dharam Pal v. WTO (1983) 15 TLR 81 had the occasion to deal with similar situation and as against the approach of the assessing authority annulled the assessment when one of the three legal representatives representing the estate did not object to the proceedings being prosecuted against him in respect of his father's estate. The short judgment of the Tribunal must be brought in close focus as under :
"1. The assessee is in appeal for the asst. yr. 1976-77.
2. The assessee late Shri Gurdas Mal, had filed a return on 16th April, 1977 at Rs. 1,25,200. He revised the return on 2nd July, 1977, showing an income of Rs. 1,40,200. During the course of assessment proceedings he expired on 9th Dec., 1979. He left his wife Smt. Sumitra Devi and two sons, Shri Devinder Pal and Shri Dharam Pal. Notice was issued to Shri Devinder Pal for continuing the proceedings. No other legal heir was impleaded in the assessment proceedings, but the assessment was finalised on 12th March, 1981 on a total income of Rs. 5,85,000 by the ITO in which together with Shri Devinder Pal, Dhararn Pal and Sumitra Devi were mentioned as the legal heirs on whom assessment had been made.
3. The assessee impugned this assessment before the AAC on the ground that all legal heirs had not been joined together in the assessment proceedings, but the assessment was made on all of them. It was claimed that the two other persons, Shri Dhatam Pal and Smt. Sumitra Devi not having been provided any opportunity, could not be included as the legal heirs on whom the assessment had been made. Taking note of this defect, the AAC, Jullundar caused the assessment to be set aside and directed the WTO to redo the assessment after issuing proper notices to all the legal heirs brought on record. It is against this finding that the assessee feels aggrieved.
4. According to the assessee, the assessment was null and void and therefore, the AAC should not have merely set aside the same, but quashed the proceedings. By setting aside the assessment and issuing of direction to the WTO to redo the assessment, the WTO has been provided a second innings in respect of the limitation of time provided in the Act for making the assessment. He referred to the decision of the Gauhati High Court in the case of Jai Prakash Singh v. CIT (1978) 111 ITR 507 (Gau), in this connection. On the basis of this judgment, he claimed that, in the absence of all the legal heirs having been interpleaded in the assessment proceedings, the assessment was null and void. On the other hand Revenue claimed that Devinder Pal, on whom the assessment was made had not objected to the validity of the assessment. In any case, failure to associate the other legal heirs was merely an irregularity. Committed by the ITO and it was to correct that error that the AAC set aside the assessment and directed the WTO to redo the assessment. It is not the case of the assessee that the WTO was not possessed of the jurisdiction to make the assessment, failure to interplead the other legal heirs should not be considered as very material.
5. Having heard the rival views, we are not persuaded by the Revenue that we can over-rule the plea of the assessee. This Bench has been following the Gauhati decision in the past. According to this, failure on the part of the WTO to interplead all the legal heirs, who would together represent the entire estate of the deceased, was fatal omission which made the assessment null and void. On the facts of the case, WTO did not notice that in making the assessment on all the legal heirs, without interpleading two out of the three heirs, he has made himself liable to be charged with the violation of the principle of natural justice. If the two legal heirs had not been provided with an opportunity during the assessment proceedings such an assessment could not be saved from being considered as null and void. We had considered a similar issue in ITA No. 977/1979 in the case of ITO v. Dr. Harbhajan Singh and Ors., where this Bench observed that it was not possible to direct the assessment so that it may operate against the legal heir to whom the notice had been given and remain ineffective for the remaining legal heirs who were not impleaded in the assessment proceedings. Following this decision, we hold that the plea of the assessee has to be accepted and the assessment has to be considered as null and void. We vacate the finding of the AAC accordingly and allow the appeal of the assessee. The appeal is allowed."
26. The CIT's request for reference under Section 27(1) of the WT Act, 1957, came to be rejected in R.A. No. 91/Asr/1993 vide order dt. 14th Nov., 1983. The learned CWT filed petition under Section 27(3) of the Act before the Hon'ble Punjab and Haryana High. Court seeking reference of the following reproduced question but the petition came to be dismissed vide judgment dt. 27th April, 1984 in W.T.C. No. 8 of 1984, (1984) 17 TLR 220 :
"Whether on the 'facts and in the circumstances of the case, the Tribunal, Amritsar is right in law in holding that the assessment order made by the WTO on 12th July, 1981 is null and void."
27. In other words we have judicial binding precedent of the Hon'ble jurisdictional High Court that even when one of the legal heirs does not question the validity of proceedings against him in respect of the assessment proceedings of his father but there being other legal representatives, consequent assessment framed cannot be valid and has to be treated as nullity.
28. In view of the above, my brother Shri R.K. Bali, has not been justified in trying to draw support from the judgments of the Hon'ble Gujarat High Court and the Madras High Court (supra) and should have accepted the legal contention of the assessee.
29. Holding that the assessee must succeed in respect of his preliminary legal objection that notices under Section 148 r/w Section 147(a) of the IT Act, 1961 issued to one of the legal heirs Shri Ashok Kumar only when the IT Department admittedly knew about the existence of other representatives, were void ab initio, and the assessments, which followed, did not suffer from curable infirmity but were non est in law, I allow the appeals.
30. To repeat, notices issued under Section 148 r/w Section 147(a) of the Act for the asst. yrs. 1979-80 and 1981-82 were invalid on the ground that these were served only on Shri Ashok Kumar treating him to be the sole legal heir, which was not permissible under law.
31. So far as the asst. yr. 1980-81 is concerned the notice under Section 143(2) of the Act, should also have been served on all the legal heirs and not solely on Shri Ashok Kumar. The resultant assessment on this score was, therefore, invalid.
32. Notices under Section 148 for the asst. yrs. 1983-84, 1984-85 and 1985-86 were equally invalid as they ought to have been served on all the legal heirs. Besides, the assessment orders for the last three years came to be made on Shri Ashok Kumar in the capacity of legal heir as if even during the said three years, the income accrued only to Shri Gurbax Lal individually and absolutely.' This was wholly illegal because Shri Gurbax Lal had died on 24th May, 1980 and no income could accrue to the deceased. The assessments of the last three years, therefore, have to be quashed on this ground alone.
33. In view of the above, it is not considered necessary to go into the merits, much less any justification in approving the CIT(A)'s approach in setting aside the assessments to the file of the AO to be re-processed again.
34. In the result, all the assessee's appeals are allowed on the legal issue.
ORDER UNDER Section 255(4) OF THE IT ACT, 1961 31st May 1993 There being difference of opinion between the two Members, who heard the appeals, the following point of difference is framed for reference to the President of the Tribunal under Section 255(4) of the IT Act, 1961 :
"Whether, on the facts and in the circumstances of the case, the proposed order of the AM in approving the Dy. CIT(A)/CIT(A)'s approach of setting aside the assessments for framing the same afresh can be said to be valid or the view taken by the JM that the notices issued under Section 148 r/w Section 147(a) of the IT Act, 1961 and served on Shri Ashok Kumar could not give any valid jurisdiction to the AO and the assessments, which followed and for which notices were issued to Shri Ashok Kumar for raising assessments in respect of Shri Gurbax Lal were void ab initio, is correct ?"
R.M. Mehta, Vice-President (As Third Member) 3rd Dec., 2001
1. The following point of difference has been referred to me as a Third Member under Section 255(4) of the IT Act, 1961:
"Whether, on the facts and in the circumstances of the case, the proposed order of the AM in approving the Dy. CIT(A)/CIT(A)'s approach of setting aside the assessment for framing the same afresh can be said to be valid or the view taken by the JM that the notices issued under Section 148 r/w Section 147(a) of the IT Act, 1961 and served on Shri Ashok Kumar could not give any valid jurisdiction to the AO and the assessments, which followed and for which notices were issued to Shri Ashok Kumar for raising assessments in respect of Shri Gurbax Lal, were void ab initio, is correct?"
2. At the outset I would like to mention that on the date of hearing fixed nobody was present on behalf of the assessee in spite of notice and efforts made by the registry of the Tribunal did not bear any fruit. Efforts were made to contact the assessee at the local address at Amritsar as also the local lawyer but to no avail Even earlier when the matter was listed before the Third Member in March, 2001 nobody attended to argue the reference. Considering that adequate opportunity has been allowed, the matter is old and neither the assessee nor his counsel is traceable I am inclined to dispose of this reference ex parte on merits considering the submissions of the learned Departmental Representative.
3. No doubt, the learned Members of the Division Bench have discussed the facts at length but for purposes of disposing of the present reference I only need to recapitulate these as follows:
4. The assessee during his life-time was being assessed as an individual in respect of the share of profit from various firms in which he was a partner. For the assessment years under consideration i.e., asst. yrs. 1979-80 to 1981-82 and asst. yrs. 1983-84 to 1985-86 assessments had been completed for the first three mentioned assessment years whereas no returns had been filed for the last three.
5. The AO received information from the ITO Central Circle n. Amritsar that the assessee had purchased FDRs amounting to Rs. 7,02,000 on various dates with the Punjab & Sind Bank, Hall Bazar, Amritsar. On the ground that the source of these FDRs had not bees, properly explained by the assessee and interest earned thereon had also not been disclosed in the returns originally filed for asst. yrs. 1979-80 to 1981-82 the AO reopened the assessments under Section 147 and the same were completed by making additions to the income as already assessed of the entire interest accrued on the fixed deposits alleged to be belonging to. the assessee. For the asst. yrs. 1983-84 to 1985-86 the interest income assumed to have been accrued on the said FDRs were assessed under Section 147 r/w Section 143.
6. During the course of the assessment proceedings it was explained on behalf of the assessee that the FDRs purchased with the Punjab & Sind Bank actually belonged to the firms M/s S.N. Jaiswal and M/s Gurdas Ram & Co. from where the amounts had been withdrawn. The AO, however, opined that since these had been purchased in the name of the assessee the interest income relating thereto was required to be assessed in the hands of the assessee and he accordingly completed assessments by making addition on account of interest accrued on the FDRs to the income already assessed in the hands of the assessee. The reassessment proceedings were finalised in the name of Shri Ashok Kumar legal heir of Shri G. Lal (Decd.) C/o M/s G.R. & Co., Rani Ka Bagh, Amritsar.
7. Being aggrieved with the orders passed by the AO the assessee preferred appeals before the first appellate authority on factual as well as legal grounds. The initial legal plea was to the effect that there was no justification for the AO to initiate proceedings under Section 147(a) as the source of the alleged FDRs was on account of withdrawals from the firms in which the assessee was a partner and the said FDRs, in fact, represented the margin money against the excise duty liability of Rs. 17,97,803 due from the firms M/s S.N. Jaiswal to the Collector of Excise. The further submission on the legal ground was that the assessee had left behind seven legal heirs at the time of his death on 24th May, 1930 and this fact was known to the AO who should have issued notices to all the legal heirs. It was pointed out to the first appellate authority that for estate duty purposes one Shri Bharat Bhushan had been made the accountable persons whereas in the income-tax proceedings notice had been issued to Shri Ashok Kumar only who, in fact, had not inherited anything from the estate of the late assessee who on his death had left behind more liabilities than assets. The plea in other words was that since notices under Section 148 had been issued and served on only one of the legal heirs i.e., Shri Ashok Kumar the assessments framed thereto were invalid and bad in law and required to be annulled. The first appellate authority, however, did not annul the assessments but restored the matter back to the file of the AO asking him to make enquiries for ascertaining the legal heirs so that notices could be issued to all of them. On the merits of the case relating to accrual of interest on fixed deposits the matter was set aside by the first appellate authority to the file of the AO with directions to find out as to whether the amount invested in the fixed deposits in the name of the assessee actually belonged to the assessee in his individual capacity or the same was out of the withdrawals from the various firms in which he was a partner.
8. As regards the asst. yr. 1980-81, however, the facts are slightly different since the appeal was heard by the CIT(A) as against the Dy. CIT(A) for the other assessment years the assessed income being more than Rs. 1 lakh. The CIT(A) confirmed the order of the AO in including the interest income on the FDRs in the hands of the assessee on the ground that no evidence had been filed as to whether the firm M/s N. Jaiswal had filed any return with the ITO at Delhi and whether any assessment had been framed in the said case at Delhi.
9. Being aggrieved with the orders passed by the first appellate authority for all the six assessment years the assessee filed appeals before the Tribunal and at which stage the orders were assailed on the legal ground that the notices issued under Section 148 for asst. yrs. 1979-80, 1981-82 and asst. yrs. 1983-84 to 1985-86 were bad in law. The assessee's counsel sought to categorise the cases into two groups, i.e., one for asst. yrs. 1979-80 and 1981-82 and for the remaining three assessment years into the second group. The plea was that the notices issued under Section 148 were invalid, as they had been served only on Shri Ashok Kumar treating him to be the sole legal heir of the deceased whereas, in fact, there were seven legal heirs. For asst. yr. 1980-81 the submission was that notice under Section 143(2) should have been served on all the legal heirs and not solely on Shri Ashok Kumar. Similarly, for asst. yrs. 1983-84 to 1985-86 the notices issued under Section 148 were assailed on the ground that these should have been served on all the legal heirs. It was also pointed out by the assessee's counsel that assessment orders for asst. yrs. 1983-84 to 1985-86 had been made on Shri Ashok Kumar in the capacity of a legal heir as even during the last three assessment years income accrued to the deceased individually and absolutely. The plea in other words was that these assessments were also illegal since after the death of the assessee on 24th May, 1980 no income could accrue to the deceased and income, if any, accrued to the legal heirs individually to the extent each one of them was entitled to inherit the property of the deceased which was represented by the alleged fixed deposits in his name. The plea of the learned counsel for the assessee was that on the aforesaid facts, the assessments for the later three years were required to be quashed.
10. The further submission was to the effect that income accruing after 24th May, 1980, i.e., the date of death of the assessee and assessable in asst. yr. 1981-82 could also not have been assessed in the hands of a angle legal heir and that to in his representative capacity. The plea was that all income accruing after 24th May, 1980 could be assessed only in the hands of the seven legal heirs separately and in proportion to their respective shares assuming but not admitting that the fixed deposits were the absolute property of the deceased. In support of the various arguments the assessee's counsel placed reliance on a number of judgments which are mentioned in para 15.2 of the order by the learned AM.
11. On behalf of the Department the learned Departmental Representative strongly relied on the orders passed by the first appellate authority contending that the FDRs stood in the personal name of the assessee and interest accruing therein was assessable in his hands. Another argument was to the effect that the AO was perfectly justified in reopening the assessments and making additions on account of interest accruing on the FDRs standing in the name of the assessee in the Punjab & Sind Bank.
12. As regards the legal arguments advanced on behalf of the assessee the plea of the Department was that the estate of the late assessee was administered by Shri Ashok Kumar his son and one of the legal heirs with the help of Mansa Ram his manager/accountant who represented the deceased before the IT authorities even prior to the death of the assessee. The further submission was to the effect that notices had been received by Shri Ashok Kumar, Bharat Bhushan and Mansa Ram in various proceedings and returns of income had been filed by Shri Ashok Kumar for all the assessment years beginning asst. yr.
1979-80 with the exception of asst yr. 1980-81 when the return was filed by Shri Bharat Bhushan his legal heir and on behalf of the family members. It was also submitted that notices for reopening of ex parte assessment completed under Section 144 on an application made under Section 146 for asst. yr. .1980-81 had been served on Shri Bharat Bhushan and all the proceedings had been attended by Shri Ashok Kumar and/or Mast Ram and all the appeals had been filed by Shri Ashok Kumar. The plea in other words was that Shri Ashok Kumar was performing all the aforesaid functions on behalf of the family members and the estate of the late assessee with the full knowledge and implied consent of all other legal heirs who had constructive notice of the various income-tax proceedings pending against the estate. In support of the arguments the learned Departmental Representative placed reliance on a number of reported decisions and these are mentioned by the learned AM in para 16.5 of his order.
13. In considering the facts of the case with reference to the arguments advanced aforesaid the learned AM who passed the initial order at the outset echoed the well propounded principle of law i.e. where an assessee who died intestate leaving behind more than one legal heir then the AO in order to assess the total income of the deceased had to proceed against all the legal heirs and he could not choose any one or more of them to the exclusion of others and that he must serve all notices including the notice under Section 148 on all the legal heirs/representatives. He, however, referred to certain exceptions to the aforesaid general principle of law and it was that if in a given case it was shown that the legal representative of the deceased-assessee who was present before the ITO either voluntarily or in response to a notice issued against the deceased but served upon the legal heir or his agent and allows the assessment proceeding to continue against the deceased without any objection and lets the ITO to make an order against the deceased after affording him full opportunity of being heard it would not be open to the legal representative so present to take up a plea at the appellate stage as a last resort or an afterthought that the proceedings taken and the assessment orders made against the deceased were a nullity specially when the consequence of permitting him to raise such a plea would be to debar a fresh assessment on him and in such a situation though a gross irregularity is involved the assessment would still be valid and effective qua the legal representative. For the aforesaid proposition the learned AM relied on the judgment of the Hon'ble Gujarat High Court in Sumantbhai C. Munshaw (1981) 128 ITR 142 (Guj). A similar view was found to have been expressed by the Hon'ble Madras High Court in V. Ramanathan v. CIT (1963) 49 ITR 881 (Mad) and which decision also the learned AM relied on.
14. Applying the interpretation of Section 159 of the IT Act, to the facts of the case the learned AM noted that whereas there were seven legal heirs of the deceased yet in fact the proceedings were initiated only against Shri Ashok Kumar as the legal heir of the deceased and it was he who attended the proceedings and was allowed due opportunity to explain the merits of the case. It was also noted as affect by the learned AM that Shri Ashok Kumar individual never objected to the proceedings before the AO and he never raised a plea to the effect that all the legal heirs should be impleaded. In view of the aforesaid the learned AM held that the proceedings under Section 148 had been validly initiated against Shri Ashok Kumar as legal heir of the deceased and the assessment consequent to assuming jurisdiction by issue of notice under Section 148 were valid. On the merits of the case vis-a-vis the addition itself the learned AM confirmed the view taken by the Dy. C1T(A) to direct the AO to make necessary enquiries and re-decide the matter. It may be relevant to mention at this stage that one of the directions given by the first appellate authority and which is adverted to by the learned AM in para 19.2 of his order was that the assessments were to be framed de novo in accordance with law after reasonable and proper opportunity of being heard to the assessee and after bringing other legal heirs on record. The learned AM also set aside the order of the CIT(A) for asst. yr. 1980-81 and directed the AO to re-process the assessment in the light of the directions given by the Dy. CIT(A) for the remaining assessment years.
15. The learned JM, however, did not concur with the view taken by the learned AM and although there was no difference between them about the relevant facts the difference arose on the legal aspect of impleading all the legal representatives as parties to the proceedings. In para 23 of his separate order the learned JM referred to the judgments of the Hon'ble Gujarat and Madras High Courts which had been relied upon by the learned AM but being of the view that the judgment of the Hon'ble Gauhati High Court in the case of CZT v. Jai Prakash Singh (1996) 219 ITR 737 (SC) was applicable the facts being identical he proceeded to record a different view. It was noted by the learned JM that in the aforesaid case before the Gauhati High Court the question was one of issue of notice under Section 143(2) and the failure to issue the same to all the legal representatives was held to be fatal to the assessments which followed. The view of the Hon'ble High Court (supra) as set out by the learned JM was that if the estate of a deceased was to be assessed to income-tax the estate must be fully represented by impleading all the legal representatives and serving notices under Section 143(2) on all of them who represented the entire estate. In case this was not done then the assessment proceedings and assessment orders passed thereon would cease to be valid proceedings and valid orders in the eye of law. The learned JM also referred to the judgment of the Amritsar Bench of the Tribunal in the case of Devinder Pal, Dharam Pal v. WTO (1983) 15 TLR 81 where according to him on identical facts the assessments had been annulled. It is noted from p 21 of the learned JM's order that in the aforesaid decision of the Amritsar Bench of the Tribunal the decision of the Hon'ble Gauhati High Court in Jai Prakash Singh's case (supra) was followed. The learned JM also referred to the rejection of the reference application filed against the said order initially by the Tribunal and thereafter by the Hon'ble Punjab & Haryana High Court. In considering the aforesaid facts as also the legal aspects of the matter the learned JM in the ultimate analysis held that notices under Section 148 r/w Section 147(a) issued to one of the legal heirs only were void ab initio and the assessments which followed did not suffer from curable infirmity but were non est in law. In annulling the same he allowed the appeals.
16. I have heard the learned Departmental Representative at length in support of the order passed by the learned AM and he at the outset submitted that the judgment of the Hon'ble Gauhati High Court in the case of Jai Prakash Singh (supra) relied upon by the learned JM was no longer a good law since the said decision had been reversed by the Hon'ble Supreme Court in CIT v. Jai Prakash Singh (supra) being the case of the same assessee. The learned Departmental Representative submitted that in fact the judgment of the learned AM was in conformity with the view now expressed by the Hon'ble Supreme Court as their Lordships had taken the view that non-issue of notices to all the legal heirs was an irregularity and not a nullity. The learned Departmental Representative emphasised that in the matter before the Hon'ble Supreme Court their Lordships have upheld the view taken by the Tribunal in confirming the order of the AAC whereby the assessments had not been cancelled but set aside to the ITO for framing them de novo after issuing notices to all the legal representatives. In concluding the learned Departmental Representative urged that the order passed by the learned AM be confirmed as against the order passed by the learned JM taking a view to the contrary.
17. I have perused at length the orders passed by the learned Members constituting the Division Bench and have also perused minutely the decision of the Hon'ble Supreme Court supra relied upon by the learned Departmental Representative As rightly contended by him the facts are quite identical to those considered in the present case and as already stated the entire decision of the Hon'ble JM is based on the judgment of the Hon'ble Gauhati High Court in Jai Prakash Singh's case (supra) which stands now reversed by the Hon'ble Supreme Court in Jai Prakash Singh's case (supra). At pp. 738 and 739 of the report their Lordships have observed as under :
"An omission to serve or any defect in the service of notices provided by procedural provisions does not efface or erase the liability to pay tax where such liability is created by distinct substantive provisions (charging sections). Any such omission or defect may render the order irregular depending upon the nature of the provision not complied with but certainly not void or illegal.
Held allowing the appeal, that the Tribunal was correct in holding that non-service of notice under Section 143(2) of the IT Act, 1961, to nine out of the ten legal representatives of the deceased S did not invalidate the assessment orders of the ITO relating to the asst. yrs. 1965-66, 1966-67 and 1967-68 and that it was at best an irregularity for which the AAC was justified in setting aside the assessments and it was not a case fit for cancellation of the assessments."
18. The learned AM in his order has approved the action of the first appellate authority in restoring the matter back to the file of the AO asking him to reprocess the same de novo but after bringing the other legal heirs on record. This direction is in conformity with the judgment of the Hon'ble Supreme Court in Jai Prakash Singh's case (supra) and I, therefore, have no hesitation whatsoever in confirming on the aforesaid facts and legal position the view expressed by the learned AM, Before I part with this reference I would like to mention that six assessment years were involved but in respect of three the assessee decided to avail of KVSS, 1998 and a separate order has already been passed. The present order, therefore, pertains to those assessment years for which the assessee did not choose to go in KVSS, 1998.
19. The matter may now be listed before the Division Bench for passing an order in accordance with the majority opinion.