2003 (8) TMI 173 - AT - Income Tax

Summary

Issues Involved:
1. Validity of notice under section 148 issued to a deceased assessee.
2. Requirement of issuing notice to all legal heirs.
3. Participation of legal heirs in assessment proceedings.
4. Jurisdiction of the Assessing Officer (AO) in light of procedural irregularities.
5. Applicability of legal precedents on the issue.

Issue-wise Detailed Analysis:

1. Validity of notice under section 148 issued to a deceased assessee:
The revenue contended that the notice under section 148 was validly issued to one of the legal heirs of the deceased assessee. The notice addressed to "Shri Shahid Atiq L/H of Late Shri S.H. Atiquer Rehman" was served on 27-3-1997. The Assessing Officer (AO) completed the assessment, adding lease money to the declared income, and initiated penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961.

2. Requirement of issuing notice to all legal heirs:
The assessee challenged the validity of the notice under section 148 on the grounds that it was not issued to all legal heirs of the deceased, which included his wife, sons, and daughters. The CIT(A) annulled the assessment, observing that the notice was not validly issued as it was not addressed to all legal heirs, thereby questioning the AO's jurisdiction.

3. Participation of legal heirs in assessment proceedings:
The revenue argued that since one of the legal heirs participated in the proceedings, the validity of the notice could not be challenged subsequently. The legal heir, Shri Shahid Atiq, did not object to the notice during the assessment proceedings and even filed appeals against the AO's order.

4. Jurisdiction of the Assessing Officer (AO) in light of procedural irregularities:
The CIT(A) admitted additional grounds challenging the AO's jurisdiction due to the procedural irregularity of not issuing notice to all legal heirs. However, the revenue relied on the Supreme Court's decision in CIT v. Jai Prakash Singh, which held that non-service of notice to all legal representatives is an irregularity that does not invalidate the assessment if one legal heir participates in the proceedings.

5. Applicability of legal precedents on the issue:
The revenue cited various precedents, including:
- CIT v. Jai Prakash Singh, where the Supreme Court held that non-service of notice to all legal representatives is a curable irregularity.
- Chatturam v. CIT, where the Federal Court observed that the jurisdiction to assess and the liability to pay tax are not conditional on the validity of the notice.
- Estate of late Rangalal Jajodia v. CIT, where the Supreme Court held that lack of notice to one legal representative only made the assessment defective, not void.
- A.K.M. Govindaswamy Chettiar v. ITO and Dr. H.R. Rai v. CIT, where procedural irregularities in notice service were deemed non-fatal if the assessee participated in the proceedings.

Conclusion:
The Tribunal found that the legal heir's participation in the assessment proceedings without objecting to the notice's validity cured any procedural irregularity. The CIT(A)'s annulment of the assessment was set aside, and the revenue's appeals for both assessment years 1992-93 and 1993-94 were allowed, restoring the AO's assessment orders.