TMI Blog2007 (7) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... e to some other person of some other property. The ld. AM further found that no notice was issued u/s 143(2) of the Income-tax Act on return filed on 25-2-2002. In the opinion of the ld. AM, the entire proceedings of assessment were illegal. In the opinion of the ld. AM, the entire proceedings of assessment were illegal. In the present case, the Assessing Officer further had no reason to believe that income had escaped assessment to take action u/s 147 of the Act. The ld. AM also held that conditions of section 147/148 were not satisfied. In the present case, notice was issued to an individual u/s 148 and return also filed by an individual and, thus, question of determination of status did not arise. If the Assessing Officer was of the opinion that notice has wrongly been issued to the individual, he had every right to issue fresh notice to the HUF but no such action was taken. He, therefore, annulled the assessment. Order ld. JM - Assessee had consented to be assessed in the status of the HUF although the notice was issued to the assessee in individual capacity. Had the assessee not consented to the assessment in the status of HUF, the Assessing Officer might have examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment. Any good or bad reason is not sufficient to sustain initiation of proceedings u/s 147/148 as valid. Therefore, agree with the reasons given by the ld. AM for holding that no valid proceedings were initiated in this case u/s 147/148 of the Income-tax Act. It is also settled law that assessment under the Income-tax Act has to be made in accordance with statutory provisions and not on agreement or consent of the assessee. The jurisdiction to make assessment can be assumed only on satisfaction of condition as prescribed under the law. It cannot be conferred with consent of the parties. Therefore, in my view, after having issued notice u/s 148 of the Income-tax Act to the individual, the ITO had no jurisdiction to assess HUF of the assessee. He could assume jurisdiction by issuing valid notice u/s 148 of the Income-tax Act after satisfying conditions laid down u/s 147. This was not done and, therefore, entire proceedings have rightly been held by the ld. AM to be illegal and without jurisdiction. In the case of K. Adinarayana Murty [ 1967 (4) TMI 1 - SUPREME COURT] , the notice was issued by the Assessing Officer to HUF but assessment was made in the status of the ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming of the impugned assessment under section 147 was bad in law and against the facts of the case. 5. That having regard to the facts and circumstances of the case, learned Commissioner of Income-tax (Appeals) has erred in law and on facts and confirming the action of the Assessing Officer in framing the impugned assessment without serving the notice and without giving opportunity. 6. That having regard to the facts and circumstances of the case learned Commissioner of Income-tax (Appeals) has erred in law and on facts in confirming the action of the Assessing Officer not allowing the deduction on account of section 54B. 7. In any view of the matter and in any case, disallowance of investments made on purchase of agricultural land amounting to Rs.6,00,000 was bad in law and against the facts and the circumstances. 8. That having regard to the facts and circumstances of the case learned Commissioner of Income-tax (Appeals) has erred in law to confirm the order of Assessing Officer and framing the assessment in the status of Hindu undivided family and the notice was issued under section 147/148 in the status of individual. 9. That having regard to the facts and circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration of Rs. 9,59,540. Though the assessee filed his return of income in the status of individual but as per note-sheet entry dated February 22, 2002, he was asked : You have claimed the status of the assessee as individual, whereas the lands sold were ancestral. Why the status of Hindu undivided family should not be taken. If the Hindu undivided family status is taken the rebate under section 54B is not allowable. Shri R. P. Gupta, advocate along with Shri Suraj Mal the asses see attended on February 28, 2002, stated as under : Shri R. P. Gupta along with Shri Suraj Mal appeared. Written submissions filed. He has stated that the status of the assessee should be taken as Hindu undivided family as the lands were ancestral. He agreed that the rebate under section 54B is not allowable to Hindu undivided family. In view of the above, the status of the assessee was held as Hindu undivided family and keeping in view the hon'ble Madras High Court judgment in the case of CIT v. G. K. Devarajulu [1991] 191 ITR 211 the rebate under section 54B was not allowed. In addition to the above, the land stated to have been purchased by the assessee not in his own name, but in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Selected Dalurband Coal Co. P. Ltd. [1996] 217 ITR 597 (SC) ; ITO v. Biju Patnaik [1991] 188 ITR 247 (SC) ; Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC) and looking to the facts of the case learned Commissioner of Income-tax (Appeals) held as under : In this case, there was information that land belonging to one Shri Suraj Mal had been sold and that income from capital gains in respect of this land has escaped assessment. The assessee filed a return and indeed showed income under the head ' Capital gains' but declared its status as that of the individual. At this stage while filing the return or while filing the challan the assessee claimed the status of the individual. But, however, it was only during the assessment proceedings that it came to the knowledge of the Assessing Officer that the land was ancestral land and it was only after the division of the ancestral land that the assessee had sold his share of land and these facts are so special to the present case that the cases relied upon by counsel do not apply to the facts of this case. At the time of initiation of proceedings under section 148 it is not the mandate of the law that the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to deduction under section 54B when the status is that of Hindu undivided family. 11. Before us, learned counsel for the assessee not only disputed the orders of the lower authorities, but also challenged that there was no valid notice to the assessee and hence the proceedings are void ab initio. It was submitted that notice dated December 12, 2000, at page 54 of the paper book was in the name of individual and the property referred to therein does not belong to the assessee. Even the notice dated November 29, 2000, at page 56 of the paper book was also issued to the individual. Return dated February 25, 2002, at page 51 of the paper book was also filed as an individual. Therefore, assessment could not have been made in the capacity of Hindu undivided family. No notice was ever served in the capacity of Hindu undivided family. It was further submitted that Tribunal has dealt with other cases relating to similar properties in respect of other assessees and assessment has been made in individual capacity. Our attention was drawn to the order of Tribunal/Commissioner of Income-tax (Appeals)/ Assessing Officer at pages 60-77 of the paper book. 12. The learned Departmental repres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us of the assessee as individual whereas the lands sold were ancestral, why the status of Hindu undivided family should not be taken. If the Hindu undivided family status is taken then the rebate under section 54B is not allowable. As regards the construction of house, you are required to explain the cost of construction. Case adjourned to February 28, 2002. Shri R. P. Gupta, advocate along with Shri Suraj Mal appeared. Written submissions filed. He has stated that the status of the asses see should be taken as Hindu undivided family as the lands were ancestral. As regards the cost of land on April 1, 1981, he has no objection for taking it at Rs. 2,00,000 per acre as taken in the other case of Shri Subh Ram, village Ishlampur (assessed by Addl. Commissioner of Income-tax, Spl. Range, Faridabad). He argues that the rebate under section 54B is not allowable to the Hindu undivided family. For the construction cost he has filed the valuation report which at Rs. 3,54,000 + Rs. 3,38,000 = Rs. 6,92,000. But assessee claimed the rebate under section 54B at Rs. 6,00,000. No bank interest or any other income admitted. Agricultural income has been shown at Rs. 40,000. 14. It wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the order passed by the learned Commissioner of Income-tax (Appeals). 19. In the result, the appeal filed by the assessee is dismissed. 20. P. K. Bansal (Accountant Member). I have gone through the proposed order of my learned brother, but I could not be able to agree with the said proposed order of my learned brother both with regard to the reasoning and the conclusion arrived at. I, therefore, propose to write my separate order along with the reasoning. 21. The brief facts of the case are that Shri Suraj Mal and his brother Bharat Singh inherited agricultural land in village Ishlampur, District Gurgaon on the death of their father intestate. As per the assessment order, the assessment proceedings in this case were initiated on December 22, 2000, by issue of notice under section 148 of the Income-tax Act to Suraj Mal. Individual on the basis of information that the assessee sold his agricultural land measuring 18B-08B situated in village Ishlampur to the company Kareshekh Builders (P) Ltd. for a consideration of Rs. 13.8 lakhs and 109B-110B to the company Vaibhav Software and Estate (P) Ltd. for a consideration of Rs. 84,62,500 during the period relevant to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable at page 51 of the paper book. No notice under section 143(2) was issued on this return. The Departmental representative could not produce the copy of the return filed on February 22, 2002, as recorded by the Assessing Officer in the order sheet or the copy of the notice being served on the assessee individual or Hindu undivided family capacity under section 143(2). 23. The impugned assessment was made on February 28, 2002, at determining the total income of Rs. 1,65,100 by recording following notings on the order sheet in the status of the Hindu undivided family without recording any reasons to believe in the case of the assessee-Hindu undivided family and without issuing any notice to the assessee-Hindu undivided family and on the basis of the return, the evidence for the filing of which are not on record : February 28, 2002, Sh. R. P. Gupta, advocate, along with Sh. Suraj Mal appeared. Written submission filed. He has stated that the status of the assessee should be taken as Hindu undivided family as the lands were ancestral. As regards the rate of the land as on April 1, 1981, he has no objection for taking it at Rs. 2,00,000 per acre as taken in the other case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer to have an agreed order passed by the Income-tax Officer and the order passed is sometimes not strictly in accordance with the return . . . . Had the assessee not consented to have an agreed order of assessment, the Income-tax Officer would have perhaps held an enquiry for determining his actual income for that year. The assessee having derived the benefit of an agreed order cannot be allowed to turn around and urge that such an order was incorrect or unwarranted. . . .' 20. In view of the above, there is no merit in the contentions raised by the assessee. The Assessing Officer was fully justified in holding the status of the assessee as that of the Hindu undivided family as against the claim of the status of an individual. 25. The action of the Assessing Officer denying the relief under section 54B was also confirmed and thus the appeal of the assessee was dismissed. 26. Before us, the learned authorised representative not only disputed the orders of the lower authorities, he also challenged that there was no initiation of the proceedings under section 147 in the case of the assessee. Neither any valid notice was issued to the assessee nor were reasons recorded i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uary 22, 2002 and finally on February 28, 2002, as is clear from the order sheet. Thus the question of any discussion on February 22, 2002, on return already filed and the claim of status therein does not arise. No notice under section 143(2) was issued on the return filed on February 25, 2002. Even on that ground the order passed under section 143(3) read with section 147 without issuing notice under section 143(2) is invalid. The assessment order, remand report and the order sheet contradict each other and no valid order can be made on the face of such contradictions and assumed facts. Regarding consent, the learned authorised representative argued that there cannot be any consent against the law, and any such order passed on the basis of such consent is bad in law. The authorised representative of the individual did not have any power of attorney from the assessee Hindu undivided family. There has been no investigation on the existence of such Hindu undivided family of late Shri Shera, on the basis of which the two brothers are stated to have formed their separate smaller Hindu undivided families. The only meaning allotted to such consent could be that the assessment is not to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue be adopted as on April 1, 1981. 29. The learned Departmental representative justified the action of lower authorities submitting that notice under section 148 was validly issued. But when questioned by the Bench, he agreed that there is no notice issued to the assessee-Hindu undivided family. Even there is no notice on record for initiating proceedings under section 148 on December 22, 2000. It was also conceded that no notice under section 143(2) was issued on the return filed by the assessee in individual capacity on February 25, 2002. The reasons were duly recorded on November 29, 2000, as is evident from page 58 of the paper book. With regard to specific query from the Bench whether any notice was issued in the name of Hindu undivided family, the learned Departmental representative replied in the negative but submitted that the assessee had consented to the assessment in the status of Hindu undivided family and therefore action of the Assessing Officer is justified. In support, the learned Departmental representative placed reliance on the decision of Munilal Shivnarain Kothari v. CIT reported in [1984] 149 ITR 567 (Raj). It was further submitted that even if there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary 22, 2002, although the learned Departmental representative has brought the assessment record. In my opinion, no valid assessment can be framed under section 143(3) on the return which was never filed or if filed until and unless the notice under section 143(2) is issued to the assessee. I have seen the order sheet and found that there is nothing on record for issuance of notice under section 143(2) either in respect of the return which Assessing Officer presumed to have been filed on February 22, 2002, or in respect of the return which was in reality filed on February 25, 2002. From this, it appears that the assessment has been framed by the Assessing Officer in a manner avoiding all the provisions of law to which he is duty bound to follow while framing the assessment. The Assessing Officer in our view should understand that he is exercising the quasi-judicial power and in doing so he must act in a fair and not a partisan manner. Although it is part of his duty to ensure that no tax which is legitimately due from the assessee should remain unrecovered, he must also at the same time not act in a manner as might indicate that he thought himself as if he is the creator or framer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub- section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. 32. From the reading of the above, it is clear that the Assessing Officer must have reason to believe that any income chargeable to tax has escaped assessment for any assessment year. Thus, reason to believe is necessary for reassessing or assessing the assessee under section 147 of the Income- tax Act. Reassessment means that the assessee has already been assessed and is being assessed again. Assessment simply means that the assessee has not already been assessed earlier and assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. P. Ltd. [1996] 217 ITR 597 (SC) ; Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC). The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied, firstly, the Assessing Officer must have reason to believe that income, profits or gains chargeable to income-tax have escaped assessment, and, secondly, he must also have reason to believe that such escapement has occurred by reason of either (i)omission or failure on the part of the assessee to disclose fully or truly all material facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f law. It was further observed (page 89) : Up to 31st March, 1989, two conditions were required to be fulfilled to confer jurisdiction on the Assessing Officer to act under section 147(b). They are (1) he must have information which comes into his possession subsequent to the making of the original assessment order, and (2) that information must lead to his belief that income chargeable to tax has escaped assessment, or that it has been under assessed or assessed at too low a rate or has been made the subject of excessive relief. After April 1, 1989, the position is somewhat different. Section 147 with effect from April 1, 1989, provides that where the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may apply the pro visions of sections 148 to 153. He may assess or reassess the income, which has escaped assessment. It is to be noted that section 147 as it stands with effect from April 1, 1989, not only merges clauses (a) and (b) of the pre-amended section 147 but also brings about a significant change in the preliminary requirement of certain conditions mandatory in character before reassessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income chargeable to tax. (b) The reasons to believe must be recorded by the Assessing Officer prior to the issuing of any notice to the assessee. (c) Before making the assessment, the Assessing Officer must serve notice on the assessee requiring him to furnish the return in accordance with the provisions of section 148(1). 35. Looking to the facts of the case, I find that none of the conditions as stipulated above has been complied with by the Assessing Officer what to talk of complying with all the conditions while passing the order in the case of the assessee Hindu undivided family. Rather, this fact was conceded by the learned Departmental representative but he stressed that the assessment order is valid because Shri Suraj Mal has given the consent during the course of the assessment proceedings relating to the individual, for being assessed in Hindu undivided family capacity. Under section 2(31), an individual and an Hindu undivided family are different persons and are regarded to be the separate assessee. Conditions complied with in the case of one assessee cannot be deemed to have been complied with in the case of another assessee even if that another assessee agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case also in our opinion will not assist the Revenue. The other case of CIT v. Durga Prasad More [1969] 72 ITR 807 (SC) relates to the issue whether the Department is bound to locate source of receipt assessable as income. Question was if an income liable to tax in India was earned by the assessee the Department had not to prove the source thereof. Once again this too did not relate to the determination of the status of the assessee and the validity of the initiation of the proceedings under section 147. Now coming to the case of Remfry and Sons v. CIT [2005] 276 ITR 1 (Delhi), in this case hon' ble High Court has dealt with the meaning of illegality which has been defined as contrary to law or unlawful and that it is distinguishable from irregularity, which has been defined as a want of adherence to prescribed rule or mode of proceedings and consist of omitting to do what is necessary. The word illegality on the other hand denotes a complete defect in jurisdiction or proceedings. In this case the assessee had not properly signed the MOA and the appeal was dismissed on this ground by the Commissioner of Income-tax (Appeals) and confirmed by the Tribunal, but the High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had escaped assessment for the assessment year 1949-50. Since for the assessment year 1954-55, the Income-tax Officer had taken the status of the respondent to that of an individual , he issued a notice under section 34 of the Indian Income-tax Act on March 22, 1957, to reopen the assessment for the assessment year 1949-50 in the status of an individual, having taken the sanction of the Commissioner of Income-tax to make the reassessment in that status. The respondent, however, filed a return in the status of an Hindu undivided family . Pending the proceedings the Appellate Assistant Commissioner in an appeal against the assessment for the year 1954-55 held that the status of the respondent was that of an Hindu undivided family. Thereafter the Income-tax Officer issued a fresh notice under section 34 on February 12, 1958, to reassess the income of the respondent for the year 1949-50 as an Hindu undivided family . A second return was duly filed pursuant to the second notice and the Income-tax Officer made an assessment on August 16, 1958. Both the notices were, however, in identical terms. The question was whether the assessment made pursuant to the second notice and the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta of his Hindu undivided family, the Department could not be permitted to change its case at the stage before the Supreme Court and contend that in reality the assessee was the family. 40. In view of aforesaid discussion, I hold that conversion of status from individual to Hindu undivided family and vice versa cannot take place on the same return. For this a fresh notice has to be issued to that the assessee who is proposed to be assessed on the income so evaded/escaped assessment. The cases of voluntary return filed for the first time under section 139(1), where the status is to be determined for the first time stand on totally different footing where the claim itself is to be determined. In the present case the notice was issued to the individual under section 148 and return also filed by the individual and thus the question of determination of status did not arise. 41. If the Assessing Officer was of the opinion that the notice had been wrongly issued to the individual he had every right to issue a fresh notice to the Hindu undivided family and proceed on that, and assess the individual to nil income, which has not been done. Thus even on this ground also the assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, in the period relevant to the assessment year 1996-97, on which, according to the Revenue, taxable capital gain had accrued. The Assessing Officer accordingly initiated action to assess the gain and issued notices under section 148 of the Income-tax Act. First notice dated November 28, 2000, is alleged to have been issued by the Income-tax Officer, Ward-2, Gurgaon. However, reasons as per the requirement of section 148(2) were found to be recorded on November 29, 2000. As notice could only be issued after recording reasons, the above illegality appears to have been noticed and, therefore, a second notice on December 12, 2000, was issued after recording the reasons which are as under : 1. The assessee is a resident of village Ishlampur, Gurgaon. 2. He has sold his agricultural land measuring 18B-08B to the company Kareshekh Builders (P) Ltd. during the assessment year 1996-97 for Rs. 13,80,000. 3. The land falls within 8 kms. of the municipal limits of Gurgaon. Hence, as per notification dated January 6, 1994, it falls within the definition of capital asset under section 2(14). 4. Hence, capital gain on the above sale is leviable. 5. The value of this land as on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er acre as taken in the other case/of Shri Subh Ram village Ishlampur (assessed by Addl. Commissioner of Income-tax, Spl. Range, Faridabad). He argues that the rebate under section 54B is not allowable to the Hindu undivided family. For the construction cost he has filed the valuation report which is at Rs.3,54,000 + Rs. 3,38,000 = Rs. 6,92,000. But the assessee claimed the rebate under section 54B at Rs. 6,00,000. No bank interest or any other income admitted. Agricultural income has been shown at Rs. 40,000. 49. The Assessing Officer accordingly completed the assessment in the status of the Hindu undivided family and took net assessable capital gain at Rs. 1,65,100 vide order dated March 31, 1996. 50. The assessee impugned the above assessment in appeal before the Commissioner of Income-tax (Appeals) and challenged validity of notices under section 148 of the Income-tax Act. The status in which the assessment was made was also challenged. The learned Commissioner of Income-tax (Appeals), after considering facts and circumstances of the case, did not find any force in any of the contentions raised in appeal before her. Accordingly the appeal was dismissed. 51. The cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember relied upon the decision in the case of CWT v. Ridhkaran [1972] 84 ITR 705 (Raj) where the question was whether return filed as Hindu undivided family could be assessed as individual without fresh return. The hon'ble High Court held that the Wealth-tax Officer is not competent to assess them in the status of individual without serving them with notice to file fresh return as individual. The learned Accountant Member categorically held that conversion of status from individual to the Hindu undivided family and vice versa cannot take place on the same return. In the present case, notice was issued to an individual under section 148 and return also filed by an individual and, thus, question of determination of status did not arise. If the Assessing Officer was of the opinion that notice has wrongly been issued to the individual, he had every right to issue fresh notice to the Hindu undivided family but no such action was taken. He, therefore, annulled the assessment. The learned Accountant Member, also in the penultimate paragraph of the proposed order, relied upon the decision of the Special Bench in the case of Rahul Kumar Bajaj [2000] 241 ITR (AT) 1 (Nagpur). 53. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 148(2) of the Income-tax Act on November 28, 2000, whereas reasons were recorded a day later i.e. on November 29, 2000. Perhaps, for the above reasons, the Assessing Officer ignored and issued second notice on December 12, 2000, (wrongly written as December 22, 2000, in the assessment order). I have already noted reasons under section 148(2) of the Income-tax Act for issuing the said notice. The said notice suffers from several legal infirmities. In the first place, the transaction noticed related to sale of some agricultural land sold to Kareshekh Builders (P.) Ltd. and not by the assessee. Further sale consideration is taken at a sum of Rs. 13,80,000. This is not the transaction with which the assessee was connected. So, notice was issued in respect of some other transaction carried by some other person. Secondly, the notice is admittedly issued to the assessee Suraj Mal, individual. No notice was issued to the Hindu undivided family in which status the assessment was subsequently made. The assessee has vehemently contended throughout that no notice under section 148 was served on the assessee. There is neither any finding nor is there any material to refute the claim of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ividual. The assessment of the Hindu undivided family is taken to be justified on the basis of the decision of the hon'ble Punjab and Haryana High Court in the case of Kanshi Ram Wadhwa [1982] 138 ITR 830. The headnote of the said case is as under : The essence of the scheme of the Indian Income-tax Act is that depreciation is allowed, year after year, on the actual cost of the assets as reduced by the depreciation actually allowed in earlier years. It follows, therefore, that even in the case of assets acquired before the previous year, where in the past no depreciation was computed, actually allowed or carried forward, for no fault of the assessee, the ' written down value' may, under clause (b) of section 43(6) also, be ' the actual cost of the assets to the assessee'. The profits under section 41(2) should be computed by deducting depreciation actually allowed under section 32 and not any notional depreciation allowable under section 32. Where the assessment order for 1971-72 showed that the assessee had agreed to his income being taken at a particular figure, and that depreciation had been allowed as agreed to by the assessee, and, for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family but assessment was made in the status of the individual. Their Lordships observed as under (headnote) : Under the scheme of the Income-tax Act, the ' individual' and the ' Hindu undivided family' are treated as separate units of assessment and if a notice under section 34 of the Act is wrongly issued to the assessee in the status of an individual and not in the correct status of an Hindu undivided family, the notice is illegal and all proceedings taken under that notice are ultra vires and without jurisdiction. Held, that since the correct status of the respondent was that of an ' Hindu undivided family', the first notice issued in the status of individual was illegal and without jurisdiction and the Income-tax Officer could not have validly acted on the return filed by the respondent pursuant to that notice, notwithstanding that, it was made in the status of an Hindu undivided family, and any assessment made on such a return would have been invalid. The Income-tax Officer was entitled to ignore that return as non est in law. The second notice issued on February 12, 1958, was valid and the return filed in response to that notice and the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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