TMI Blog2001 (12) TMI 883X X X X Extracts X X X X X X X X Extracts X X X X ..... 1980-81 (-) 3,10,760 5-2-1982 19-3-1983 (-) 2,41,590 1981-82 ₹ 1,605 10-1-1983 18-11-1983 ₹ 1,605 1983-84} No returns filed. 1984-85 1985-86 3. Subsequently the Assessing Officer received information from the Income Tax Officer, Central Circle-II, Amritsar that the assessee had purchased FDRs amounting to ₹ 7,02,000 with Punjab Sind Bank, Hall Bazar, Amritsar, whose details are as under: - No. dt. of FDR Amount of FDR 804311 26-9-78 ₹ 40,000 804312 -do- ₹ 40,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 (deceased) C/o M/s. Gurdas Ram Co., Rani Ka Bagh, Amritsar. 8. As already mentioned, for the Assessment years 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 (deceased). However, for the Assessment year 1982-83 no return was filed and no proceedings were initiated. For the Assessment years 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 Assessing Officer, 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 Assessing Officer under section 143(3)/147 was ille ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s set aside by the learned first Appellate Authority the DCIT(A) to the file of the Assessing Officer with the directions to find out as to whether the amount invested in the Fixed Deposits in the name of Sh. Gurbax Lal (deceased) 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. year 1980-81, on account of the assessed income being more than ₹ 1 lac, the appeal was heard by the learned CIT(A) as first Appellate Authority who confirmed the order of the Assessing Officer 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 M/s. S.N. Jaiswal at Delhi. 13. The assessee is in second appeals before us in respect of all the 6 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., assessment years 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted 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 24-5-1980, the date of death of Sh. Gurbax Lal, assessable in the assessment year 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 24-5-1980 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: - Jai Prakash Singh v. CIT [1978] 111 ITR 507 (Gauhati). Chooharmal Wadhuram v. CIT [1971] 80 ITR 360 (Guj.). First Additional ITO v. Mrs. Suseela Sadanandan [1965] 57 ITR 168/79 ITR 324 (sic) (SC) E. Alfred v. First Addl. ITO [1951] 32 ITR 401 (Mad.). 16. Sh. B.L. Razdan, learned Sr. DR, supported the order of the Dy. CIT(A) in relation to assessment years 1979-80, 1981-82, 1983-84 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 146, for assessment year 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 Sr. DR, 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 ACED 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. DR, relied on the decision of Hon'ble Supreme Court as in Mrs. Suseela Sadanandan's case (supra) Hon'ble Gujarat Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umar as legal heir of Sh. Gurbax Lal (deceased) who attended the proceedings and was allowed full opportunity to explain the source of FDRs amounting to ₹ 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 Assessing Officer and no such plea that all the legal heirs should be impleaded was taken before the Assessing Officer. Accordingly, we are of the opinion that the proceedings under section 148 were validly initiated against Sh. Ashok Kumar as legal heir of late Sh. Gurbax Lal (deceased) 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 Assessing Officer that the above FDRs were acquired by Sh. Gurbax Lal (deceased) 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. Jaiswal to the Collector of Excise. However, the case of the Department is that out of the five FDRs, four were taken by the decease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer to be re-processed again in the light of the directions of learned Dy. CIT(Appeals) in the impugned order for the assessment years 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 assessment year 1980-81 in ITA No. 345/ASR/1988 is treated to have been allowed for statistical purposes. Per S. Grover, Judicial Member 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eased) wherein Sh. Bharat Bhushan signed as the Accountant Member. 14. It was submitted that the notices issued under section 148 for the assessment years 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 7 legal heirs, list of which has been furnished to us at page 3 of the Paper Book, which are as under: - (i) Smt. Kaushadalya Devi Wife Sh. Ashok Kumar Son Sh. Bharat Bhushan Son Sh. Ramesh Kumar Son Smt. Usha Rani Daughter Smt. Pushpa Rani Daughter Smt. Vandana Daughter As regards assessment year 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 assessment years 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that the Fixed Deposits of ₹ 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 Bali 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 Parkash Singh (supra) 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Parkash Singh v. CIT reported in 111 ITR 507, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings 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 read with section 147(a) of the Income-tax Act, 1961 issued to one of the legal heirs Shri Ashok Kumar only when the Income-tax 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 read with section 147(a) of the Act for the assessment years 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of the case, the proposed order of the Accountant Member in approving the DCIT(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 Judicial Member that the notices issued under section 148 read with section 147(a) of the Income-tax Act, 1961 and served on Shri Ashok Kumar could not give any valid jurisdiction to the Assessing Officer 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 Assessing Officer 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 ₹ 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 24-5-1980 and this fact was known to the Assessing Officer 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 notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 983-84 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 assessment years 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 24-5-1980 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 ld. 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 24-5-1980 i.e. the date of death of the assessee and assessable in assessment year 1981-82 could also not have been assessed in the hands of a angle legal heir and that to in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate. In support of the arguments the ld. D.R. placed reliance on a number of reported decisions and these are mentioned by the ld. Accountant Member in para 16.5 of his order. 13. In considering the facts of the case with reference to the arguments advanced aforesaid the ld. Accountant Member 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 Assessing Officer 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 I.T.O. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eard to the assessee and after bringing other legal heirs on record. The ld. Accountant Member also set aside the order of the CIT(A) for assessment year 1980-81 and directed the Assessing Officer to re-process the assessment in the light of the directions given by the DCIT(A) for the remaining assessment years. 15. The ld. Judicial Member, however, did not concur with the view taken by the ld. Accountant Member 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 ld. Judicial Member referred to the judgments of the Hon'ble Gujarat and Madras High Courts which had been relied upon by the ld. Accountant Member but being of the view that the judgment of the Hon'ble Gauhati High Court in the case of Jai Prakash Singh (supra) was applicable the facts being identical he proceeded to record a different view. It was noted by the ld. Judicial Member 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ld. D.R. urged that the order passed by the ld. Accountant Member be confirmed as against the order passed by the ld. Judicial Member taking a view to the contrary. 17. I have perused at length the orders passed by the ld. Members constituting the Division Bench and have also perused minutely the decision of the Hon'ble Supreme Court supra relied upon by the ld. D.R. 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 Judicial Member is based on the Judgment of the Hon'ble Gauhati High Court in Jai Prakash Singh's case 111 ITR 507 (supra) which stands now reversed by the Hon'ble Supreme Court in Jai Prakash Singh's case (supra). At pages 738 and 739 of the report their Lordships have observed as under : - An omission to serve or any defect in the service of notic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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