TMI Blog1967 (8) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in Karachi and he carried on business in partnership with one Muljibhai in the name of Daulatram Chooharmal at Karachi. Subsequent to the partition of India, the assessee and Muljibhai came down to India and it is common ground that the partnership between them was dissolved by an agreement dated 7th November, 1948. The record does not show that the assessee was assessed to income-tax in Karachi for the assessment years 1946-47 and 1947-48 and the case before the revenue authorities throughout proceeded on the basis that no assessment of the assessee to income-tax was made in Karachi for those assessment years. The assessee died in India on 28th August, 1952, leaving behind him Daulatram and others as his legal representatives. Now it appears that in the books of account of a firm named Messrs. Narayandas Purshottamdas, which was carrying on business in Petlad, there was an account in the name of " Daulatram Chooharmal Vahivatkarta Shah Muljibhai Dahyabhai, Karachi " and in that account diverse amounts were credited on different dates between 31st January, 1946, and 6th August, 1946. The total amount credited during the financial year 1945-46 came to Rs. 70,000 and that credite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tram and others. These two notices were served only on Daulatram and were not served on the other legal representatives. The notice for the assessment year 1946-47 was served on Daulatram on 29th March, 1955, while the notice for the assessment year 1947-48 was served on him on 29th March, 1956. Pursuant to these two notices Daulatram attended before the Income-tax Officer from time to time and ultimately the assessment for the assessment year 1946-47 was completed on 24th March, 1956, and the assessment for the assessment year 1947-48 was completed on 31st January, 1957. There were appeals against the assessment orders and the Appellate Assistant Commissioner set aside the assessment orders and directed the Income-tax Officer to make fresh assessments after giving the assessee a proper opportunity of being heard. The Income-tax Officer thereupon gave a proper hearing to the assessee and made fresh orders of assessment. The Income-tax Officer took the view that the amounts deposited in the name of Daulatram Chooharmal with Messrs. Narayandas Purshottamdas belonged wholly to the assessee and he accordingly added a sum of Rs. 70,000 in the assessment for the assessment year 1946-47 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments for the years 1946-47 and 1947-48 could be made on the assessee in respect of the deposits in the account of Daulatram Chooharmal with the Petlad firm without the amount being first assessed in the hands of the firm of Messrs. Daulatram Chooharmal ? (3) If the answer to question No. (2) is in the affirmative, whether, on the facts and in the circumstances of the case, the proceedings for the assessment of the amounts in question could be initiated under section 34(1)(a) and not under section 34(1A) ? (4) Whether, on the facts and in the circumstances of the case, the assessments for the years 1946-47 and 1947-48 could be completed on the assessee in the status of an individual when the sanction of the Commissioner for starting proceedings was given in respect of an association of persons? (5) Whether, on the facts and in the circumstances of the case, proceedings under section 34(1)(a) for the assessment year 1946-47 and 1947-48 were validly initiated by serving notices under section 34(1)(a) on Daulatram, who was only one of the legal heirs of the deceased ? " We may point out at the outset that question No. 3 was not pressed by Mr. Dwarkadas, learned advocate appear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat as in the assessment year 1946-47, the assessee was resident in a territory which was then a part of British India, the assessee was a resident within the taxable territories as defined in section 4(1)(b), though those territories subsequently became part of Pakistan and, therefore, the assessee could not dispute his liability to be taxed under section 4(1)(b)(ii). This decision concludes the determination of the first question against the assessee. Some reliance was placed on behalf of the assessee on the agreement for avoidance of double taxation between India and Pakistan but we do not see how that agreement helps the assessee in disputing his liability to be assessed to Indian income-tax. There is nothing in this agreement which says or even remotely suggests that an assessee who was resident in territories, subsequently forming part of Pakistan, during the previous years relevant to the assessment years 1946-47 and 1947-48, should not be assessable in the taxable territories under the Indian Income-tax Act. The first question must, therefore, be answered against the assessee. The position of the assessee is equally hopeless, when we turn to the second question. We will a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmal with Messrs. Narayandas Purshottamdas represented the undisclosed profits of Chooharmal Wadhuram and the Income-tax Officer sought the sanction of the Commissioner for the purpose of assessing Chooharmal Wadhuram under section 34(1)(a). It can, therefore, hardly be disputed that the sanction of the Commissioner sought by the Income-tax Officer was for initiation of proceedings for reassessment of the profit derived by Chooharmal Wadhuram during his lifetime and the assessment was sought to be made by the Income-tax Officer on Daulatram and others as legal representatives of Chooharmal Wadhuram under section 24B(1). This assessment could obviously be made only in the status of individual and not in the status of association of persons. But through some oversight the applications made by the Income-tax Officer to the Commissioner showed the status of the assessee as association of persons. This was clearly a mistake and the question is whether this mistake had any invalidating consequence on the subsequent proceedings for assessment initiated by the Income-tax Officer after the grant of the sanction by the Commissioner. We do not think that the wrong description of the status of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Income-tax Officer, therefore, issued a fresh notice to the respondent in the status of Hindu undivided family and sought to proceed against the Hindu undivided family for the purpose of reassessing its income. The respondent challenged the initiation of the proceedings by issue of a fresh notice and the ground of challenge was that the respondent having already filed a return in the status of Hindu undivided family pursuant to the first notice, it was not competent to the Income-tax Officer to issue a fresh notice to the respondent in the status of Hindu undivided family under section 34(1)(a). The Supreme Court negatived the challenge on the ground that the sanction of the Commissioner having been given to the initiation of proceedings against the respondent in the status of individual and the first notice having been issued pursuant to such sanction, the proceedings initiated by the issue of such notice were invalid and ultra vires in so far as they were directed towards reassessing the income of the respondent in the status of a Hindu undivided family and it was, therefore, competent to the Income-tax Officer to issue a fresh notice against the respondent in the status of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice was served only on Daulatram and was not served on the other legal representatives. On these facts the assessee contended that since the notice was not served on all the legal representatives of Chooharmal Wadhuram, the proceedings were not validly initiated and the orders of assessment made against the assessee were invalid. The Tribunal took the view that so far as the account in the name of Daulatram Chooharmal with Messrs. Narayandas Purshottamdas was concerned, Daulatram had operated on this account and all the adjustments which had been made in this account were the result of negotiations between Daulatram and Messrs. Narayandas Purshottamdas and Daulatram had, therefore, administered that part of the estate of Chooharmal Wadhuram which consisted of the amounts deposited in this account and in the circumstances the notice served on Daulatram as legal representative of the deceased was sufficient to bind his estate. The validity of this view taken by the Tribunal was challenged before us on behalf of the assessee and in support of the challenge strong reliance was placed on a decision of the Supreme Court in First Addl. Income-tax Officer v. Mrs. Suseela Sadanandan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceed to assess the total income of the deceased against all the heirs and the notice must, therefore be served on all the heirs. But the Supreme Court observed that the principle laid down in Daya Ram v. Shyam Sundari, that, where a plaintiff or an appellant after diligent and bona fide enquiry ascertains who the legal representatives of a deceased defendant or respondent are and brings them on record within the time limited by law, there is no abatement of the suit or appeal, that the impleaded legal representatives sufficiently represent the estate of the deceased and that a decision obtained with them on record will bind not merely those impleaded but the entire estate including those not brought on record, although laid down in the context of suits or appeals, is one of general application and there is no reason why this principle cannot be invoked in the case of assessment of income of a deceased person in the hands of his legal representatives. If this principle is applicable in the case of assessment of the income of a deceased person in the hands of his legal representatives as the Supreme Court was prima facie inclined to hold, it is necessary to have a finding of the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X
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