TMI Blog1985 (7) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer (" the ITO ") that the assessee, Mohanlal (deceased), failed to disclose the material facts truly and correctly and as such income has escaped assessment. The case of the assessee was that a plot was purchased for Rs. 9,900 on March 27, 1965. A house was constructed on the plot and the construction was completed by March, 1966. The major portion of the construction was completed in the assessment year 1966-67 and a sum of Rs. 27,387 was spent. A sum of Rs. 650 only was spent by Mohanlal Gupta (assessee) in the assessment year 1967-68. The cost of construction, as per the version of the assessee, was Rs. 31,200. The Income-tax Officer estimated the cost of construction at Rs. 38,000. This cost of construction estimated by the Income-tax Officer was wrong according to the assessee. After issuance of a notice under section 148 of the Act for the aforesaid assessment years, Mohanlal filed a return declaring income below the taxable limit, on March 13, 1974. After the filing of the return, he died on December 7, 1974. After his death, a notice under section 142(1) of the Act was issued in the name of Mohanlal Gupta (deceased-assessee). In other words, the notice was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Tribunal dismissed the appeal and agreed with the Appellate Assistant Commissioner that the assessments were rightly annulled. In this view of the matter, the Tribunal did not go into the other points raised before it. An application was filed by the Commissioner of Income-tax under section 256(1) of the Act. Hence, the aforesaid question has been referred. We have heard Mr. B.R. Arora, for the Revenue, and Mr. Rajesh Balia, learned counsel for Gyan Prakash (non-petitioner). The only point involved in this reference is whether the Appellate Assistant Commissioner was right in annulling the assessment for the assessment year 1965-66. There is no dispute that after service of the notice under section 148 of the Act, Mohanlal Gupta had filed the return on March 13, 1974, declaring income below the taxable limit. It was after the filing of the return that he died on December 7, 1974. The notice under section 142(1) of the Act was issued to Mohanlal Gupta though he had already died before the issuance of it. That notice was received by his son, Gyan Prakash Gupta, and on receipt of that notice, he apprised the Income-tax Officer by his letter dated December 11, 1975, about the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Commissioner. The question is whether the completion of the assessment without serving notice under section 143(2) of the Act, on all the legal representatives of the deceased-assessee, renders the assessment order a nullity, so that it has to be annulled or failure to serve notices on the legal representatives is not a defect of a fundamental nature so as to warrant annulling of it, but merely makes the assessment order invalid. Mr. B. R. Arora, learned counsel for the Revenue, has referred to Estate of Late Rangalal Jajodia v. CIT [1971] 79 ITR 505 (SC) and Kamalesh Kumar Mehta v. CIT [1977] 106 ITR 855 (Cal). On facts, Estate of Late Rangalal Jajodia's case [1971] 79 ITR 505 (SC) is distinguishable from the case on hand. However, the important observations in this decision are to the effect that an assessment proceeding does not cease to be a proceeding under the Act merely by reason of want of notice and that it will be a proceeding liable to be challenged and corrected. Before the Calcutta High Court, in Kamalesh Kumar Mehta's case [1977] 106 ITR 855, at the time of the assessment by the Income-tax Officer, the assessee had died and no notice was given to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the old Act and directed the Income-tax Officer to make a fresh assessment after issuing notice under section 23(2) of the old Act. The Tribunal had confirmed that order. R. S. Pathak J., as he then was, speaking for the court, held that failure of the Income-tax Officer to issue a notice under section 23(2) does not call for an order by the Appellate Assistant Commissioner annulling the assessment and the Appellate Assistant Commissioner was right in merely setting aside the assessment. It was observed as under (at page 199): " That is a power to be exercised where the assessment Proceeding is nullity in the sense that the Income-tax Officer had no jurisdiction ab initio to take the Proceeding. A proceeding is a nullity when the authority taking it has no jurisdiction either because of want of pecuniary jurisdiction or of territorial jurisdiction or of jurisdiction over the subject-matter of the proceeding. A proceeding is a nullity when the authority taking it has no power to have seisin over the case. The omission of the Income-tax Officer to issue a notice under section 23(2) does not affect the ab initio jurisdiction enjoyed by the Income-tax Officer in respect of the proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 and 514): " Thus, it was the legal duty of the Appellate Assistant Commissioner and also of the Tribunal to annul the assessments in the instant case. After annulment of the assessment orders, if law permits and there is no bar under the limitation prescribed by law, fresh assessment proceedings may be drawn up in appropriate cases but instead of passing an annulment order, by passing an order setting aside the assessments and directing completion of the assessments by issuing notices on the remaining legal representatives, as has been done in the instant case, the authority may not be allowed to nullify the provisions of law as laid down in section 153 of the Act." In that case, it was held that the estate of the deceased was not fully represented, for, on the death of deceased B. N. Singh, the entire estate of the deceased B. N. Singh was represented by his legal representatives. It was also observed as under (at page 513): " That being so, by serving a notice on one of the legal representatives and without serving notices on the other nine legal representatives and without proving that one of the legal representatives, namely, Jaiprakash Singh, represented the other leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make any inquiry and there was, therefore, no inquiry, much less a diligent and bona fide inquiry. It is, therefore, not possible to hold that service of the notices on Daulatram alone was sufficient to bind the estate of Chooharmal Wadhuram. Daulatram did not completely represent the estate of the deceased, the estate was only partially represented and, therefore, the assessment of the income of the deceased, Chooharmal Wadhuram, was not in compliance with the requirements of section 24B, sub-section (2). " While repelling the contention raised on behalf of the Revenue, it was held that in order to assess the income of a deceased person, the assessment must be made on all those who represent his interest or estate wholly and completely and that there must be complete representation of the estate of the deceased in the proceedings. Much emphasis was laid on the following observations (at page 376): " The correct view seems to be that if the Income-tax Officer wants to assess the income of a deceased person after his death, he must serve notice on all the legal representatives so that the interest or estate of the deceased is completely represented before him and the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rders completed without service of notice under section 143(2) cannot be said to be ab initio void and when it is not so, the assessment order cannot be annulled. Having considered the reasons given by the Allahabad and Jammu and Kashmir High Courts in Sant Babu Mohan Singh's case [1973] 90 ITR 197 (All) and Rattan Lal Tiku's case [1974] 97 ITR 553 (J K), we are of the opinion that, in the circumstances of the case which have already been adverted to above, the order that the Appellate Assistant Commissioner should have passed on account of the failure of the Income-tax Officer to serve notices on all the legal representatives of Mohanlal Gupta or for that matter on Smt. Dayawati Gupta, in whose favour, the will was executed by the deceased, Mohanlal Gupta, was to set aside the assessment order passed by the Income-tax Officer in respect of the assessment year 1965-66 and not to annul the assessment. We respectfully agree with the view taken by the Allahabad High Court and the Jammu and Kashmir High Court, as it is in conformity with the provisions of section 143(3) and section 159 of the Act. Mr. Rajesh Balia, learned counsel for the assessee, submitted that in view of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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