TMI Blog1975 (6) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... TO, Special Circle-III, Calcutta, issued a notice under s. 34(1)(a) of the Indian I.T. Act, 1922, for the assessment year under reference upon Rama Devi Agarwalla and others. On receipt of the said notice, they moved an application under art. 226 of the Constitution before this court challenging the legality and validity of the said notice. By its judgment and order dated 12th December, 1958, this court held the said notice under s. 34(1)(a) and also the proceedings thereunder to be invalid and bad. Thereafter, on the 20th December, 1961, the ITO, Dist. III(2), Calcutta, issued a letter to Rama Devi Agarwalla whereby he intimated his intention to appoint her as the principal officer of the association of persons formed by the said five ladies under s. 2(12)(b) of the Indian I.T. Act, 1922, for taxing the said amount of Rs. 2,50,000 earned by the said association during the accounting year relevant to the assessment year in question. By her letter dated 29th December, 1961, Rama Devi Agarwalla intimated the ITO that she never was nor is the principal officer of any association of persons, and as such, she cannot be appointed as the principal officer and that each of the ladies m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, the Tribunal was justified in holding that there is no illegality either in the issue or the service of the notice under section 148 or in the assessment as made under section 144? 3. Whether, on the facts and in the circumstances of the case, Smt. Rama Devi Agarwalla can be treated as the principal officer of the alleged association of persons as alleged by the ITO ?" Mr. Pranab Pal, learned counsel on behalf of the assessee, made his submissions first on question No. 2. He contended that the statutory notice in the instant case issued on the 8th January, 1963, by the ITO, 'A' Ward, District III(2), Calcutta, was defective and did not conform with the provisions of the relevant sections of the I.T. Act, 1961. The defects in the notice, according to him, are respectively as follows: (a) The notice it appeared was addressed to Rama Devi Agarwalla and others. It was not stated, apart from Rama Devi Agarwalla, which other persons were being addressed in this notice. (b) It was not also stated in what capacity Rama Devi Agarwalla and the alleged others were being served with this notice. It was not stated whether Rama Devi Agarwalla was being served as principal offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued to him and that the assessee in compliance thereof had filed a return showing his correct status. The Tribunal held that this was a case of waiver of the defect in the notice following the decision of the Bombay High Court in the case of CIT v. Ramsukh Motilal [1955] 27 ITR 54 and following the decision of this court in the case of Tarak Nath Bagchi v. CIT [1946] 14 ITR 319 (Cal). This court, however, followed the observations of the Supreme Court in the case of Y. Narayana Chetty v. ITO [1959] 35 ITR 388 and held that the notice prescribed under s. 34 cannot be regarded as a mere procedural requirement. The proper service of the notice on the assessee confers jurisdiction on the ITO concerned to assess or reassess under s. 34. It was also held that if any notice was issued or if the notice issued was shown to be invalid then the validity of the proceedings taken by the ITO without a notice or in pursuance of an invalid notice would be illegal and void. This court held that in the facts before it the notice and the proceedings thereunder were illegal and void. Mr. Pranab Pal next cited the decision in the case of CIT v. Kurban Hussain Ibrahimji Mithiborwala [1971] 82 ITR 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led in Suit No. 2006 of 1963. In this affidavit it was also stated that the said HUF had been disrupted. There was no evidence to the contrary available to the revenue. It was then contended that the notices suffered from an infirmity inasmuch as they did not indicate on whom the said notices were required to be served. The decision in the earlier case of Sewlal Daga [1965] 55 ITR 406 (Cal) was relied on. Sabyasachi Mukharji J. followed the decision in the case of Sewlal Daga [1965] 55 ITR 406 (Cal) and held that the fact of disruption being established such notices did not state that they were being served on the petitioner in any particular capacity and the same were liable to be quashed. Lastly, Mr. Pranab Pal relied on a decision of the Delhi High Court in the case of Ravinder Narain v. ITO reported in [1974] 96 ITR 612. In this case notices for various assessment years were issued to eight individuals addressing them by their names and stating that their income were chargeable to tax which had escaped assessment within the meaning of s. 147 of the I.T. Act, 1961, and that such income would be assessed. The Delhi High Court noted that the words " association of persons " wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso contended that, in construing the statutory notice, extraneous evidence may be looked into to fill up any lacuna or cure the defects, if any, in such notice. Mr. B. L. Pal cited only one decision of the Supreme Court in the case of Balchand v. ITO reported in [1969] 72 ITR 197. In this case by a notice under s. 34 of the Indian I.T. Act, 1922, the assessee was called upon to file a return for the assessment year 1946-47. In the preamble of the notice it was recited: " whereas I have reason to believe that your income assessable to income-tax for the assessment years 1946-47, 1945-46 has- (a) escaped assessment ...... I, therefore, propose to assess the said income." In the body of the notice it was clearly recited that the appellant was called upon to deliver a return of his total world income assessable for the year ending 31st March, 1946. Admittedly this was for the assessment year 1945-46. The assessee contended that he had misunderstood the notice and had filed a return for the assessment year 1946-47. On these facts the Supreme Court held that though there was some negligence in drafting the preamble of the notice, it did not affect its validity because the notice its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by the Tribunal. The facts of this case were that a property was acquired by a deed of conveyance dated the 9th of January, 1922, by four purchasers in different shares. The three of the original purchasers and the nominee of the fourth purchaser jointly appointed and/or empowered one of the joint purchasers as their attorney for the purpose of managing the property, collecting rents and doing all other acts in respect of the said property on behalf of all the purchasers. In these circumstances, the ITO assessed the four persons as an association of individuals, in respect of the income derived from the property. It was contended by the assessee that individual assessments should have been made. The question which was referred to the High Court from the order of the Tribunal was: " (2) Whether, in view of the circumstances of the case, the petitioners will legally be treated as an association of individuals and whether the joint assessments of them had been rightly made?" In his judgment Derbyshire C.J. construed the word " associate " on its dictionary meaning. He held that the said word means to join in a common purpose, or to join in an action. In the facts of that case h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come was liable to be assessed in their hands in the status of an association of persons. The Tribunal further held that s. 9(3) of the Indian I.T. Act, 1922, did not apply in the facts and circumstances of that case. The question which was referred to the High Court was: " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessment made on the three widows of Balkrishna Purshottam Purani in the status of an association of persons is legal and valid in law ? " The Supreme Court considered the facts of that case and came to the conclusion that the widows succeeded as co-heirs and joint tenants to the estate with rights of survivorship and equal beneficial enjoyment. The Supreme Court also took note of the fact that it had been found by the Tribunal that the widows had not exercise their right to separate possession and enjoyment and that they had chosen to manage the property jointly, each acting for herself and the others and receiving the income of the property which they were entitled to enjoy in equal shares. The Supreme Court further found that with regard to the shares, dividends and interest on deposits which were re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were credited to the account of G. Murugesan Brothers in the books of the firm of Nadar. In such books there were separate accounts for the four grandsons and the incomes and expenses of such persons were credited and debited to such individual accounts. On the basis of the above facts, the ITO assessed the assessee during the relevant years in the status of an association of persons. This assessment was confirmed by the Commissioner; but on further appeal the Tribunal held that the assessee should be assessed as individuals and not as an association of persons. The question which was referred to the High Court was: " Whether, on the facts and in the circumstances of the case, the department was justified in assessing the assessee in the status of an association of persons ?" The Supreme Court considered the earlier decisions including the decision in the case of B. N. Elias [1935] 3 ITR 408 (Cal) and its own decision in the case of Indira Balkrishna [1960] 39 ITR 546 (SC) referred to earlier. The Supreme Court reiterated that such decisions correctly laid down the law for determining what was an association of persons within the meaning of s. 3 of the Indian I.T. Act, 1922 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . B. L. Pal contended that from these facts the inevitable conclusion followed that the assessee had voluntarily embarked on a joint enterprise with the object of making gains. On a careful consideration of such facts we are unable to agree with the contentions of Mr. B. L. Pal. The facts on which he relies by themselves or jointly, in our opinion, cannot determine the question conclusively one way or the other. On the other hand, we find that there are other findings of the Tribunal which go to show the position to be the contrary. We note that all the conclusions which could have been drawn from such facts have not been so drawn or recorded. The Tribunal had also found that the said ladies had drawn out their separate funds to purchase the property and that they had a distinct share in the ownership of the property. Reading the order of the Tribunal we find that there is no specific finding that the five ladies had intended to embark upon a joint enterprise. There is also no finding that there was any arrangement or agreement or any common aim or purpose or volition of the persons concerned. It is to be noted that after the purchase there is no evidence of any common manageme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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