High Court Of Allahabad
CIT vs. Shital Prasad Kharag Prasad
Sections 148, 283, 292B
Asst. Year 1964-65
R.K. Agrawal & Prakash Krishna, JJ.
IT Ref. No. 89 of 1986
6th December, 2004
Counsel Appeared : Dhananjay Awasthi, for the Revenue Judgment
Prakash Krishna, J. :
The Tribunal, Allahabad, at the instance of the IT Department has referred the following question of law under s. 256(1) of the IT Act, 1961 (hereinafter referred to as the Act) for opinion to this Court :
“Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that neither a notice under s. 148 of the IT Act, 1961, had been issued to the assessee nor it had been validly served?”
2. The asst. yr. 1964-65 is involved in the present reference. The brief facts of the case are as follows :
The proceedings giving rise the present reference arose out of reassessment proceedings under s. 147 of the Act. There was a Hindu joint family known as M/s Shital Prasad Kharag Prasad. This family consisted of Raja Sir Moti Chand, his younger brother, Gokul Chand, the sons of latter and the sons of predeceased brother, Shri Mangal Prasad. Raja Sir Moti Chand who was originally the Karta of the family died in 1934 leaving no male issue and was succeeded by Shri Gokul Chand as Karta, who also died in 1958. Ultimately, Shri J.B. Gupta became the Karta of the family. The family was enjoying income from business, house property and Zamindari properties spread over at different places including Varanasi, Delhi and Calcutta. After death of Sir Moti Chand in 1934, the business of family virtually came to a close and a separation took place between the two branches; one consisting of Shri Gokul Chand and his sons and the other consisting of Shri J.B. Gupta and sons. A dispute had arisen among the family members which led to the filing of the suit No. 49 of 1936 by Shri J.B. Gupta against his uncle, Shri Gokul Chand, in 1936. A preliminary decree for partition was passed. Ultimately, the matter went before the Supreme Court in appeal being MCA No. 1219 of 1969. One of the points involved was the date of separation. The matter was referred to arbitrator by the Supreme Court. On 29th April, 1973, the arbitrator gave the award which was confirmed by the Supreme Court on 18th July, 1973. The effect of this award was that the family was disrupted on the above date. The ITO on 27th April, 1976, passed an order under s. 143(3)/171 of the Act regarding the fact of partition of 18th July, 1973.
In the assessment proceedings for the asst. yr. 1967-68, a question arose with regard to the amount of capital gains in respect of property No. 22, Harding Avenue, let out to Union of India on requisition since 1942, for the purposes of establishing a Women’s Polytechnic. The said property was acquired by the Land Acquisition Officer under the provisions of Land Acquisition Act, by the award dt. 26th Oct., 1966, which was confirmed by the Collector on 5th Dec., 1966. The ITO charged the capital gains on the said property in the asst. yr. 1967-68 as he was of the opinion that the date of award of the Land Acquisition Collector is the relevant date for charging the capital gains. However, this part of the order of the ITO was set aside by the Tribunal by the order dt. 20th June, 1974. The ITO found that the capital gain is chargeable with reference to the date when the possession of the property was transferred, in view of s. 45 of the Act. The transfer of property in the present case took place on 20th Dec., 1963, and, therefore, the ITO felt that the capital gains were taxable in the asst. yr. 1964-65. In the original assessment proceedings for the asst. yr. 1964-65, no capital gain was charged on such profit. After obtaining the Board’s approval, a notice under s. 148 of the Act was issued on 20th of August, 1976. The said notice was addressed to M/s Shital Prasad Kharag Prasad, Azmatgarh Palace, Varanasi, and was served on 27th of August, 1976, on one Shri B.D. Agrawal who had been looking to the affairs of the family from time-to-time and has a written authority in his favour from Shri J.B. Gupta. It may be noticed here that Shri J.B. Gupta had died on 13th Aug., 1974, consequently a plea was raised that after the death of Shri J.B. Gupta, no notice on his behalf could be received or served by Shri B.D. Agrawal whose authority had come to an end on account of the death of Shri J.B. Gupta. However, return was filed in pursuance of the notice by Shri Rajkumar on 7th of January, 1977. During the course of reassessment proceeding, before the ITO, one of the objections raised was that the notice under s. 148 of the Act was neither validly issued nor served, as required in terms of s. 283(1) of the Act. The said section prescribes mode of service after finding of total partition has been recorded by the ITO under s. 171 in respect of the Hindu joint family. The ITO did not accept the aforesaid contention of the assessee and passed the reassessment order which was challenged before the CIT(A), by the assessee.
In appeal, the CIT(A), found that in view of the undisputed facts that a partition has taken place in the joint Hindu family of assessee on 27th April, 1976, by passing an order under s. 171 of the Act and that Shri J.B. Gupta had died on 13th of August, 1974, notices under the IT Act in respect of the income of the assessee were compulsorily to be served on all the adults, who were members of the family, immediately before the partition. This order has been confirmed by the Tribunal in appeal filed by the Revenue. Heard Shri Dhananjay Awasthi, the learned standing counsel for the Department. Challenging the order passed by the Tribunal he has placed reliance upon the following three rulings in support of his submission that the reassessment notice was validly issued and was validly served on Shri B.D. Agrawal : (i) CIT vs. Anand & Co. (1994) 207 ITR 418 (Cal). Briefly, the facts of this case are that a notice under s. 148 of the Act for reassessment was issued. In the said notice the validity of the mode of issuance of notice under s. 148 of the Act was not at all subject-matter of the case. The allegation of the assessee was that the notice did not contain the distinct signature of the ITO. On this contention no finding was given by the CIT(A). But the assessment itself was set aside by him on the ground of want of initial jurisdiction. In the second appeal preferred by the Revenue, the Tribunal initially passed an order in favour of the assessee upholding the findings of CIT(A) as to non-maintainability of the provisions of s. 147(b) and invalidity of the initiation of proceedings. Subsequently, the Tribunal, on a miscellaneous petition filed by the assessee pleading as regards the illegality of notice itself by reason of manner of signature of the issuing officer appearing on the notice, came to the conclusion that the said notice does not bear the authentic signature of the issuing officer. The case was decided in this factual background. To say the least there is no similarity in between the facts of the case relied upon by the learned counsel for the Revenue and the facts of the case in hand. In the case in hand there is no dispute with regard to the question that the reassessment notice was not signed by the officer concerned. Moreover, as noticed by the Calcutta High Court in that judgment there was no question of the validity of the mode of the issue of notice in that case. Therefore, the aforesaid ruling does not defend the case of the Department. (ii) The next case relied upon is CIT vs. Rajbir Singh (1998) 145 CTR (P&H) 461 : (1998) 233 ITR 126 (P&H). It appears that the learned standing counsel has cited the above case even without caring to read it. The said judgment of the High Court is on the income-tax application directing the Tribunal to refer the question framed therein for the opinion of the Court as the High Court was of the opinion that a question of law arises from the order of the Tribunal. (iii) The next case relied upon is Mulchand Rampuria vs. ITO (2002) 172 CTR (Cal) 45 : (2001) 252 ITR 758 (Cal). The said case is also not applicable. The assessee in that case had challenged the validity of the reassessment notice by filing a writ petition in the High Court on the ground that there was no material before the assessing authority to form a belief that the income of the assessee has escaped the assessment. The High Court on the facts of that case held that the assessing authority had the authority to issue such notice. Since no such question is involved in the present case, the said case has hardly any application to the facts of the present case. It was held that the sufficiency of the correctness of the material is not a thing to be gone into by the Court hearing the question of validity of issuance of fresh assessment notice under s. 148 of the Act.
In view of the above discussion none of the authorities relied upon by the learned standing counsel has any application to the facts of the present case. The learned standing counsel cited the above rulings little realising that these rulings have any application to the facts of the present case or to the question of law involved therein. We have independently examined the findings of the Tribunal on the question of issuance of a valid notice under s. 148 of the Act and its service on Shri B.D. Agarwal, who represented Shri J.B. Gupta. It is not in dispute that Shri J.B. Gupta had died on 13th Aug., 1974. Therefore, notice under s. 148 of the Act could not be validly served on Shri B.D. Agrawal on 27th Aug., 1976. The authority of Shri B.D. Agrawal came to an end ipso facto on 13th Aug., 1974, on account of death of Shri J.B. Gupta. It is settled law that service of a valid notice under s. 148 is the foundation for the initiation of reassessment proceedings and a condition precedent for the validity of the notice. The further fact is that the notice under s. 148 was not served on the adult members of the family who were in existence at the time of the partition of the joint Hindu family. Filing of the return in consequence of illegal service of notice on Shri B.D. Agrawal will not validate the reassessment proceedings. A Full Bench decision of this Court rendered under s. 21 of the U.P. Sales Tax Act which is in pari materia of s. 147 of the Act says no. This has been so held in Laxmi Narain Anand Prakash vs. CST 1980 UPTC 125. In this case the High Court has relied upon number of cases relating to service of reassessment notice under the IT Act including Bhagwan Devi Saraogi & Ors. vs. ITO (1979) 118 ITR 906 (Cal) and quoted following passage from it : “If the authority concerned does not acquire jurisdiction in absence of a valid notice being served, the entire proceedings will be without jurisdiction and void and even the consent on the part of the assessee would confer no jurisdiction on the ‘ITO’.” The Kerala High Court in P.N. Shashi Kumar & Ors. vs. CIT (1988) 69 CTR (Ker) 78 : (1988) 170 ITR 80 (Ker) has held that the issue of a notice under s. 148 of the IT Act, 1961, is a condition precedent to the validity of any assessment order to be passed under s. 147 of the Act. It is also settled law that if no such notice is issued or if the notice is invalid or is not in accordance with law or is not served on the proper person in accordance with law, the assessment would be illegal and without jurisdiction. The notice should specify the correct assessment year and should be issued to particular assessee. The notice issued to the assessee in that case did not specify the capacity in which it was issued to one S, whether as individual or as “principal officer” or as a member of association or BOI. The assessment was completed by the ITO in the status of an AOP consisting of S and some others. It was held that before assessing an AOP, notice should be addressed to the “principal officer” or a “member” thereof as required by s. 282(2)(c), which was not done. Such a fundamental infirmity, it was held, could not be called a “technical objection” or a mere irregularity; such vital infirmity could not be cured or obliterated by placing reliance on s. 292B.
A Division Bench of this Court in the case of Madan Lal Agrawal vs. CIT (1983) 32 CTR (All) 179 : (1983) 144 ITR 745 (All) has held that a notice contemplated by s. 148 is a jurisdictional notice for initiating proceedings for making an assessment under s. 147 and any defect in that notice cannot be cured by any thing done by the ITO subsequently. A vague notice is an invalid notice and in such a case vagueness cannot be removed by reference to the other documents on the record. If a notice itself is otherwise bad in law, invalidity thereof cannot be cured by any act of the assessee to whom the said notice is issued. In view of above, the Tribunal has rightly held that s. 292B of the Act will have no application to the facts of thepresent case. The said section condones the invalidity which arises merely by reason of any mistake, defect or omission in a notice, if in substance and effect, it is in conformity with or according to the intent and purpose of the Act. The notice in question was not served on all the adult members of the family, as required under s. 283(1) of the Act. This mistake goes to the very root of the matter. It is fairly settled that an assessing authority gets jurisdiction to reopen a concluded assessment only after serving a valid notice on the assessee. A notice contemplated under s. 148 of the Act is a jurisdictional notice and is not curable under s. 292B of the Act, if it was not served in accordance with the provisions of the Act. No other point was pressed or raised by the learned counsel for the Department. In view of the foregoing discussion, we find that the order of the Tribunal is legally sound. We, therefore, answer the question in affirmative, i.e., against the Revenue and in favour of the assessee. However, there shall be no order as to costs.
[Citation : 280 ITR 541]
