Commissloner
of Income Tax, Shilong Vs. Jai Prakash Singh [1996] INSC 385 (13 March 1996)
Jeevan
Reddy, B.P. (J) Jeevan Reddy, B.P. (J) Majmudar S.B. (J) B.P.Jeevan Reddy,J.
CITATION:
1996 AIR 1303 1996 SCC (3) 525 JT 1996 (3) 356 1996 SCALE (2)832
ACT:
HEAD NOTE:
These
appeals are preferred against the judgment of the Gauhati High Court answering
the following question in favour of the assessee and against the revenue:
"Whether
on the facts and in the circumstances of the case, the Tribunal was correct in
holding that non-service of notice under section 143(2) of the Income-tax Act,
1961, against nine out of the ten legal representatives of the deceased Shri B.N.Singh
did not invalidate the assessment orders of the Income-tax Officer relating to
the assessment years 1965-66, 1966- 67 and 1967-68 and that it was at best an
irregularity for which the Appellate Assistant Commissioner was justified in
setting aside the assessments and it was not a case fit for cancellation of the
assessments"? One B.N.Singh had extensive business interests. He did not
file a return for the Assessment Years 1965-66, 1966-67 and 1967-68. He died on
April 16, 1967. He left behind ten legal
representatives comprising three widows, four sons and three daughters. The
eldest son, Jai Prakash Singh, filed the returns for the said three assessment
years on March 17, 1970, November 12, 1970 and October
27, 1971 respectively.
The
returns were signed by Jai Prakash Singh alone - not by other legal
representatives. In these returns, Jai Prakash Singh disclosed the income
received by late B.N.Singh from all his business interests and properties. [lt
may be emphasized that B.N.Singh died after the close of the accounting year
relevant to Assessment Year 1967-68 - in fact, sixteen days after the
commencement of the Assessment Year 1967-68]. The returns filed by Jai Prakash
Singh were scrutinized by the Income Tax Officer who also issued notices under
Sections 142(1) and 143(2) to him to appear and produce documents, accounts and
other material. He complied with the same. No objection was raised by Jai Prakash
Singh before the Income Tax Officer in the said assessment proceedings that
notice must be given to the other legal representatives of late B.N.Singh.
Assessment orders were made mentioning the names of all the ten legal
representatives against the column "Name of the Assessee". They were
described as "legal representatives of late B.N.Singh". Assessment
was made in the status of "individual". Appeals were filed by Sri Jai
Prakash Singh contending for the first time therein that inasmuch as all the
legal representatives of B.N.Singh were not given notice of the assessment
proceedings, the assessments made were illegal and void and must be so
declared. The Appellate Assistant Commissioner rejected the contention. While
taking note of the fact that "B.N.Singh's death and the names of his legal
representatives were intimated to the Income Tax Officer shortly after his
death", he held that completing the assessment without serving notices
upon all the legal representatives was only an irregularity in completing the
assessment. Accordingly, he set aside the assessment orders and remitted the
matters to the Income Tax Officer for making fresh assessments after Singh
filed further appeals before the Tribunal raising the very same contention but
to no avail. lt is then that the aforesaid question was referred for the
opinion of the High Court.
The
High Court referred to the definitions of "assessee" and "legal
representatives" in Clauses (7) and (29) of Section 2 as well as to
Section 159 of the Act and held that in the absence of service of notice on all
the legal representatives, the assessment made upon them is a nullity and not a
mere irregularity. It has accordingly set aside the direction of the Appellate
Assistant Commission [affirmed by the Tribunal] remitting the matters to the
Income Tax Officer for making fresh assessments after notice to all the legal
representatives.
The
question that arises in these appeals is whether in the facts and circumstances
of the case, the orders of assessment made by the Income Tax Officer Without
notice to all the legal representatives of B.N.Singh are null and void in law
or merely irregular/defective proceedings which can be set right by remitting
the matters to Income Tax Officer for making fresh assessments with notice to
all legal representatives.
The
expression `assessee' is defined in Clause (7) of Section 2 in the following
words:
"assessee'
means a person by whom any tax or any other sum of money is payable under this
Act, and includes:
(a)
Every person in respect of whom any proceeding under this Act has been taken
for the assessment of his income or of the income of any other person in
respect of which he is assessable, or of the loss sustained by him or by such
other person, or of the amount of refund due to him or to such other person:
(b) every
person who is deemed to be an assessee under any provision of this Act;
(c) every
person who is deemed to be an assessee in default under any provision of this
Act." Clause (29) in Section 2 defines the expression "legal
representative" in the following words:
"2
(29) 'legal representative' has the meaning assigned to it in Clause (11) of
Section 2 of the Code of Civil Procedure, 1908 (5 of 1908)." Section 2(11)
of the Code of Civil Procedure defines the said expression as follows:-
"2.(11)
'legal representative' means a person who in law represents the estate of a
deceased person, and includes any person who intermeddles with the estate of
the deceased and where a party sues or is sued in a representative character
the person on whom the estate devolves on the death of the party so suing or
sued." Section 159 of the Income Tax Act, which is relevant in this
behalf, reads:
"159,
Legal representatives.
(1) where
a person dies his legal representative shall be liable to pay any sum which the
deceased would have been liable to pay if he had not died, in the like manner
and to the same extent as the decease.
(2)
For the purpose of making an assessment (including an assessment, reassessment
or recomputation under Section 147) of the income of the deceased and for the
purposes of levying any sum in the hands of the legal representative in
accordance with the provisions of subsection (1)-, (a) any proceeding taken
against the deceased before his death shall be deemed to have been taken
against the legal representative and may be continued against the legal
representative from the stage at which it stood on the date of the death of the
deceased;
(b) any
proceeding which could have been taken against the deceased if he had survived,
may be taken against the legal representative; and
(c) all
the provisions of this Act shall apply accordingly.
(3)
The legal representative of the deceased shall, for the purposes as the Act, be
deemed to an assessee.
(4)
Every legal representative shall be personally liable for any tax payable by
him in his capacity as legal representative if, while his liability for tax
remains undischarged, he creates a charge on or disposes of or parts with any
assets of the estate of the deceased, which are in, or may come into, his
possession, but such liability shall be limited to the value of the asset so
charged, disposed of or parted with.
(5)
The provisions of sub-section (2) of Section 161, Section 162 and Section 167,
shall, so far as may be and to the extent to which they are not inconsistent
with the provisions of this section, apply in relation to a legal
representative .
(6)
The liability of a legal representative under this section shall, subject to the
provisions of sub-section (4) and sub-section (5), be limited to the extent to
which the estate is capable of meeting the liability." Dr.Gauri Shankar,
learned counsel for the Revenue.
contended
that in the facts and circumstances of the case the assessment orders cannot be
said to be null and void. At worst, they are irregular orders. This is not a
case where no notice was served upon the legal representatives and an
assessment made. Even before service of any notice, returns were filed by one
of the legal representatives [Jai Prakash Singh] voluntarily. The returns were
filed by Jai Prakash Singh taking advantage of the provisions contained in
subsection (4) of Section 139; actually the time for filing the returns had
expired by the time they were filed. The violation, if any, was not serious
enough to declare the entire proceedings a nullity. Sri N.R.Choudhary, learned
counsel for the assessee, on the other hand, submitted that an assessment made
on persons without notice to them is a clear case of violation of principles of
natural Justice and, hence, the assessments are null and void. Since the
proceedings are a nullity in law there was no question of sending the matters
back to the Income Tax Officer for making fresh assessments. The learned
counsel commended the reasoning and conclusion of the High Court for our
acceptance.
Before
we proceed to answer the question it is necessary to keep in mind the facts of
this case. B.N.Singh died on April 16, 1967.
He failed to file a return for the Assessment Years 1965-66 and 1966-67 within
the time prescribed. So far as the Assessment Year 1967-68 is concerned hes of
courses died before the expiry of the period prescribed for filing the return.
No return was filed for the Assessment Year 1967-68 also within the prescribed
period. Jai Prakash Singh, however, wanted to take advantage of tho provision
contained in Section 139(4) - which enables an assessee to "furnish the
return for any previous year at any time before the end of the period specified
in clause (b)" provided the assessment is not made by the time of filing
the return. (Clause (b) of the said subsection specifies various periods of
limitation; in respect of the assessment years concerned herein, it is four
years from the end of the relevant assessment year.) The returns were filed
voluntarily disclosing the income received by B.N.Singh during the relevant
accounting years by one of his legal representatives inviting an assessment.
The names of all the legal representatives were already intimated to the Income
Tax Officer [as found recorded in the orders of the t Appellate Assistant
Commissioner and the Tribunal though the occasion for giving such information
is not evident from the record. It is also not clear who gave the information
regarding the death of B.N.Singh and his legal representatives and in what
connection.]. It is true that the returns were signed only by Jai Prakash Singh
and not by the other nine legal representatives, but it should also be
remembered that when notices under Sections 142(1) and 143(2) were issued to
Jai Prakash Singh, he appeared through his Authorised Representative and
produced the relevant books and accounts on the basis of which assessments were
made. Jai Prakash Singh did not raise an objection before the Income Tax Officer
that unless and until notices to all the other legal representatives are sent,
assessment orders cannot be made. He raised this question for the first time in
the appeals preferred by him before the Appellate Assistant Commissioner and
thereafter before the Tribunal.
It
appears rather curious that Jai Prakash Singh who had voluntarily filed the
returns of income should raise this issue; no other legal representative of B.N.Singh
has come forward with such a plea. We do not wish to go into the question whether
Jai Prakash Singh should at all have been allowed to so turn round and raise
this plea in appeal, for the reason that the said issue is not before us in
these appeals.
We are
of the opinion that the High Court was not right in holding in the above circumstances
that the assessment orders made are null and void. They are not. At the worst,
they are defective proceedings or irregular proceedings - as has been rightly
held by the Appellate Assistant Commissioner and the Tribunal. In Chatturam and
Others v. Commissioner of Income Tax,Bihar [(1947) 15 I.T.R. 302), it has been
held by the Federal Court that the liability to pay the tax arises by virtue of
Sections 3 and 4 of the Indian Income Tax Act, 1922 [charging sections] and
that Section 22 and other Sections of the said Act are merely machinery
provisions to determine the quantum of tax. The following observations are
apposite:
"The
income-tax assessment proceedings commence with the issue of a notice. The
issue or receipt of a notice is not, however, the foundation of the
jurisdiction of the Income-tax Officer to make the assessment or of the
liability of the assessee to pay the tax. It may be urged that the issue and
service of a notice under Section 22 (1) or (2) may affect the liability under)
the penal clauses which provide for failure to act as required by the notice.
The jurisdiction to assess and the liability to pay the tax,however, are not
conditional on the validity of the notice. Suppose a person, even before a
notice is published in the papers under Section 22(1), or before he receives a
notice under Section 22(2) of the Income tax Act, gets a form of return from
the Income-tax Office and submits his return, it will be futile to contend that
the Income-tax Officer is not entitled to assess the party or that the party is
not liable to pay any tax because a notice had not been issued to him. The
liability to pay the tax is founded in Sections 3 and 4 of the Income Tax Act,
which are the charging sections. Section 22 etc. are the machinery sections to
determine the amount of tax." (Emphasis added)
In
Maharaja of Patiala v. Commissioner of Income Tax. (Central)
Bombay [(1943) 11 I.T.R. 202], a decision
rendered by the Bombay High Court, the facts were these: the late Maharaja of Patiala
had income from property and business in Gritish India. He died on March 23, 1938. On November 23, 1938, the Income
Tax Officer, Bombay sent two notices under Sections 22(2) and 38 of the Indian
Income Tax Act, 1922 addressed to the Maharaja cf Patiala requiring him to make
a return of his income from all sources for the Assessment Years 1937-38 and
1938-39. They were served upon the successor Maharaja. Returns were filed,
signed by the Foreign Minister of patiala. The Income Tax officer passed assessment orders describing the assessee
as "His Highness.....late Maharaja of patiala". The succeeding Maharaja appealed against the assessment orders
contending that inasmuch as the notices were sent in the name of Maharaja of Patiala
and not to him as the legal representative of the Maharaja of Patiala, the
assessments made were illegal. The contention was that the notices were really
addressed to the late Maharaja, who was not alive when the said notices were
issued and that they were wrongly served upon him. The argument was rejected by
the authorities under the Act as well as by the High Court on reference. The
Division Bench comprising Beaumont, CJ. and Kania,J. held that inasmuch as the
present Maharaja,"who raised the contention of nullity) was the legal
representative of the late Maharaja of Patiala and because the return of the
Late Maharaja's income was made by the Foreign Minister on his behalf and
because he knew perfectly well that what was being assessed was the income of
his predecessor, the assessment made, though not complying strictly with
Section 24-B (Corresponding to Section 159 of the present Act),is yet valid.
The following observations of Beaumont,CJ., are relevant for our purpose:
"In
this case the person to be assessed was the late Maharaja, who had died before
he was served with any notice under Section 22, and, therefore, the provisions
of Section 24b(2) apply, and the Income-Tax officer was entitled to serve on
the executor, administrator or other legal representative of the deceased
Maharaja a notice under Section 22(2) or under Section 34 as the case might be,
and then proceed to assess the total income of the deceased Maharaja as if such
executor, administrator or other legal representative were the assessee.. As
observed by the president of the Tribunal in his judgments the Income-tax
Officer made no attempt to observe the provisions of that sub-section. He
served the notice on the present Maharaja, without showing in what capacity.But
the tribunal have found, as a fact, that the present Maharaja is the legal
representative of the deceased Maharaja, and although it would obviously have
been better so to describe him in the notice, I am not prepared to say that the
notice was had, if it was served on the legal representative, merely because it
omitted to state that it was served in that capacity. It should have been
stated that it was served on the legal representative of the late Maharaja, and
that the return required was of the late Maharaja's income. It was not so
stated, and the present Maharaja himself may have had taxable income for the
years in question but I think there is a good deal of force in the contention
of the Tribunal that any irregularities in this respect were waived by the
Maharaja because returns of the late Maharaja's income-were made by the Foreign
Minister on behalf of the Maharaja, and then subsequently corrections were made
in the assessment at the instance of the Maharaja. There is no doubt that the
present Maharaja knew perfectly well that what was being assessed was the income
of his predecessor." To the same effect are the observations of Kania,J.
in his separate but concurring opinion. The decision, one of the earliest on
the subject shows that an assessment made without strictly complying with,
Section 24-B [Section 159 in the present Act] is not void or illegal and that
any infractions in that behalf can waived by the assessee.In Estate of Late Rengalal
Jajodia v. Commissioner of Income-- Tax, Madras [(1971) 79 I.T.R. 505), it was
held by this Court:
"The
lack for a notice does not amount to the revenue authority having had no
jurisdiction to assess, but that the assessment was defective by reason of
notice not having been given to her. An assessment proceeding does not cease to
be a proceeding under the Act merely by reason of want of notice . It will be a
proceeding liable to be challenged and corrected." The facts in this case
are telling. They are Rangalal Jajodia filed his income tax return for the
Assessment Years 1942-43 and 1-943-44 under: the Income Tax Act as well as
under the Excess Profits. Tax Act. Before the assessments were completed, he
died (on January 11,
1946). Rangalal had a
son Shankar Lal, by his pre- deceased wife. He married a second time and had
children from the second wife Aruna Devi. Rangalal executed a will totally
disinheriting Shankar Lal and appointing Aruna Devi and another as executors of
his Will. The income Tax Officers probably unaware of the Will, gave notice to Shankar
Lal, who objected that he is not the legal representative of the deceased and
that the second wife [Aruna Devi] and the other executor are the proper persons
to be notified. The Income Tax Officer called for a copy of the Will but it was
not produced. The income Tax Officer thereupon completed the assessment
describing the assessee as "the estate of late Sri Rangalal Jajodia by
legal heirs and representatives Sri Shankar Lal Jajodia son of Rangalal Jajodia,
Smt. Aruna Devi wife of Rangalal Jajodia and her children". Appeals were
preferred by the second wife, Aruna Devi, contending inter alia that the
assessments having been made without notice to her or the other executor were
illegal and invalid. This plea was rejected by the Appellate Assistant
Commissioner and the Tribunal, who remitted the matters to the income Tax
Officer to complete the assessments after notice to Aruna Devi. The High Court
too rejected the said contention whereupon the matter was brought to this
Court, which held that absence of notice to Aruna Devi makes the assessment
merely defective but not null and void. It is in this connection that the
aforesaid observation was made. This Court sustained the direction given by the
Appellate Assistant Commissioner to the Income Tax Officer to make fresh
assessment on Aruna Devi in accordance of the provisions of the Act. This
decision, in our opinion, is sufficient to reject the assessee's contention
herein. If an assessment made with notice to Shankar Lal [who was not really
the legal representative of the deceased Rangalal] and without serving notice
upon the lawful legal representatives Caruna Devi) the other executor or Aruna Devi's
children] - that too, despite the objection of Shankar Lal that he is not the
legal representative and that notice must be sent to Aruna Devi etc., who are
the legal representatives of the deceased Rangalal - is only
"defective" and not null and void, it would be rather odd to contend
that assessments made on the basis of returns filed by one of the legal
representatives [disclosing the total income received by the deceased] is null
and void on the ground that notices were not sent to other legal
representatives. The principle that emerges from the above decision is that an
omission to serve or any defect in the service of notices provided by
procedural provisions does not efface or erase the liability to pay tax where
such liability is created by distinct substantive provisions [charging
sections]. Any such omission or defect may render the order made irregular -
depending upon the nature of the provision not complied with- but certainly not
void or illegal. In this view of the matter, we do not think it necessary to
refer to certain other decisions of the High Courts cited before us which have
turned mainly on the basis of facts in each case. It is equally unnecessary for
us to go into the meaning of the expressions "void", "void ab initio",
"voidable" or "a nullity" - a fairly complicated exercise.
The
appeals are accordingly allowed, the judgment of the High Court set aside and
the question referred answered in the affirmative, i.e., in favour of the
Revenue and against the assessee. The Revenue shall be entitled to its costs
which are quantified at Rupees ten thousand consolidated.
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