ORDER
P.N. Parashar, J.M.
1. These are two appeals filed by the Revenue against the order of the learned CIT(A) dt. 23rd March, 2000, for the asst. yrs. 1992-93 and 1993-94.
2. Since identical grounds have been raised in both the appeals by the Revenue, hence, for the sake of convenience, the two appeals have been decided by a common order.
3. Smt. S. Narasamma, learned Departmental Representative for the Revenue and Shri C.S. Agarwal, advocate and Smt. Lalita Krishna Murty, CA appeared for the assessee.
ITA No. 3046/Del/2000
4. The ground taken by the Revenue on this appeal is being reproduced as under:
“On the facts and in the circumstances of the case, the learned CIT(A) erred in annulling the assessments made under Section 148/143(3) on the grounds that notice under Section 148 was not valid having been issued in the name of the dead assessee, whereas in fact it was issued in the name of the deceased assessee through one of his legal heirs who always represented the deceased in subsequent assessment years.”
5. The facts related to the issue involved in the ground of appeal are that originally return for asst. yr. 1992-93 was filed on 21st Dec., 1992 by the assessee and the income of Rs. 65,000 was declared. The return was processed under Section 143(1)(a) of IT Act. Thereafter the assessee late Shri Atiquer Rehman died on 9th Feb., 1997. After his death, a notice under Section 148 was issued on 26th March, 1999. This notice was addressed to Shri Shahid Atiq legal heir of late Shri Atiquer Rehman. This notice reads as under :
“Shri Shahid Atiq L/H of Late Shri S.H. Atiquer Rehman, 4791, Chandni Chowk, Delhi-6”
6. This notice was served upon the assessee on 27th March, 1997. Thereafter notice under Sections 143(2) and 142(1) was issued. In response thereof. Shri R. Balasubramanian, CA, filed necessary explanations and case was discussed by the AO. The AO considered the relevant agreement and the case law in detail and thereafter completed the assessment by observing as under :
“The assessee has ultimately in fact accepted that the arrangement made was not legally permissible therefore filed a letter as referred to above. Penalty proceedings under Section 271(1)(c) of the IT Act, 1961 have also been initiated separately for not furnishing full and correct particulars of his income under the head “Income from House Property”. The income of the assessee is computed as under :
Income as per intimation under Section 143(1)(a) Rs. 65,000 Add lease money given to Shahid Atiq Nasir Atiq Rs. 1,60,548 Income assessed Rs. 2,25,548 Income rounded off Rs. 2,25,550 Assessed. Issue necessary forms. Charge Interest. Give credit for prepaid taxes. Issue penalty notice under Section 271(1)(c) of the IT Act, 1961." 7. Shri Shahid Atiq L/H of late Shri Atiquer Rehman filed appeal against the order of (AO before) CIT(A). The learned CIT(A) decided the appeal for 1992-93 and 1993-94 by a common order. Before learned CIT(A), additional grounds were taken by the assessee/appellant challenging the validity of the notices and assumption of jurisdiction by the AO. The additional grounds so taken are as under:
“That late Shri S.H. Atiquer Rehman had died on 9th Feb., 1997. That the assessment should have been in the names of all the legal heirs comprising of his wife, sons and daughters, as laid down by law. That, since the assessment has been in the name of a dead person it is invalid, a nullity in the eyes of law, therefore, should be annulled. That, the AO erred in issuing a notice under Section 148 in the name of Shri Shahid Atiq legal heir of late Shri S.H. Atiquer Rehman only without impleading all the other legal heirs collectively. That, because of this, the notice is invalid and the assessment on the basis of this notice is a nullity and should be cancelled. Further, that the AO in not setting out/attaching reasons of notice under Section 148 has erred in law. And for that reason also the assessment is invalid.”
8. The learned CIT(A) admitted the additional grounds and thereafter obtained the comments of the AO as well as the reply of the assessee against such comments. He also discussed the case law and the points as referred to by the party before him and accepted the plea of the assessee by observing as under :
“On considering the above position, I am of a view that the notice under Section 148 has not been validly issued inasmuch as it has not been issued to all the legal heirs which in this case consists of late assessee’s sons, his wife and a daughter and, therefore, the AO did not assume proper jurisdiction to pass the assessment order. Also it is visually clear that the assessment order has been passed in the name of a dead person.”
9. The learned Departmental Representative submitted before me that the learned first appellate authority has not properly considered the legal issue. According to her since notice under Section 148 was issued to one of the legal heirs who participated in the proceedings, it was not open for him to raise objection subsequently regarding the legality of notice issued under Section 148 and assessment made against him as legal heir of the deceased assessee. She also placed reliance on the decision of Supreme Court in the case of CIT v. Jai Prakash (1996) 219 ITR 737 (SC). After placing the reliance on the said decision, she submitted that the assessment cannot be treated to be null and void and at the most there was only an irregularity which was curable and stood cured by the participation of the legal heir of the assessee.
10. Learned counsel for the assessee on the other hand .supported the order of learned CIT(A). He contended that notice in this case was issued under Section 148 against the deceased and one of the legal representatives whereas the notice should have been issued to one (sic) of the legal heirs. After making reference to the provision contained under Section 159(1) of the IT Act, he pointed out that term “legal representative” means all legal heirs or legal representatives and in view of this provision there is embodied requirement of law to find out all the legal representatives and effect service of notice upon them. He distinguished the case of CIT v. Jai Prakash (supra) by pointing out that in that case the legal representative complied with the notice under Sections 142(1) and 143(2). According to him, the requirements of Section 148 being mandatory, the jurisdiction cannot be assumed without fully complying the legal requirements. He further submitted that there is a basic lack of jurisdiction for framing the assessment order because notices to all the representatives were not issued and, therefore, subsequent assessment was illegal and void.
11. In support of his arguments, the, learned counsel for the assessee made
reference to the following cases:
(i) Sheikh Abdul Kadar v. ITO (1958) 34 ITR 451 (MP).
(ii) CIT v. Shanti Lal C. Mehta (1978) 113 ITR 79 (Cal).
(iii) Rani Jagdamba Kumari Dew v. CIT (1983) 143 ITR
527 (Cal).
(iv) Kalawati Devi v. ITO.
11.1 He further made reference to the commentary of Chakervarti (sic-Chaturvedi) Pithisaria IV Edition pp. 5503 and 5504.
12. We have carefully considered the submissions of parties and have perused the entire material available on record. As stated above, notice in this case was issued under Section 147 to one of the legal representatives and that notice was also duly served upon him. On perusal of the assessment order, it is found that the legal representative participated in the proceedings. In the assessment order, the AO has also made reference to the letter of assessee dt. 26th March, 1999 filed on 30th March, 1999 in the assessment proceedings for asst. yr. 1994-95, the contents of that letter as reproduced by the AO are as under:
“After having due consideration to the professional advice tendered to me by my counsel, I feel that I should not be denied the right of appeal in respect of the additions that you propose to make. While doing so, I am also aware of the fact that on the assessment so made, substantial demands are going to arise, which apart from regular tax would also include interest under the appropriate sections. I am also aware of the fact that after the creation of these demands, there would be significant pressure on me to discharge these liabilities. I have always been a firm believer in the rule of law. I also appreciate that till such time the matter gets finally involved interest would keep piling up on such demands. I therefore feel that while I should not lose my right of appeal nevertheless, I would like to discharge the regular tax liability (if any) that may be created in pursuance to the assessment order under Section 143(3), in six months instalments. I would also propose to move a petition under Section 273 for the waiver of interest and penalty. However, before paying the demands that are likely to arise, may I request you to adjust a part of the demand against the refund determinable in the case of the assessee (since decreased) for the asst. yrs. 1998-99 and 1999-2000. These refunds have arisen because of the tax deducted at source by the tenant on an income which was never owned by the assessee subsequent to his death; which income as returned in the hands of the legally (sic). I am filing this letter with the sole intention to convey my good and honest intentions of co-operating with the Department and to ensure that my mother and legal heirs of my father are not subjected to any mental tension.”
13. On perusal of the above, it is found that the assessee did not raise any objection regarding the validity of notice under Section 148 before the AO and the assessment was completed on merits after considering various pleas raised by the assessee against the tax liability.
14. The learned CIT(A) has misconstrued and not properly appreciated the provisions contained under Section 147 of IT Act.
15. The Hon’ble Supreme Court has considered a similar issue in the case of C7T v. Jai Prakash Singh (supra). In that case the assessee died without filing return under Sections (sic) 65-66 and 67-68. His eldest son filed return for three years. The returns were scrutinised and he participated. No objection was raised by him before the ITO. In the said assessment proceeding, it was argued that the notice must be given to other legal representatives of the deceased-assessee also. The AO completed the assessment against the legal representatives. In the appeal filed against the assessment order, it was contended that in as much as all the legal representatives of the deceased were not given notices to the assessment proceedings, the assessments made were illegal and void. The AO rejected the contention. However, he had completed the assessment without serving notices upon all the legal representatives in completing the assessment. The learned CIT(A) set aside the assessment order and remitted the matters for ITO for fresh assessment after notice to all the legal representatives. This order was affirmed by the Tribunal. On a reference the Hon’ble High Court has held that in the absence of notice to the legal representatives, the assessment was a nullity. On appeal, the Hon’ble Supreme Court observed as under :
“Held, allowing the appeal, that the Tribunal was correct in holding that non-service of notice under Section 143(2) of the IT Act, 1961, to nine out of the ten legal representatives of the deceased S did not invalidate the assessment orders of the ITO relating to the asst. yrs. 1965-66, 1966-67 and 1967-68 and that it was at best an irregularity for which the AAC was justified in setting aside the assessments and it was not a case fit for cancellation of the assessments.”
16. The Hon’ble Supreme Court also made reference to the decision of Federal Court in the case of Chhattu Ram v. CIT (1947) 15 ITR 302 (FC). In that case the Federal Court made the following observations :
“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 ITO to make the assessment or of the liability of the assessees 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 IT Act, gets a form of return from the ITO and submits his return, it will be futile to contend that the ITO 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 on Sections 3 and 4 of the IT Act, which are the charging sections. Sections 22, etc., are the machinery sections to determine the amount of tax.”
17. In the case of Estate of Late Ranga Lal Jajodia Maharaja of Patiala v. CIT (1971) 79 ITR 505 (SC), the Hon’ble Supreme Court has held that “the lack of notice to her. only made the assessments defective. The setting aside of the assessments was only on the ground that notice was not given to A, and therefore, the finding and direction was vital to the assessment proceedings. The second proviso to Section 34(3) applied and the assessment proceedings were not barred by limitation.”
18. The issue regarding service of notice on one of the agents of the assessee was considered by Hon’ble Madras High Court in the case of A.K.M. Govindaswamy Chettiar (Decd.) and Ors. v. ITO (2000) 244 ITR 559 (Mad). In that case also, the assessee died during the course of reference proceedings and his legal representatives were brought on record. During the appellate proceedings before CIT, the validity of the notice was challenged but rejecting the plea, he held that the notice under Section 148 of the Act was served on the agent of the assessee though not a proper agent. Thus, the plea that there was no valid service of notice was rejected. The Tribunal also upheld the findings of CIT by holding that (assessment under) Section 147 was valid.
19. Before the Hon’ble High Court, the issue was taken in the reference application by the assessee. The Hon’ble Madras High Court after referring to the decision in the case of Jayanti Talkies Distributors’ case (1979) 120 ITR 576 (Mad) and other cases (sic).
20. In the case of Dr. H.R. Rai v. CIT (1984) 145 ITR 809 (MP) on the same issue, the Hon’ble Madras High Court has observed as
under:
“Held, that the assessee did not dispute before the ITO that he received the notice. The assessee participated throuhout in the assessment proceedings before the ITO without raising any objection. Even if there was any procedural irregularity in the service of the notice in that it was not served by the serving officer on the assessee personally or on an agent empowered to receive service, that irregularity lost all significance once the notice was received by the assessee and was acted upon by him before the ITO without raising any objection. Such a procedural irregularity in the service of the notice under Section 148 could not invalidate the assessment. The service of the notice on the assessee was valid.”
21. In this case, the Hon’ble High Court made reference to the decision in the case of CIT v. Bhanji Kanji’s Shop (1968) 68 ITR 416 (Guj), wherein it was held that even if there is a procedural irregularity in the notice of reassessment, if the assessee admits that he had received the notice or from the facts it can be ascertained that the notice was served then the contention on behalf of such an assessee that the notice was not properly served is to be rejected. The case of Gujarat High Court was also followed by Patna High Court in case Mahendra Kumar Aggarwal v. ITO and Ors. (1976) 103 ITR 688 (Pat).
22. In view of the above decisions, the legal position is very clear. Since notice under Section 148 was served upon one of the legal representatives who did not raise the plea of illegal assumption of jurisdiction before the ITO and on the other hand, participated in the assessment proceedings, such plea cannot be raised at the appellate stage. It may also be pointed out that Shri Shahid Atiq, legal heir filed the appeal against the (order of) AO and other legal representatives did not challenge that order.
23. The learned CIT made reference to certain decisions which are distinguishable on facts. Most of the decisions to which reference has been made covered different situations and not exactly the factual situation involved in the present appeal. The commentary of Chaturvedi and Pithisaria to which reference has been made by the learned CIT(A) is about the assessment order passed against the deceased person. So far as the present case is concerned, in this case the assessment was passed on the legal heir of the assessee who was representing the deceased and not against the deceased person. In view of the above, I am not convinced with the argument raised by the assessee. On the other hand, I find sufficient force in the contention of the learned Departmental Representative. In fact, the ratio of decision in the case of Jai Prakash Singh (supra) is applicable on the facts and circumstances of the case. Thus, the order of learned CIT(A) is set aside and the ground taken by the Department is allowed.
ITA No. 3049/Del/2000
24. The facts of the ITA No. 3046/Del/2000 are identical and identical grounds have been taken in this appeal for asst. yr. 1993-94 also. This appeal involving the identical grounds is, therefore, allowed on the basis of reasons adopted by me, while deciding ITA No. 3046/Del/2000.