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Jai Prakash Singh (Legal Representative of Estate of Late B. N. Singh) Vs. Commissioner of Income Tax, Assam. - Court Judgment

LegalCrystal Citation
Subject;Direct Taxation
CourtGuwahati High Court
Decided On
Case NumberIncome-tax Reference No. 39 of 1974
AppellantJai Prakash Singh (Legal Representative of Estate of Late B. N. Singh)
RespondentCommissioner of Income Tax, Assam.
Prior history
PATHAK C.J. - The following question of law has been referred by the Income-tax Appellate Tribunal, Gauhati Bench, under section 256(1) of the Income-tax Act, 1961, hereinafter referred to as 'the Act', to this court for decision :
'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
Excerpt:
.....of the income-tax officer to issue notices under section 143(2) of the act to nine out of the ten legal representatives and that it was at best an irregularity for which the appellate assistant commissioner was justified in setting aside the assessments and that it was not a case fit for cancellation of the assessments. -(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 deceased. singh and they are legal representatives both for the purposes of the civil procedure code as well as for the purposes of the income-tax act. during the course of argument we wanted to know from the learned standing counsel of the department as to who signed and..........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 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 assessment ?'the facts of the case may be briefly stated as follows : the assessee is b. n. singh who died on april 16, 1967. the relevant assessment years are 1965-66, 1966-67 and 1967-68.the return for the assessment year 1965-66 was filed on march 17, 1970, showing a net income of rs. 1,90,178. the income-tax officer issued.....
Judgment:

PATHAK C.J. - The following question of law has been referred by the Income-tax Appellate Tribunal, Gauhati Bench, under section 256(1) of the Income-tax Act, 1961, hereinafter referred to as 'the Act', to this court for decision :

'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 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 assessment ?'

The facts of the case may be briefly stated as follows : The assessee is B. N. Singh who died on April 16, 1967. The relevant assessment years are 1965-66, 1966-67 and 1967-68.

The return for the assessment year 1965-66 was filed on March 17, 1970, showing a net income of Rs. 1,90,178. The Income-tax Officer issued notice under section 143(2) and assessed the the total income at Rs. 4,09,773.

The return for the assessment year 1966-67 was filed on November 12, 1970, showing an income of Rs. 92,646. The Income-tax Officer served notices under sections 143(2) and 142(1) of the Act, and, after hearing the authorised representative of the assessee, assessed the total income at Rs. 1,18,386.

For the assessment year 1967-68 the return of income was filed on October 27, 1971, showing a loss of Rs. 3,702. The Income-tax Officer, after hearing the authorised representative of the assessee, assessed the total income at Rs. 73,490.

From the assessment orders in all the three assessment years, it appears that ten persons were described as legal representatives of B.N. Singh. The status of the assessee was shown as individual.

Against the assessment orders of the Income-tax Officer the assessee appealed before the Appellate Assistant Commissioner. In his order the Appellate Assistant Commissioner observed that B.N. Singh died on April 16, 1967, and he was succeeded by ten legal representatives, namely, three widows, three sons and four daughters, and the fact of death and the names of his successors and legal representatives were intimated to the Income-tax Officer shortly after the death of the assessee, B.N. Singh, but all the legal representatives were not brought on record and they were not served with necessary notices before the completion of the assessments.

The submission of the appellant, Jaiprakash Singh, one of the legal representatives of late B.N. Singh, before the Appellate Assistant Commissioner was that since notice was served only Jaiprakash Singh, the assessment was illegal, invalid and without jurisdiction. But this submission was repelled by the Appellate Assistant Commissioner holding that the Income-tax Officer had committed only an irregularity in completing the assessment as only one of the ten legal representatives had been served with notice. Accordingly, the Appellate Assistant Commissioner set aside the assessment orders of the Income-tax Officer for all the three assessment years and directed the Income-tax Officer to serve notices on all the legal representatives before completing the assessments. The Appellate Assistant Commissioner passed a consolidated order for all the three assessment years.

Being aggrieved by the order of the Appellate Assistant Commissioner, the assessee preferred three appeals before the Income-tax Appellate Tribunal. The contention of the assessee before the Tribunal was that the assessment in question should have been annulled instead of setting aside the assessments, as has been done by the Appellate Assistant Commissioner. It was submitted on behalf of the assessee that the Appellate Assistant Commissioner committed an illegality in setting aside the assessments and not annulling them.

The Tribunal considered the point as to whether the Appellate Assistant Commissioner was justified in setting aside the assessments or he was bound to annul the assessments and came to the conclusion that the assessment orders of the Income-tax Officer could not be said to be invalid in view of the omission of the Income-tax Officer to issue notices under section 143(2) of the Act to nine out of the ten legal representatives and that it was at best an irregularity for which the Appellate Assistant Commissioner was justified in setting aside the assessments and that it was not a case fit for cancellation of the assessments.

On the above facts the above-mentioned question of law has been referred.

The point that arises for consideration is whether, on the facts and in the circumstances of the case, the Appellate Assistant Commissioner was required by law to annul the assessments in question and that he committed an illegality in setting aside the assessments and directing reassessments inasmuch as, in the meantime, the bar of limitation came in.

The assessee, B. N. Singh, died on April 16, 1967, and the fact of his death and the names of his legal representatives were intimated to the Income-tax Officer shortly after his death. It is a finding of fact that all the legal representatives were not brought on record and that they were not served with necessary notices before completion of the assessments and that notice served only on one of the legal representatives, namely, Jaiprakash Singh.

During his lifetime the assessee, B. N. Singh, did not file his return for the assessment year 1965-66. The question of filing, return for the assessment years 1966-67 and 1967-68 by the assessee, B. N. Singh, who died on April 16, 1967, does not arise at all.

Section 159 of the Act deals with the liability of the legal representative of an assessee when he dies. It would be convenient to quote section 159 of the Act.

'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 deceased.

(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 purpose of levying any sum in the hands of the legal representative in accordance with the provisions of sub-section (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 of the Act, be deemed to be 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 assets 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 the legal representative.

(6) The liability of the 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.'

Section 2(7) of the Act defines 'assessee' as follows :

''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.'

Section 2(29) of the Act defines 'legal representative' as under;

'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 'legal representative' 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.'

In the instant case it is not disputed that B. N. Singh when he died on April 16, 1967, left his ten legal representatives, namely, three windows, three sons and four daughters. So, in view of the provisions of law, as noted hereinabove, all these ten persons represent the estate of late B. N. Singh and they are legal representatives both for the purposes of the Civil Procedure Code as well as for the purposes of the Income-tax Act. In view of the provisions of section 159 of the Act, all the ten legal representatives of late B. N. Singh are, therefore, liable to pay any tax that is payable by late B, N. Singh. It is also very clear that all these ten legal representatives are assessees within the meaning of the provision of section 2(7) of the Act.

As observed above, the returns for the assessment years 1965-66, 1966-67 and 1967-68, were filed on March 17, 1970, November 12, 1970, October 27, 1971, respectively, by one of the sons of the deceased assessee, namely, Jaiprakash Singh.

From the notice dated March 17, 1970, for the assessment year 1965-66, notice dated November 12, 1970, for the assessment year 1966-67, and the notice dated October 27, 1971, for the assessment year 1967-68, it is found that notices under sections 142(1) and 143(2) of the Act were issued to Jaiprakash Singh, legal representative of late B. N. Singh, Digboi.

During the course of argument we wanted to know from the learned standing counsel of the department as to who signed and who filed the returns but he failed to produce the returns before us nor could he point out anything from the paper-book as to the person or persons who filed or signed the returns.

From the notices dated March 17, 1970, November 12, 1970, and October 27, 1971, copies of which ar found in the paper-book, the only conclusion that can be made is that the notices under sections 142(1) and 143(2) of the Act were issued to Jaiprakash Singh to clarify certain points in connection with the returns of income submitted by him for the assessment years 1965-66, 1966-67 and 1967-88. It has also been found as as a fact that notice under section 143(2) of the Act was issued to one of the legal representative of the deceased assessee, namely. Jaiprakash Singh. There is nothing on record to show that Jaiprakash Singh, one of the sons of late B. N. Singh, represented the entire estate left by the assessee, B. N. Singh or that he represented all the legal representatives of late B. N. Singh. On this point the Tribunal has found as follows :

'We have already pointed out above that the assessment order has been passed against all the 10 legal representative of the deceased, Shri B. N. Singh, and the notice under section 143(2) was served only against Shri Jaiprakash Singh and the notices under section 143(2) were not issued against the other nine legal representatives.'

The original assessee is B. N. Singh. When he died, his estate became subject to tax under the Act through his legal representative and legal representative means, as we have already noticed, a person who in law represents the estate of the deceased person. In the instant case, ten persons represent the estate of the deceased assessee, B. N. Singh. That being the position, serving of notice under section 143(2) of the Act on one of the legal representatives is not service of notice on the legal representatives representing the estate of late B. N. singh and that being so, the assessments are bad in law and the Appellate Assistant Commissioner has set aside these assessments. But the Appellate Assistant Commissioner, after setting aside the assessments directed the Income-tax Officer to serve notices on all the legal representatives before completing the assessments. In other words, the Appellate Assistant Commissioner has directed the Income-tax Officer to start fresh proceeding after issuing notices to all the legal representatives and this finding has been approved by the Tribunal and we have to examine the legality of this finding.

As we have observed above, when assessments were made by the Income-tax Officer, the estate of B. N. Singh was not fully represented. On the death of B. N. Singh the entire body of the legal representatives of B. N. Singh representing his estate became the assessee. 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 legal representatives, there could not be any valid assessment proceeding. That being so, the assessment proceedings and the assessment orders must be held to be null and void.

The finding of the Tribunal that non-service of notice under section 143(2) of the Act against nine out the ten legal representatives of the deceased, B. N. Singh, did not invalidate the assessment orders of the Income-tax Officer, is not sustainable in law. Violation of the principles of natural justice, and, more particularly, violation of statutory principles of natural justice, as in the instant case, takes away the jurisdiction of the authority concerned to proceed with the proceedings and make the assessment orders and necessarily invalidates the proceedings and the orders passed therein. If you want to assess the estate of the deceased assessee, the estate must be fully represented by impleading all the legal representatives and serving notices on all of them who represent the entire estate. If you do not do that, assessment proceedings and assessment orders passed therein will cease to be valid proceedings and valid orders in the eye of law. 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 the result, we hold that, on the facts and in the circumstances of the case, the Tribunal was wrong 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.

The question of law referred is accordingly answered in the negative and against the department. There will be no order as to costs.

IBOTOMBI SINGH J. - I agree.


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