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R.B. Dhuru Chufi (Huf) Vs. Seventh Wealth-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Mumbai
Decided On
Judge
Reported in(1982)2ITD44(Mum.)
AppellantR.B. Dhuru Chufi (Huf)
RespondentSeventh Wealth-tax Officer
Excerpt:
.....by affixation was not in accordance with law.11. even assuming for the sake of argument that the notice served by affixation on 23-3-1979 was not in accordance with the law, it is to be seen as to what consequences flowed therefrom. in other words, if the notice under section 16(2) was not validly served and an assessment was subsequently made on the basis of that notice, it is to be seen whether the assessment is a nullity from the very beginning and cannot be revived or whether the assessment suffered merely from an irregularity which could be rectified and the assessment could be made again from the point of time when the irregularity intervened. in our opinion, the notice under section 16(2) was not a notice which confers jurisdiction on the wto to proceed with the assessment. the.....
Judgment:
1. These 12 appeals filed by the assessee are directed against the common order, dated 21-1-1980, of the AAC. Hence, they are heard together and disposed of by this common order for the sake of convenience. The assessee is a HUF. The present appeals relate to the assessment of the assessee under the Wealth-tax Act, 1957 ('the Act'), for the assessment years 1963-64 to 1974-75, both inclusive.

2. The assessee filed voluntary returns under Section 14(1) of the Act, for all the 12 years under consideration. The WTO completed the assessments exparte under Section 16(5) of the Acton the ground that the assessee had failed to comply with the terms of the notices issued under Section 16(2) for all the years. He determined the total wealth of the assessee at figures considerably higher than the figures in return in all the years.

3. The assessee appealed to the AAC and contended that the WTO had erred in making the assessments ex parte under Section 16(5). The case of the assessee was that except for the assessment year 1973-74, no notice under Section 16(2) was served on the assessee for any of the years under consideration. Hence, it was urged that the ex parte assessments made on 30-3 1979 were null and void. For the assessment year 1973-74, it was argued that a notice under Section 16(2) was no doubt served on the assessee, but the assessee asked for an adjournment and the case was refixed again. On the date so refixed, the representative of the assessee attended. Thereafter, no further notice was served and the assessment was completed ex parte and so the assessment for this year was also null and void.

4. The AAC found that on 23-3-1979 a notice under Section 16(2) for all the 12 years was served by affixation requiring the assessee to comply with the terms thereof on 27-3-1979. He examined the Ward Inspector's report regarding the service by affixation and came to the conclusion that the notice under Section 16(2) was validly served on the assessee by affixation, on 23-3-1979, fixing compliance on 27-3-1979. Hence, he held that the assessments completed on 30-3-1979 were quite proper, as they were made after serving notice under Section 16(2) for all the years. However, he further observed that the assessee did not get a reasonable opportunity to explain its case before the WTO because of the short time allowed by the aforesaid notice and the assessments had to be completed because they were getting time-barred. Besides, he found that the WTO had estimated the net wealth of the appellant and the basis of those estimates was not clear. In these circumstances, the AAC set aside the assessments for all the 12 years with a direction to the WTO to make the assessments afresh, after giving a proper opportunity of being heard to the assessee.

5. Aggrieved by the above order of the AAC, the assessee is in appeal before us. Shri D.Y. Pandit, the learned representative for the assessee, urged before us that the AAC should have quashed the assessments as void ab initio and should not have directed the WTO to make the assessments afresh after giving reasonable opportunity of being heard to the assessee. He urged that the notice under Section 16(2), stated to have been served by affixation was not valid in law because it was not shown by the department that every effort was made to effect a personal service before the service by affixation was resorted to. He referred to Section 41 of the Act and Order V, Rules 12, 15 and 17 (sic) of the Code of Civil Procedure and urged that the service as effected by the WTO was not in accordance with the aforesaid rules. According to him, if no notice under Section 16(2) was served, then the assessment made thereafter becomes a nullity and could not again be revived by the AAC. He relied on the decisions in the cases of Hardeo Das Jagannath v. ITO [1961] 43 ITR 562 (Ass.), CIT v. Ramendra Nath Ghosh [1971] 82 ITR 888 (SC), Jai Prakash Singh v. CIT [1978] 111 ITR 507 (Gau.), the unreported decision dated 23-8-1976 of the Bombay High Court in Misc. Petition No. 1203 of 1974 and the order dated 23-5-1980 of the Tribunal in IT Appeal No. 90/PN/1980, in support of his contentions.

6. Smt. Meenakshi Singh, the learned representative for the department, on the other hand, supported the order of the AAC. At the outset, she stated that the AAC had merely set aside the assessment to be done afresh after hearing the assessee and so the assessee should not have any grievance. Then, she referred to the records of the WTO and pointed out that a notice under Section 16(2), date 2-8-1976, for the assessment years 1963-64 to 1971-72, fixing the date of hearing on 19-8-1976, was served on the assessee personally on 6-8-1976. Then she pointed to the office copy of the notice under Section 16(2), dated 3-11-1977, fixing appearance on 18-11-1977, which was personally served on the assessee on 15-11-1977. She also referred to the office copy of the notice under Section 16(2), dated 7-1-1978, fixing the hearing on 16-1-1978, for the assessment year 1973-74 onwards, which was served on the assessee. The learned representative for the assessee examined the office copy of these notices and admitted that they had been served on the assessee. Smt. Meenakshi Singh stated that it was enough if a notice under Section 16(2) was served once before completing the assessment and so it was not true to say that no notice under Section 16(2) was served on the assessee before the completion of the assessment. Then, she referred to the reports dated 8-3-1979 and 23-3-1979 of the Ward Inspector, in which the circumstances under which the notice under Section 16(2) had to be served by affixation has been mentioned. In the first report, the Inspector has stated the same thing. On the body of the second report, the ITO has directed that the notices should be Served by affixation by his order dated 23-3-1979.

Under the circumstances, Smt. Meenakshi Singh urged that the notices finally served by affixation were quite regular and in accordance with the procedure laid down in Section 41.

7. In reply, Shri D.Y. Pandit stated that the final notice under Section 16(2) served by affixation was not in accordance with law and so the assessment should have been quashed completely without giving a direction to make fresh assessments on the basis of the authorities referred to earlier. Further, he stated that the decision of the Supreme Court in the case of Guduthur Bros. v. ITO [1960] 40 ITR 298 did not apply to the facts of the instant case because in that case the notice under Section 28(1)(a) of the Indian Income-tax Act, 1922, had been validly served and the question was only regarding the hearing after the valid service of the aforesaid notice.

8. We have considered the contentions of both the parties as well as the facts on record. At the outset, we may say that there is a difference between annulling the assessments with a direction to do them afresh and without such a direction. While in the latter case, it may be argued that no fresh assessment was possible, such an argument cannot be raised in the former case. The AAC, in the case before us, has given a clear direction to do the assessment afresh and so the assessee would be precluded from arguing that no fresh assessment can be made unless the assessee challenges the finding in an appeal filed against the same. Hence, we do not see much force in the argument raised by the learned representative for the department that the assessee should not be aggrieved by the order of the AAC.9. From the records produced by the learned representative for the department before us. we find that a notice under Section 16(2), fixing the case on 19-8-1976, was served on 6-8-1976 for the first 9 years. A similar notice under Section 16(2), fixing the date of hearing on 16-1-1978, has been served for the assessment year 1973-74 onwards.

But, for some reason or other, the WTO decided to give another opportunity under Section 16(2) and served a notice under Section 16(2) by affixation on 23-3-1979, fixing the date of hearing on 27-3-1979 for all the 12 years. The assessments have been made ex parte for the non-compliance of this latter notice which required the assessee's compliance on 27-3-1979. The case of the assessee before us is that the said latter notice was not validly served and so the ex pane assessments made under Section 16(5) for the non-compliance of the said notice were null and void. It is, therefore, necessary to see whether that latter notice was validly served and, if not, what are the consequences.

10. Section 41(1) says that notice under the Act may be served either by post or as if it were a summons issued by a court under the Code of Civil Procedure. As pointed out by the learned representative for the assessee, the relevant order and rules of the Code of Civil Procedure state that a personal service should first be tried and only when that attempt fails, the service might be effected by affixation. We find that the WTO tried to effect personal service through the departmental notice server. But the reports of the notice server, already referred to earlier, stated that direct service could not be effected for the reasons stated in his report. Thereupon, the WTO directed the service of the notice by affixture. This was done by the notice server in the presence of the Ward Inspector, who reported back to the WTO that the notice had been served by affixing a copy thereof on the main entrance of the house belonging to the assessee-family. Thereafter, the WTO proceeded on the basis that the notice was validly served. Under the circumstances, we find that the notice under Section 16(2) for all the 12 years under consideration was served by affixture on 23-3-1979 in accordance with the procedure laid down in Section 41. Hence, we do not find any force in the argument of the learned representative for the assessee that the service of notice under Section 16(2) by affixation was not in accordance with law.

11. Even assuming for the sake of argument that the notice served by affixation on 23-3-1979 was not in accordance with the law, it is to be seen as to what consequences flowed therefrom. In other words, if the notice under Section 16(2) was not validly served and an assessment was subsequently made on the basis of that notice, it is to be seen whether the assessment is a nullity from the very beginning and cannot be revived or whether the assessment suffered merely from an irregularity which could be rectified and the assessment could be made again from the point of time when the irregularity intervened. In our opinion, the notice under Section 16(2) was not a notice which confers jurisdiction on the WTO to proceed with the assessment. The notices which confer jurisdiction on the WTO for assessment proceedings are the notices under Section 14(2) and Section 17(2) of the Act. Where the assessee files a return without being served with a notice under Section 14(2) or 17(1), the WTO assumes jurisdiction to proceed with the assessment by the mere fact that the assessee has filed the returns. The notice under Section 16(2) is a procedural notice which requires the assessee to produce such evidence as the assessee may choose to support the return filed by him. If a notice under Section 14(2) or 17(1) was not properly served, then that fact goes to the very root of the assessment as it involves assuming jurisdiction and, consequently, the entire assessment has to be quashed and no direction to do the assessments afresh on the basis of the invalid notice can be given. However, in our opinion, such is not the case with a notice under Section 16(2). If a notice under Section 16(2) is not properly served, then it does not affect the jurisdiction of the WTO to proceed with the assessment proceedings. In such a case, it will be open to the appellate authority to set aside the assessment and direct to make the assessment afresh after removing the irregularity relating to the service of notice under Section 16(2). Hence, even assuming, but not admitting, that the notice under Section 16(2) served in this case was not valid, then also, we do not find anything improper in the direction of the AAC to make the assessments afresh after giving a reasonable opportunity of being heard to the assessee.

12. The above conclusion of ours is supported by the decision of the Supreme Court in the case of Guduthur Bros, (supra). In that case, the ITO started penalty proceedings under Section 28(1)(a) of the 1922 Act and served a notice under Section 28(3) of the said Act on the assessee to show cause as to why penalty should not be imposed. The assessee had also filed a written reply in response to the said notice. The ITO did not give any further opportunity of being heard to the assessee but imposed the penalty. The assessee appealed to the AAC and contended that the penalty order was defective. The AAC set aside the penalty order. On receipt of that order, the ITO issued a further notice giving an opportunity of being heard to the assessee. The assessee moved to the High Court, under article 226 of the Constitution, against the said notice contending that the ITO could not continue penalty proceedings by rectifying the defect pointed out by the AAC. The High Court dismissed the petition in limine. Thereafter, the assessee appealed to the Supreme Court, who held as below : Sub-section (3) of Section 28, however, required that the penalty shall not be imposed without affording to the assessee a reasonable opportunity of being heard. This opportunity was denied to the appellants and, therefore, the order of the ITO was vitiated by an illegality which supervened, not at the initial stage of the proceedings, but during the course of it. The order of the learned AAC pointed out the ground on which the illegality proceeded and his order directing the refund of the penalty, if recovered, cannot but be interpreted as correcting the error and leaving it open to the ITO to continue his proceedings from the stage at which the illegality occurred. No express remand for this purpose, as it contended, was necessary.(p. 300) In our opinion, the notice issued to the appellants to show cause why penalty should not be imposed on them did not cease to be operative, because the AAC pointed out an illegality which vitiated the proceeding after it was lawfully initiated. That notice having remained still to be disposed of, the proceedings now started can be described as during the course of the assessment proceedings, because the action will relate back to the time when the first notice was issued.

In our opinion, the ITO is well within his jurisdiction to continue the proceedings from the stage at which the illegality has occurred and to assess the appellants to a penalty, if any, which the circumstances of the case may require.(p. 301) It is clear from the above decision that in a case where the ITO has validly assumed jurisdiction in a certain proceeding, he does not lose that jurisdiction merely because any illegality occurred at a subsequent stage. It is open to the ITO to correct that illegality or defect and continue the proceedings once again. This is so even when there is no express direction to do so by the appellate authority. In the case before us, the AAC has expressly directed the WTO to complete the reassessment in accordance with the law after giving a reasonable opportunity of being heard to the assessee. Hence, we do not find anything improper or irregular in the order of the AAC.13. We have considered the decision of the Assam High Court in the case of Hardeodas Jagannath (supra) but find the said decision to be of no assistance to the assessee because the decision of the Supreme Court in the case of Guduthur Bros, (supra) was not brought to the notice of their Lordships in that case. Similarly, we find that the decision of the Bombay High Court dated 23-8-1976 in Misc. Petition No. 1203 of 1979 and the decision of the Gauhati High Court in the case of Jai Prakash Singh (supra) have not noticed the decision of the Supreme Court in the case of Guduthur Bros. (supra) and so, these decisions should be considered per incuriam. We rely on the decision in the case of Tata Iron & Steel Co. Ltd. v. D.V. Bapat, ITO [1975] 101 ITR 292 (Bom.) wherein it has been held that a decision should be held to have been given per incuriam only where it was given in ignorance or forgetfulness of some inconsistent statutory provision or of some authority binding on the court, so that in such cases, some part of the decision or step in the reasoning on which it was based was, on that account, demonstrably wrong.

14. We have considered the decision of the Supreme Court in the case of Ramendra Nath Ghosh (supra) but we' find that the facts in that case are distinguishable from those of the case before us. That was a case relating to a notice under Section 33B of the 1922 Act which conferred jurisdiction on the Commissioner to initiate proceedings. As stated earlier, the notice under Section 16(2) in the case before us is not a notice conferring jurisdiction on the WTO to initiate proceedings.

15. We have also considered the decision, dated 23-5-1980, of the Tribunal in IT Appeal No. 90/PN/1980 but, once again, we find that the facts of that case were different. In that case, the ITO made an assessment which he was not authorised to make without the prior approval of the IAC under Section 144B of the Act. As the difference between the returned income and the income proposed to be assessed exceeded Rs. 1 lakh, the ITO should have referred the assessment to the IAC who was authorised to hear the objections of the assessee and take a decision thereon, which would be binding on the ITO. In other words, it was the IAC and not the ITO who was required under the law to take a final decision. Hence, in that case, the ITO himself assumed jurisdiction which really belonged to the IAC. Under those circumstances, the Tribunal found that the assessment made by the ITO suffered from lack of inherent jurisdiction and, so it was a nullity and could not be revived by the AAC. As stated earlier, the facts of the case before us do not involve the validity of any notice conferring jurisdiction.

16. We have already held that the service of notice under Section 16(2) by affixation, on 23-7-1979, was quite valid and so the order of the AAC to make the assessments afresh was quite proper. We have also found that even assuming that the notice under Section 16(2) was not properly served, even then the directions of the AAC to make the assessments afresh after giving a reasonable opportunity of being heard to the assessee is quite proper, in view of the decision in Guduthur Bros, (supra). Hence, we have no hesitation in upholding the order of the AAC for all the 12 years under consideration.


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