1. This appeal by the revenue is directed against the order of the AAC dated 6-2-1981 relating to the assessment year 1976-77. The grievance of the revenue is that he 'erred in holding that the provisions of Section 147(a) is not attracted in this case' and that, 'provisions of Section 64(1)(iii) are not applicable in this case and income of minor son is not includible in the income of the assessee'.
2. The factual background to be taken into consideration for determination of the issues is as under : For the assessment year 1976-77 which is under appeal before us, the original assessment in the case of Shri Mela Ram, since deceased, was completed on 26-6-1978 on a total income of Rs. 39,900 under Section 143(1) of the Income-tax Act, 1961 ('the Act'). In the case of Smt. Sumitra Devi, w/o Shri Mela Ram, the assessment for the assessment year 1976-77 was completed on 10-1-1978 on a total income of Rs. 47,560. These two assessments were made by the same ITO (Shri H.K. Srivastava) acting as the ITO. There was a firm working under the name and style of Mangat Ram Rarnesh Kumar, Yamunanagar, having business of timber. This firm was constituted of six sons of Mela Ram, namely, Mangat Ram, Ramesh Kumar and Surinder Kumar who were major and fullfledged partners and Vijay Kumar, Ashok Kumar and Virinder Kumar, minors admitted to the benefits of partnership and bis wife Smt. Sumitra Devi. For the assessment year 1976-77, the assessment of the firm was completed on 27-9-1978 treating the firm as registered. The shares of the minors as per allocation under Section 158 of the Act were respectively, Rs. 11,174, Rs. 8,381 and Rs. 8,381. Before completion of the firm's assessment the ITO had assessed under Section 143(1), the three minors on the share of income coming to them from this firm. These assessments were made in all the three cases on 10-1-1978.
3. Subsequently, the ITO issued notice under Section 148 of the Act to reopen the assessment in the case of Mela Ram under Section 147(a) of the Act. This notice dated 17-3-1980 was served upon Smt. Sumitra Devi on 19-3-1980 because Mela Ram had since deceased. The notice issued by the ITO was addressed to Mela Ram (deceased through Smt. Sumitra Devi).
On the basis of this notice, the ITO raised reassessment under Section 143(3)/147(a) dated September 1980. According to the ITO, he had reason to believe that income of the minors aforesaid chargeable to tax for the period under review had escaped assessment within the meaning of Section 147(a). The assessee during the course of reassessment proceedings, after filing the return, asked for the reasons for reopening the assessment and the ITO intimated the substance thereof to the assessee. In this, the ITO did not give a clear-cut idea as to what information he received subsequent to the original assessment that gave him the judicial satisfaction that by failure or omission on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, the income liable to tax had escaped assessment. During the course of hearing before us, we informed ourselves from the record of the ITO that he had examined the record and came to a conclusion that reassessment was justified. There is no information as such that came into his possession to which he has adverted to.
4. In the reassessment proceedings, the ITO focused his attention on the admission of the three sons of Mela Ram to the benefits of partnership in the aforesaid firm and the provisions of Section 64(1)(iii) of the Act substituted by the Taxation Laws (Amendment) Act, 1975, with effect from 1-4-1976. According to him, though the minors had ceased to be admitted to the benefits of partnership in the aforesaid firm with effect from 1-10-1975, yet the income accruing and arising to them out of the benefits of partnership for the period from 1-4-1975 to 30-9-1975 was includible in the hands of their father in view of the new provisions referred to above. Hence, he added the sum total of the shares of the minors amounting to Rs. 27,936 to the total income of their father's originally assessed. This was challenged in appeal.
5. The AAC held that the books of account of Mangat Ram Remesh Kumar, Yamunanagar, in which the minors were admitted to the benefits of partnership, were closed on 30-9-1975 and there was change in the constitution as on that date. The minors were excluded from the benefits of partnership with effect from 1-10-1975 when the new firm was constituted. The share of the minors included by the ITO was the amount that accrued to each of them up to the taking of the accounts on 30-9-1975 as was clear from the order of the firm for the assessment year 1976-77 made by the same ITO on 20-9-1977. He, therefore, held that on merits, Section 64(1)(iii) was not applicable. Since on merits, the said section was not applicable, there was no escapement of income and Section 147(a) was not applicable. The ITO's order was, therefore, cancelled. Hence, the appeal by the revenue.
6. It was contended on behalf of the revenue that the reassessment made by the ITO upon the assessee was valid because the law applicable to an assessment is the law that stands on 1st of April of the relevant assessment year and on that date the amended provisions of law were applicable. The ITO, it was contended, validly reopened the assessment because he could have a tentative belief that income liable to tax had escaped assessment. For this proposition, reliance was placed on the Calcutta High Court judgment in the case of H.A. Nanji & Co. v. ITO  120 ITR 593. Anticipating that there may be objection to the manner and method of reassessment including the name of the assessee, it was contended by the revenue that in view of the provisions of Section 292B of the Act which was inserted by the Taxation Laws (Amendment) Act, 1975, with effect from 1-10-1975, mistake, if any, in issuing the notice in the name of the deceased Mela Ram for making an assessment upon Smt. Sumitra Devi was an insignificant mistake and covered by this section. It was also contended that the mother of the minor acted on their behalf and, therefore, if special notices were not served upon any of them, there was no lacuna in law in the reassessment. It was stressed that in any case there was substantive communication to the parties concerned and, therefore, the reassessment is made in accordance with law which the learned AAC wrongly cancelled.
There is no change of opinion as there was no formation of opinion at the original assessment stage and the ITO could justifiably come to have reason to believe that income had escaped assessment on account of failure of the assessee to disclose fully and truly all material facts necessary for the assessment.
7. The learned counsel for the assessee, replying to these contentions, submitted that the admitted facts by the revenue are that the three minor sons of Mela Ram who were admitted to the benefits of partnership of the said firm ceased to be so with effect from 30-9-1975 at the close of the day. With effect from 1-10-1975, they had no connection whatsoever with the firm and, therefore, the provisions of Section 64(1)(iii) could not be made applicable in their cases. The order of the ITO, therefore, is bad ab initio. The amended provisions of law came into force with effect from 1-10-1975 as per Notification issued by the Board bearing No. S.O. 475 (E), dated 5-9-1975, appearing at  101 ITR (St.) 25.
8. The learned counsel for the assessee submitted that this is not the only reason on account of which the order made by the AAC is sound in law. He pointed out that the notice under Section 148 is addressed to Mela Ram through Smt. Sumitra Devi. Since the notice is addressed to a dead man, it is invalid in law and on this account also, the reassessment made by the ITO is void ab initio.
9 The learned counsel for the assessee submitted that besides the three minor sons of the deceased Mela Ram, there were three major sons and his wife and, therefore, all the legal heirs particularly the major sons of the deceased should have been served with necessary notices.
Since the major sons of the deceased have not been served with notices, the reassessment is void ab initio in view of the judgment of the Gauhati High Court in the case of Jai Prakash Singh v. CIT  111 ITR 507.
10. The learned counsel for the assessee further submitted that the reassessment is bad in law because the amended provisions of Section 64(1)(iii) were not properly applied by the ITO. In this regard, he submitted that the total income of Mela Ram (deceased) for the assessment year 1976-77, as per assessment raised by the ITO on 26-6-1978, was Rs. 39,900. The income of his wife Smt. Sumitra Devi was Rs. 47,560. Taking into consideration the provisions of the Explanation 1 to Section 64(1), the ITO was obliged to include, if it otherwise was includible, the income of the minor child from the benefits of partnership in the income of that parent whose total income [excluding the income referred to in Clause (iii) of Sub-section (1) of Section 64] was greater. Since the income of Smt. Sumitra Devi, widow of late Mela Ram, for the assessment year 1976-77 as per assessment made on 10-1-1978 was more than the income of Mela Ram as per assessment made on 26-6-1978, the minors' share of profit from the firm could be included, if at all only in the hands of Smt. Sumitra Devi. On this ground also, the reassessment is bad in law and it was rightly cancelled by the AAC.11. The learned counsel for the assessee emphasised that despite the request made by the party against whom the ITO was proceeding in the reassessment proceedings for providing the reasons, as recorded by him, after the return had been filed in response to notice under Section 148, the ITO did not, in fact, intimate in writing the reasons to the assessee. By not disclosing the reasons, the reassessment raised by the ITO was ab initio void in view of the judgment of the Bombay High Court in the case of Ved Prakash Prabhudayal Agarwal v. M.R. Patel  7 Taxman 404 The learned counsel for the assessee argued that the ITO had no reasons for reopening the assessment and he merely changed opinion to make reassessment on the same set of facts which were very much before him at the time of making the original assessment because insofar as the income-tax proceedings are concerned, one ITO succeeding the other cannot be different for purposes of assessment.
12. The learned counsel for the assessee argued that the reliance of the revenue on the provisions of Section 292B is erroneous because only minor defects in the notice can be said to be covered by this section.
But in the case of the assessee, there was major defect insofar as notices were addressed to the deceased and the legal heirs were not brought on record, the assessment has been made on that parent whose income is less than the other and that there was change of opinion by the ITO without any communication by way of information for formation of the belief that income has escaped assessment for failure of the assessee to disclose fully and truly all material facts necessary for the assessment. Hence, the order of the AAC requires no interference at the hands of the revenue.
13. We have given careful consideration to the rival submissions. We have also applied our mind to the relevant provisions of law. The position of law that emerges from this is as under : Section 64(1)(iii) came on the statute book when the Taxation Laws (Amendment) Act, 1975, substituted Sub-section (1) ibid., with effect from 1-4-1976. The substituted section provides that in computing the total income of any individual, there shall be included all such income as arises directly or indirectly to the minor child of such individual from the admission of the minor to the benefits of partnership in a firm. The Explanation provides, inter alia, that for purposes of Clause (iii), the income of the minor child from the partnership shall be included in the income of that parent whose total income (excluding the income referred to in this clause) is greater. This Explanation also provides that where any such income is once included in the total income of either spouse or parent, any such income arising in any succeeding year shall not be included in the total income of the either spouse or parent unless the ITO is satisfied, after giving that spouse or parent an opportunity of being heard, that it is necessary so to do. Since the substituted section was brought on the statute book with effect from 1-10-1975, the Central Government, by virtue of the powers conferred by Sub-section (2) of Section 1 of the Taxation Laws (Amendment) Act, 1975 (41 of 1975), appointed the date as the date on which the provisions of the said Act would be applicable. This was done by Notification No. S.O.475(E), dated 5-9-1975, published in the Gazette of India, Extraordinary, Part II and also appearing at  101 ITR (St.) 25.
In this the Central Government has fixed the date of applicability of the provisions of Section 64(1)(iii) as 1-10-1975. Therefore, it is clear that by a specific legislation the date from which the substituted provisions of Section 64(1)(iii) could come into operation had been fixed as 1-10-1975. It becomes clear, therefore, that if the minors ceased to be admitted to the benefits of partnership on or before 30-9-1975, the new provisions would not be applicable to the income accruing and arising to them as share from a firm.
14. It is now well settled that the only obligation upon the assessee is to disclose primary facts to the ITO and it is for the ITO to draw any conclusions therefrom for purposes of taxation. It is not for the assessee to advise the ITO as to what he should do with regard to the facts that have been brought to his notice. It is also well settled that a successor ITO cannot sit in judgment over the decision arrived at by his predecessor.
15. The ITO can reopen an assessment under Section 147(a) only if and we repeat only if, he has reason to believe that by reasons of the failure or omission on the part of the assessee to make a return under Section 139 of the Act for any assessment year to the ITO or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax had escaped assessment for that year. The ITO has to record the reasons before initiation of the proceedings. In the reasons recorded, the ITO has to show that the escapement of income was due to the failure of the assessee to disclose fully and truly all material facts necessary for that assessment. Even for having a tentative belief for initiation of reassessment proceedings, these ingredients must be satisfied to invest the ITO with lawful jurisdiction to raise a valid reassessment.
16. When we examine the facts of the case in the light of the law applicable to it, we find that when the original assessment was made in the case of Mela Ram on 26-6-1978 by the ITO, he was aware of the minor children of Mela Ram (deceased) having been admitted to the benefits of partnership in the said concern because he had revised the assessment on the minors about their shares on 10-1-1978. Not that it matters, but incidently the person of the ITO (sic) making assessments on the minors and subsequently making assessment on Mela Ram, who has since deceased, was the same. It is also very pertinent to note that till there was amendment in law as pointed out above by substitution of Section 64(1)(iii) by the Taxation Laws (Amendment) Act, 1975, the share accruing to the minor child of an assessee from a firm where the assessee was not partner was includible in his total income. Therefore, there was no obligation on the part of Mela Ram to disclose the share of the three minors in question in his return. As such, there was no failure on the part of Mela Ram to disclose fully and truly all material facts necessary for his assessment. The ITO could not, therefore, proceed under Section 147(a).
17. When the amended law came on the statute book, the ITO has interpreted it as if his interpretation is universally acceptable. In our considered opinion, the ITO was himself proceeding against the clear cut indication given by the Central Government in Notification No. S.O. 475(E), dated 5-9-1975, wherein the operation of the amended Section 64 is shown with effect from 1-10-1975. This is another ground on the basis of which the ITO could not have reason to believe that the income liable to tax in the hands of Mela Ram (deceased) had escaped assessment due to failure to disclose fully and truly all material facts necessary for his assessment.
18. The ITO, in the reasons recorded, which we had an occasion to inform ourselves in the Court, did not use the words 'failure of the assessee to disclose fully and truly all material facts necessary for his assessment'. He has merely argued that there was amended law and that was not applied to the case of the assessee. This, to our mind, is not what the ITO should have to have reason to believe (sic) that it is the failure of the assessee to disclose fully and truly all material facts that led to an under-assessment or escapement of assessment. On this account also, the reassessment proceedings are bad in law.
19. It is very clear that in order to make an assessment on a deceased person, the notice is to be served on all the legal heirs. The revenue's contention that Smt. Sumitra Devi acted as a legal representative of all the legal heirs is devoid of any substance because nowhere the ITO treated her as legal representative of all the legal heirs. In his notice and in his impugned assessment order, he has treated Smt. Sumitra Devi as legal heir of Mela Ram (deceased). The service of notice in the manner described above, in our opinion, does not strike at the root of the reassessment. The failure of the ITO, however, to serve notice on all the legal heirs including three major sons is fatal to the reassessment in view of the Gauhati High Court judgment in the case of Jai Prakash Singh (supra). On this account as well, the reassessment is bad in law.
20. In view of what is stated above, we are of the considered opinion that the reassessment made by the ITO was rightly cancelled by the AAC.The fact that the AAC cancelled the reassessment after mentioning that there was nothing on merits before the ITO to raise a reassessment does not in any manner affect the decision. Therefore, on each of the above grounds, the order of the AAC is valid in law and does not require any interference at the hands of the revenue. It is confirmed.