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First Son of Pankaj Mohan (P.) Vs. Wealth-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Allahabad
Decided On
Judge
Reported in(1983)4ITD266(All.)
AppellantFirst Son of Pankaj Mohan (P.)
RespondentWealth-tax Officer
Excerpt:
.....materia with section 148 of the 196l act which makes it obligatory for the ito to serve on the assessee a notice containing all or any of the requirements which may be included in a notice under section 139(2) of the 1961 act, which corresponds to section 17 of the act. next, he submitted that even though the form of the notices used by the commissioner was the form under section 263(1) of the 1961 act, the notices were in substance and effect in conformity with and according to the intent and purpose of section 25 of the act and, therefore, the notices were valid. in making this submission, reliance was placed by him on the provisions of section 42c of the act. he pointed out, that ' the same officer was performing the dual functions of the ito and the wto and, therefore, the.....
Judgment:
1. These three appeals, though filed by different assessees, raised common questions and were, therefore, heard together and are being disposed of, for the sake of convenience by one common order.

2. The assessees are three different private Trusts and the assessment year involved is 1978-79. The appeals arise out of separate orders all dated 23-10-1981 of the Commissioner.

3. WT Appeal No. 42 (All.) of 1982 filed by the first son of Vinai Mohan (P.) Trust, Lucknow, was filed on 4-1-1982 after a delay of six days. In the condonation application it was stated by the assessee that the appeal was prepared on 7-12-1981 well in time as the last day of filing the appeal was 29-12-1981. It was also stated that after preparation the papers were handed over to the attorney Shri Vijai Nigam to take them to Lucknow from Delhi and that on reaching Lucknow Shri Vijai Nigam was informed that Shri Rakesh Mohan had to leave for Bombay suddenly and therefore, the papers were despatched by air to Bombay. The papers, it was stated, received the attention of Shri Rakesh Mohan only on 3-1-1982 and accordingly, they were received in the office of the counsel on 4-1-1982 when they were filed in the office of the Tribunal, Delhi. It has also been stated that, in fact, the Tribunal's fee had been paid on 19-12-1981. According to the assessee, the delay was caused due to these peculiar circumstances.

After considering the condonation application and after hearing the counsel on both the sides, we are of the view that the delay was bona fide and for a reasonable cause which requires to be condoned. The appeal is, therefore, held,to be entertainable and in time So far as the other two appeals are concerned, they were filed in time.

4. The assessees are private trusts. The corpus of the Trusts consists of 60,000 equity shares of Mohan Meakin Breweries Limited. The wealth-tax assessments for the assessment year 1978-79 in question were completed under Section 16(3) of the Wealth-tax Act, 1957 ('the Act'), on 25-10-1979 in the status of individual on the basis that on the relevant valuation dates the shares of the sole beneficiaries in each case were known and determinate As per the trust deed dated 22-5-1973, the aforesaid shares were handed over to the trusts with effect from 31-3-1973 for the benefit of the first son of Pankaj Mohan/Hemant Mohan/Vinai Mohan on attaining majority. In case of death before attaining the age of majority, the beneficiaries of the respective trusts were to be the next surviving sons on attaining majority. In case however, a son was not begot the beneficiaries of the respective trusts were to be any one of the so many or the legal heirs of Pankaj Mohan/Hemant Mohan/Vinai Mohan depending upon certain contingencies.

Since the Commissioner was of the view that the order of the WTO was erroneous and prejudicial to the interests of revenue, notices dated 12-10-1981 under Section 25(2) of the Act were purported to be issued to the assessee's fixing 19-10-1981 for hearing. Since, after the rejection of the assessee's application for adjournment, none appeared on the date of hearing, the appeals were heard by the Commissioner exparte. The Commissioner took the view that Pankaj Mohan/Hemant Mohan/Vinai Mohan being himself a minor on the relevant valuation date, the question of his begetting a son on this date did not arise. He took the view that the beneficiary was thus indeterminate and unknown on the relevant valuation date. He took the view that the assessments should, therefore, have been made under Section 21(4) of the Act under which the benefit of exemption of Rs. 1,50,000under Section 5(1)(a) of the Act was not admissible and so tax was leviable at the rate If per cent of the wealth or the rates applicable to the individual whichever was higher. Reliance was placed by the Commissioner on the decision of the Supreme Court in the case of CWT v. Trustees of H.E.H. Nizam's Family [1977] 108 ITR 555 and the decision dated 7-3-1981 of the Tribunal in WT Appeal No. 129 (All.) of 1982 for the assessment year 1973-74 in the case of first son of Pankaj Mohan Private Trust Ltd. The Commissioner, accordingly, set aside under Section 25(2) the assessment orders and directed the WTO to reframe the assessment, bearing in view the provisions of Section 21(4).

5. The assessees, being aggrieved, are in appeal before us. A preliminary point was raised by Shri C.S. Agrawal, the learned counsel for the assessee, namely, that the Commissioner had erred in not granting a fair and adequate opportunity to the assessee., Elaborating in this submission, Shri Agrawal pointed out that the notices issued on 12-10-1981 were not notices in the eyes of law and, therefore, jurisdiction was not rightly assumed by the Commissioner on the basis thereof. The notices are in Hindi. He pointed out the following infirmities in the notices: (i) In the 'subject' of the notices reference was made to Section 263(1) of the Income-tax Act and not to Section 25(2) of the Wealth-tax Act, 1957.

(ii) In para 1 of the notice reference was made to the ITO, A-Ward, Cir. II Lucknow and reference was made to order passed under Section 16(3) of the Income-tax Act, 1961.

(iii) In para 1 of the notice reference was made to Aayekar/Dhankar Adhikari showing that mind had not been applied as to whether it was 'Aayekar Adhikari' or 'Dhankar Adhikari'.

(iv) In para 1 of the notice the language used was--'ki aayekar/dhankar ADHIKARI DWARA 1,50,000 KI CHHOOT DHANKAR ADHINIYAM 21(4) KE ADHIN DEY NAHIN HAI JO TRUTIPURN HAI AUR RAJASV KE PRAT1KOOL HAI'.

(v) In para 2 of the notice again reference was made to Section 263(1) of the Income-tax Act, 1961.

He also pointed out that the aforesaid notices dated 12-10-1981 were served on the assessees on 16-10-1981 fixing the hearing for 19-10-1981 and, therefore, no proper opportunity of hearing had been afforded to the assessees. Lastly, it was pointed out that as recorded by the Commissioner himself in para 3 of his order, the assessee had given applications on 17-10-1981 requesting for adjournment of the cases to some other date in the 1st week of November 1981 and that the adjournment applications were rejected merely on the ground that limitation was going to be barred on 24-10-1981 and, therefore, it was not possible to adjourn the cases. He also referred to the decision of the Delhi. High Court in Addl. CIT v. J.K. D'Costa [1982] 133 ITR 7, for the proposition that the mere fact that there was some minor omission or mistake in the assessment order did not justify the action of the Commissioner in setting aside the whole of the assessment orders and that such a wholesale cancellation of the assessment with a direction to make a fresh assessment is called for only in cases where there is something totally and basically wrong with the assessment which is not capable of being remedied by amendment to the assessment order itself.

6. In reply Shri R.K. Upadhyay, the learned departmental representative, firstly pointed out that the provisions of Section 25 were not part materia with Section 148 of the 196l Act which makes it obligatory for the ITO to serve on the assessee a notice containing all or any of the requirements which may be included in a notice under Section 139(2) of the 1961 Act, which corresponds to Section 17 of the Act. Next, he submitted that even though the form of the notices used by the Commissioner was the form under Section 263(1) of the 1961 Act, the notices were in substance and effect in conformity with and according to the intent and purpose of Section 25 of the Act and, therefore, the notices were valid. In making this submission, reliance was placed by him on the provisions of Section 42C of the Act. He pointed out, that ' the same officer was performing the dual functions of the ITO and the WTO and, therefore, the mention of the ITO in place of the WTO in the notices was not at all fatal. Referring to the body of para 1 of the notices, he pointed out that the Commissioner purported to say that the exemption of Rs. 1,50,000 granted by the WTO in the assessment orders was not admissible in view of the provisions of Section 21(4) and that it was not necessary to further elaborate that the shares of the persons on whose behalf or for whose benefit the assets were held, were indeterminate or unknown. Shri Upadhyay also pointed out that the assessees properly understood what notice was given by the Commissioner and, therefore, there was nothing wrong with the notices. He, therefore, submitted that jurisdiction was rightly assumed by the Commissioner in these cases on the basis of these notices. Regarding the want of opportunity, he pointed out that the adjournment applications dated 17-10-1981 were left by the assessees at the counter of the ITO, without caring to find out as to what orders had been passed thereon and that it was the duty of the assessees themselves to have informed themselves about the result of the said applications. In this connection reference was made by him to the decision of the Hon'ble Allahabad High Court in Auto Sales v. STO [1974] UPTC 622. He also referred to the decision of the Hon'ble Allahabad High Court in Sant Baba Mohan Singh v. CIT [1973] 90 ITR 197 and of the Supreme Court in Guduthur Bros. v. ITO [1960] 40 ITR 298, for the proposition that if the jurisdiction was rightly assumed and the proceedings were validly initiated by the ITO it was open to him to take up the matter at the point at which the illegality supervened and to correct his proceedings. On the basis of the said decisions he pointed out that even if a view were to be taken that the opportunity of hearing provided to the assessees was not reasonable or adequate, the appeals could be restored to the Commissioner for a decision afresh after giving a due opportunity of hearing to the assessees again. In reply Shri C.S. Agrawal, referred to an order dated 11-13-1982 of the Delhi Bench 'E' of the Tribunal in Sandip Simani Trust, New Delhi v.WTO [WT Appeal Nos. 168 to 174 (Delhi) of 1981] for the assessment years 1971-72 to 1978-79 wherein, it had been observed that it was not clear from the assessment order as to whether the assessment had been made with reference to Section 21(1) or Section 21(4) and the order of the Commissioner passed under Section 25(2) was, therefore, set aside.

7. We have considered the rival submissions. Section 42C provides that no notice issued in pursuance of any of the provisions of the Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such notice if the notice is in substance and effect in conformity with or according to the intent and purpose of the Act. Admittedly, the format of notice utilised by the Commissioner was the one meant for a notice issued under Section 263(1). However, at the same time it is to be remembered that the provisions of Section 263(1) of the 1961 Act are in pari materia with the provisions of Section 25 of the Act. There is also substance in the contention raised on behalf of the revenue that the same officer was performing the dual functions of the ITO and the WTO and similarly the Commissioner of Income-tax and the Commissioner of Wealth-tax and that the issue of a formal notice is not obligatory under Section 25 as under Section 17. Therefore, the mere mention of 'Aaykar Adhikari' in place of 'Dhankar Adhikari' in the notices was not fatal. The mention of the expression 'Aaykar/Dhankar' in the notices also does not show that the Commissioner was not sure as to whose order was erroneous or prejudicial to the interests of revenue. The mention of 'A-Ward, Circle II Lucknow' was quite appropriate and the section under which the order dated 25-10-1979 was passed was correctly mentioned as Section 16(3) though the Act referred to the 1961 Act in place of the 1957 Act. In the body of para 1 of the notices it was clearly pointed out that the exemption of Rs. 1,50,000 was not admissible in view of Section 21(4) on account of which the order was erroneous and prejudicial to the interests of the revenue. We also find a lot of force in the submissions made on behalf of the revenue that the notices have to be reasonably construed and that we have to see whether the assessee properly understood what the notices were for. In this connection, it is relevant to peruse the applications moved on behalf of the assessee for adjournment. The applications were to the following effect: Re: Your Notice under Section 25(2) of the WT Act, 1957 for the assessment year 1978-79 in the case of: I acknowledge with thanks the receipt of your above notice dated 12-10-1981 in the afternoon of 1610-1981. In respect of above referred assessee. Your goodself has been pleased to call us to produce the evidence in support of above case on 19-10-1981.

In the above case ticklish and intricate law points are involved and for which I need some time to consult my counsel who is at Delhi.

That on receipt of your above notice immediately contracted my counsel at Delhi and came to know that he is away in connection of other cases till 24th October, 1981, and thereafter he is proceeding on holiday tour with family for a week.

Under the circumstances I request your goodself to kindly adjourn the hearing fixed for 19-10-1981 and fix any other date in first week of November, 1981 at your convenience.

This clearly shows that the assessees understood that the notices were under Section 25(2). It was not pointed out in these applications or by means of separate applications that the assessees did not understand as to what the notices were for. The only thing pointed out was that ticklish and intricate law points were involved for which some time was needed to consult the counsel who was at Delhi. The decision of the Tribunal in the case of Sindip Simani (supra) was not on the same facts. Having regard to the totality of all the facts, circumstances and material, we are clearly of the view that the notices in question were in substance and effect in conformity with and according to the intent and purpose of Section 25(2) which gave jurisdiction to the Commissioner to act thereunder. We, therefore, hold the notices and proceedings initiated on their basis to be quite valid in law.

8. We next come to the question of reasonable opportunity of hearing.

In the adjournment application the assessees had pointed out that ticklish and intricate law points were involved for which some time was needed to consult the counsel at Delhi. The applications also proceed to state that when efforts were made by the assessees to contact the counsel at Delhi, they came to know that the counsel was away in connection with other cases till 24-10-1981, whereafter he was proceeding on a holiday tour with his family for a week. It is under these circumstances that the assessee sought adjournment of hearing in the first week of November at the convenience of the Commissioner.

Since there is nothing on the record nor in the order of the Commissioner to show that the facts stated in the adjournment applications were not correct, the refusal to grant adjournment was not justified. As recorded by the Commissioner himself in his order, he was overawed by the consideration that the cases were getting time-barred on 24-10-1981 and that is the only reason on account of which the adjournments were refused by him. Even though the adjournment applications were left by the assessees at the counter on 17-10-1981 the Commissioner did take notice of them. The above considerations become all the more relevant when we see that only 3 days' time was given to the assessee to produce evidence. In our view, 3 days' time was absolutely inadequite particularly having regard to the fact that the assessee's counsel was not available and that the matter was such as had been dealt with in the cases of the first son of Hemant Mohan and first son of Rakesh Mohan (P.) Trusts, Lucknow at length even by the Tribunal. Even if, therefore, it was for the assessees to find out the fate of the adjournment applications moved by them, the opportunity of hearing provided to the assessees was absolutely inadequate and unreasonable, 9. The last question is regarding the consequence arising out of want of reasonable opportunity afforded to the assessees in the proceedings under Section 25(2) by the Commissioner. As rightly pointed out on behalf of the revenue, it is now well settled by the decisions of the Supreme Court and notably in Guduthur Brothers (supra) that if the proceedings were lawfully initiated and thereafter any illegality supervened, the jurisdiction of the authority concerned is not taken away and that it is open to such an authority to take up the matter at the point at which the illegality supervened and to correct his proceedings. We, therefore, set aside the impugned orders of the Commissioner and direct him to decide the matter afresh in accordance with law after giving a reasonable and sufficient opportunity of hearing to the assessees. In view of the said order it is not necessary to decide the question as to whether and if so, how far the Commissioner was justified in setting aside the orders of the WTO in their entirety. Arguments were also not addressed before us, in view of the preliminary point discussed above, on the merits of the case.


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