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Marghabhai Babarbhai Patel Vs. R.M. Parikh, Income-tax Officer, Ward-b, Petlad and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberSpecial Civil Application No. 737 of 1965
Judge
Reported in[1970]78ITR418(Guj)
ActsIncome Tax Act, 1922 - Sections 22(4), 24B, 24B(2), 34 and 34(1)
AppellantMarghabhai Babarbhai Patel
RespondentR.M. Parikh, Income-tax Officer, Ward-b, Petlad and anr.
Appellant Advocate K.H. Kaji, Adv.
Respondent Advocate J.M. Thakore, Adv.
Cases ReferredBengal Immunity Co. v. State of Bihar.
Excerpt:
.....should not be taken under section 34(1) (a) and since the petitioner failed to show cause, the impugned notices were issued. but the words used here are reminiscent of section 24b and clearly indicate that the impugned notices were issued for making reassessment of the income of the deceased as an individual through the petitioner as the legal representative under section 34(1) (a) read with section 24b(2). the learned advocate-general contended that the words'legal representative of late babarbhai hirabhai patel' were merely descriptive of the petitioner and they should not be given undue emphasis in determining the nature and character of the impugned notices. the impugned notices would also be bad since admittedly sanction for initiation of proceedings was given by the central..........1962, while the petition was filed on 8th july, 1965, more than three years after the date of the impugned notices and there was, therefore, gross delay on the part of the petitioner in approaching the court and the petition should, therefore, be dismissed in limine without going into the merits. now while it is true as a general proposition that when the court is exercising its extraordinary jurisdiction under article 226 of the constitution, delay is a factor which has to be taken into account in deciding whether the discretion of the court should be exercised against the petitioner, there is no hard and fast delay must necessarily in all cases result in the dismissal of the petition. the discretion and its exercise must always depend on the facts and circumstances of each case. we.....
Judgment:

P.N. Bhagwati, C.J.

1. One Babarbhai Hirabhai Patel (hereinafter referred to as the deceased Babarbhai) was at all material times a permanent resident of Cambay which was a Native State prior to its merger with the then Province of Bombay. The deceased Babarbhai had deposited from time to time diverse sums of money with various firms which included Messrs. Das and Company of Bombay. Tax at the appropriate rate prevalent at the relevant time on the amount of interest on these deposits was deducted and paid by Messrs. Das and Company and other firms on behalf of the deceased under section 18(3A) of the Income-tax Act, 1922. Since the deceased has no other income in British India apart from the amount of interest on these deposits, he was not assessed to tax by the British Indian authorities until the merger of Cambay with then Province of Bombay. Subsequent to the merger, some inquiry was made by the Additional Income-tax Officer, Petlad Circle, Petlad, and pursuant to the inquiry, the deceased appeared before the Additional Income-tax Officer, Petlad Circle, Petlad, and made a statement giving various explanations regarding investments made by him from time to time. The deceased disclosed in this statement that he had three sons, namely, the petitioner, Punjabhai and Nanubhai, and he also gave full particulars about their activities. This inquiry was with regard to the assessment years 1949-50 to 1953-54 and in view of the explanation given by the deceased, it was closed and no further proceedings were taken. However, so far as the assessment year 1954-55 is concerned, the Income-tax Officer, Ward-B, Petlad, issued a notice dated 25th June, 1954, under section 22(2) requiring the deceased to submit a return of income and pursuant to the notice the deceased filed a return of income on or about 13th August, 1954. The Income-tax Officer, Ward-B, Petlad, by an order dated 28th June, 1955, assessed the deceased in the status of Hindu undivided family on a total income of Rs. 700 and since that was within the limits of exemption, no tax was determined to be payable by the Hindu undivided family. The deceased, thereafter, died at Cambay on 8th September, 1956, leaving him surviving his three sons, namely, the petitioner, Punjabhai and Nanubhai. Subsequent to the death of the deceased, the assessment of Messrs. Das and Company for the assessment years 1941-42 to 1951-52 were reopened by the Income-tax Officer, Central section, Bombay, and in the course of the reassessment proceedings, a statement of the petitioner was taken at cambay on 10th January, 1961, and this statement was subsequently explained and elaborated by the petitioner by an affidavit dated 30th March, 1961. The record of the petition does not show what course the reassessment proceedings of Messrs. Das and Company followed but it is clear from an averment made in the petition which is not denied in the affidavity-in-reply that the reassessment proceedings were ultimately compromised between messrs. Das and Company and the Central Board of Revenue on 29th May, 1962. The income-tax department, in the meantime, probably with a view to making a reassessment, started taking steps against the petitioner in respect of the deposits with messrs. Das and Company and on the 16th March, 1962, a letter dated 6th March, 1962, was pasted by the process-server of the income-tax department on the outer-door of the house of the petitioner. This letter was addressed by the Income-tax Officer, Ward-B, Petlad, to 'Shri Marghabhai Babarbhai Patel', and the petitioner was called upon to show cause why action under section 34(1) (a) should not be initiated for the assessment years 1941-42 to 1951-52, since there were substantial credits 'in your account' in the books of Shri Bhogilal H Patel of Messrs. Das and Company. The petitioner was not in Cambay at that time and his minor son, therefore, addressed a letter dated 20th March, 1962, to the Income-tax Officer, Ward-B Petlad, and pointed out that the petitioner had gone out of town and he did not know for certain when the petitioner would return and time should, therefore, be granted for about 15-20 days. The Income-tax Officer, Ward-B, Petlad, was obviously not in a position to give such a long time and he, therefore, issued twelve notices dated 24th March, 1962, under section 34 for reopening the assessments in respect of the assessment years 1941-42 to 1951-52. These notices were in identical language and they were addressed to 'Shri Marghabhai Babarbhai Patel, UNDEL.' These notices were served on the petitioner by affixing them on the outerdoor of the house of the petitioner on 27th March, 1962. When the notices were served, the petitioner was admittedly out of Cambay and he returned to Cambay some time before 30th April, 1962. The petitioner, on perusing the notices, addressed a letter dated 30th April, 1962, to the Income-tax Officer, Ward B, Petlad, challenging in jurisdiction of the income-tax Officer to issue the notices and pointing out various facts and circumstances which, according to the petitioner, showed that the notices were not justified. The income-tax Officer by his letter dated 5th June, 1962, replied to the petitioner asserting that the action started against the petitioner under section 34(1) (a) was quite proper and legal and he also pointed out to the petitioner that certain copies of accounts were not enclosed with the petitioner's letter dated 30th April, 1962, as stated in that letter. The petitioner, accordingly, forwarded copies of these accounts to the Income-tax Officer. No steps were, however, taken by the Income-tax Officer for proceeding further with these assessment proceedings and a period of about two years elapsed. The Income-tax Officer suddenly woke up again on 28th April, 1964, and addressed a letter to the petitioner enclosing a notice under section 22(4), since no returns had been filed by the petitioner pursuant to the notices under section 34(1) (a). The letter as well as the notice were addressed to 'Shri Marghabhai Babarbhai, legal heir to Babarbhai Hirabhai Patel, Valandvado, Cambay'. The petitioner by his letter dated 12th May, 1964, made derailed submissions explaining all the deposits and investments of the decaesed and pointing out that there was no justification at all for initiating proceedings under section 34(1). This letter to the Income-tax Officer was followed by two letters, addressed to the Inspecting Assistant, Commissioner, one dated 12th May, 1964, and the other dated 14th May, 1964. The Inspecting Assistant Commissioner by his reply 20th May 1964, acknowledged receipt of the petitioners letter dated 20th May, 1964, and 14th May 1964, and informed the petitioner that the matter was receiving attention. The petitioner, accordingly, waited but it became clear form two notice under section 22(4) one dated 23rd February, 1965, and the other dated 12th April, 1965, issued by the Income-tax Officer that he was determined to proceed against the petitioner, and the petitioner, therefore, filed the present petition challenging the validity of the notices issued under section 34(1) (a) as also of the proceedings commenced by issue of such notices.

2. Before we set out the grounds of challenge urged on behalf of the petitioner, it would be convenient at this stage to deal with the preliminary objection urged by the learned Advocate-General on behalf of the revenue. the learned Advocate-General contended that the notices under section 34(1) (a) impugned in the petition were issued as far back as 24th March, 1962, while the petition was filed on 8th July, 1965, more than three years after the date of the impugned notices and there was, therefore, gross delay on the part of the petitioner in approaching the court and the petition should, therefore, be dismissed in limine without going into the merits. Now while it is true as a general proposition that when the court is exercising its extraordinary jurisdiction under article 226 of the Constitution, delay is a factor which has to be taken into account in deciding whether the discretion of the court should be exercised against the petitioner, there is no hard and fast delay must necessarily in all cases result in the dismissal of the petition. The discretion and its exercise must always depend on the facts and circumstances of each case. We must, therefore, examine the facts of the present case for the purpose of seeing whether the delay on the part of the petitioner is of such a character that we should in the exercise of our discretion refuse to grant relief to the petitioner even if his claim is otherwise found to be well merited. The impugned notices were served on the petitioner on 27th March, 1962, by affixation on the outer door of his residence. The petitioner was admittedly at that time out of Cambay. He returned to Cambay some time before 30th April, 1962, and immediately addressed the letter dated 30th April 1962, to the Income-tax officer protesting against the issue of the impugned notice. It is true that in his reply dated 5th June, 1962, the Income-tax officer asserted that the action initiated against the petitioner under section 34(1) (a) was quite proper and legal but after copies of accounts referred to in his reply were forwarded by the petitioner to the Income-tax Officer, the Income-tax Officer did not adopt any further steps in pursuance of the impugned notice for a period of about two years. The petitioner was, therefore, justified in assuming that the Income-tax Officer had dropped the proceedings initiated against the petitioner. It is common knowledge that ordinarily when notices under section 34 are issued by the income-tax department, they are promptly followed up by various steps required to complete the assessment proceedings and, therefore, in the present case, where no steps taken by the Income-tax Officer for a period of about two years, it would not be unreasonable on the part of the petitioner to assume that no further proceedings were intended to be taken against him more particularly since the reassessment proceedings of Messrs. Das and Company were compromised on or about 28th May, 1962. The notice under section 22(4) served on the petitioner along with the letter dated 28th April, 1964, no doubt conveyed to the petitioner that the Income-tax Officer proposed to proceed with the assessment proceedings, but when the petitioner represented his case to the Inspecting Assistant Commissioner by his letter dated 12th May, 1964, and 14th May, 1964, the Inspecting Assistant Commissioner intimated to the petitioner that the matter was receiving attention. The petitioner was, therefore, justified in waiting for further Communication from the Inspecting Assistant Commissioner and he could not be said to have acted unreasonably in not immediately rushing to the court. It may be noted that when the petitioner was, thereafter, once again served with notices dated 23rd February, 1965, and 12th April, 1965, under section 22(4) which clearly showed that the Income-tax Officer had decided to proceed further against him, he immediately filed the present petition. It is, therefore, not possible to say that the delay on the part of the petitioner in the present case was unreasonable so as to merit dismissal of the petition in limine. It is clear from the record that the petitioner did not sleep over his rights. He throughout maintained that the impugned notices were without jurisdiction and the Income-tax Officer had no justification to issue them.

3. Moreover, the delay on his part in filing the petition has not in any way resulted in any prejudice to the revenue. It is not as if the petitioner has allowed the reassessment proceedings to go on and come to the court at a late of those proceedings. The petition has actually been filed as soon as the Income-tax Officer indicated that he is proceedings further under the impugned notices. It is, therefore, not possible to throw out the petition on the ground of delay or laches.

4. But apart from this answer on facts, there is another answer to the preliminary objection which is in our view unassailable. It is no doubt true that the petitioner seeks to have the impugned notices quashed and set aside and in so far as that relief is concerned, it might be said that there is delay on the part of the petitioner since the petition has been filed more than three years after the date of issue of the impugned notices. But it may be noted that the petitioner has also claimed in the petition a writ of prohibition against the continuance of reassessment proceedings pursuant to the impugned notices. If the contention of the petitioner is right, the reassessment proceedings would be without jurisdiction and the court can certainly issue a writ of prohibition prohibiting the Income-tax Officer from proceeding further with the reassessment proceedings. So far as this relief is concerned, there is no question of any delay since, as pointed out above, the reassessment proceedings have not yet gone beyond the stage of issue of notices under section 22(4). Moreover, it is now well-settled that where there is patent lack of jurisdiction, a writ of prohibition must go almost as of course and it cannot be defeated by considerations which would otherwise be relevant to the question of exercise of discretion of the court. It was pointed out by Venkatarama Ayyar J. in Bengal Immunity Co. v. State of Bihar.

'Writ of prohibition is issued whenever a subordinate court or tribunal usurps jurisdiction which dose not belong to it, and when that has been shown, the issue of the writ, though not of course, is of right and not discretionary.'

5. We must reject the preliminary preliminary objection urged on behalf of the revenue and proceed to deal with the merits of the petition.

6. Turning to the merits, the main ground of challenge urged on behalf of the petitioner was that the impugned notices for reassessment of the income of the deceased as an individual through the petitioner as the legal representative and no proceedings could, therefore, be taken under those notices for reassessment of the income of the Hindu undivided family of the deceased as was sought to be done by the revenue. This ground was based on the admitted position taken in the affidavit-in-reply filed on behalf of the revenue that the sanction of the central Board of Revenue, pursuant to which the impugned notices were issued, was given for initiation of proceedings against the Hindu undivided family of the deceased and the impugned notices were issued for reassessment of the income of the Hindu undivided family of the deceased. The argument of the petitioner was that the impugned notices were directed against the petitioner as the legal representative of the deceased for making reassessment of the income of the deceased as an individual and these notices did not, therefore, have the effect of commencing reassessment proceedings against the Hindu undivided family of the deceased and the revenue was not entitled to continue reassessment proceedings against the Hindu undivided family of the deceased pursuant to these notices. Now, there can be no doubt that if the impugned notices are issued against the income of the deceased as an individual, they cannot be availed of for the purpose of taking proceedings for reassessment of the income of the Hindu undivided family of the deceased. This proposition is self-evident and needs no authority in support of it. But, if any authority were needed, it may be found in the decision of the Supreme Court in Commissioner of Income-tax v. K. Adinarayana Murty. It is clear, as pointed out by the Supreme Court in this case, that :

'Under the scheme of the Income-tax Act the 'individual'and the 'Hindu undivided family' are treated as separate units of assessment and if a notice under section 34 of the Act is wrongly issued to the assessee in the status of an 'individual' and not in the correct status of a 'Hindu undivided family'the notice is illegal and all proceedings taken under that notice are ultra vires and without jurisdiction.'

7. It, therefore, becomes necessary to inquire who, on a proper construction of the impugned notices, is the assessee whose income is south to be reassessed by issuing the impugned notices. This would be plainly a question of construction and it would have to be determined on a proper interpretation of the language of the impugned notices. The intention of the revenue would hardly be relevant in determining this question. The notice under section 34 is not merely a procedural requirement. It is the foundation of the jurisdiction of the income-tax Officer and if the revenue wants to reassess the income of the Hindu undivided family of the deceased, the Income-tax Officer would have to issue notice under section 34 to the Hindu undivided family of the deceased. If the impugned notices on a proper interpretation cannot be said to be notices to the Hindu undivided family of the deceased. The revenue cannot proceed to reassess the income of the Hindu undivided family of the deceased by relying on the impugned notices.

8. To determine the true nature and character of the impugned notices, it is necessary to go back a little and consider the letter dated 6th March, 1962, which was the first communication addressed by the Income-tax Officer to the petitioner before issuing the impugned notices. The Income-tax Officer called upon the petitioner by this by this letter to show cause why action should not be taken under section 34(1) (a) and since the petitioner failed to show cause, the impugned notices were issued. This letter would, therefore, throw considerable light on the question as to who was the assessee to whom the impugned notices were issued. This letter was addressed to the petitioner as 'Legal Heir : Shri Marghabhai Babarbhai Patel'and it was in that capacity that he was told that if he did not show cause notices under section 34(1) (a) would be issued against him. The impugned notices were also addressed to the petitioner as 'Legal Representative of Late Babarbhai Hirabhai Patel'. These words leave no doubt that the impugned notices were issued to the petitioner as the legal representative of the deceased and the income which was sought to be reassessed was the income of the deceased as an individual. There is not a word here about the Hindu undivided family of the deceased. If the impugned notices were issued to the Hindu undivided family of the deceased, they would have been addressed to the petitioner as manager of adult male member of the Hindu undivided family of the deceased. But the words used here are reminiscent of section 24B and clearly indicate that the impugned notices were issued for making reassessment of the income of the deceased as an individual through the petitioner as the legal representative under section 34(1) (a) read with section 24B(2). The learned Advocate-General contended that the words'legal representative of late Babarbhai Hirabhai Patel' were merely descriptive of the petitioner and they should not be given undue emphasis in determining the nature and character of the impugned notices. But this contention fails to explain why these words should at all have been introduced to describe the petitioner. It was not at all necessary for the Income-tax Officer to describe the petitioner as legal representative of the deceased if the impugned notices were being issued to the Hindu undivided family of the deceased. Such a description would be irrelevant and out of place. It would have been more appropriate and relevant in such a case to describe the petitioner as manager or adult male member of the Hindu undivided family of the deceased. The only construction therefore, which in our view the impugned notices can bear is that they were issued for reassessment of the income of the income of the deceased as an individual. That is also how the petitioner understood the impugned notices. The subject-matter of the letter dated 30th April, 1962, addressed by the petitioner to the Income-tax Officer after receipt of the impugned notices was described as 'action under section 34(1) (a) Babarbhai Hirabhai (deceased) '. The notice under section 22(4) and the letter dated 28th April, 1964, also reinforce conclusion. The notice and the letter were both addressed to the petitioner as legal heir Babarbhai Hirabhai Hirabhai Patel. 'Now if the impugned notices were issued to the Hindu undivided family of the deceased, it is difficult to see why the notices and the letter should have been addressed to the petitioner as legal heir of the deceased. It is, there- fore, clear that the impugned notices were not issued to the Hindu undivided family of the deceased but were issued to the petitioner as legal representative of the deceased for making reassessment of the income of the deceased as an individual and no proceedings for reassessment of the income of the Hindu undivided family of the deceased can therefore, be taken under the impugned notices. The impugned notices would also be bad since admittedly sanction for initiation of proceedings was given by the Central Board of Revenue against the Hindu undivided family of the deceased and that section cannot all avail for issue of the impugned notices for reassessment of the income of the deceased an an individual.

9. In this view of the matter it is unnecessary to consider the other ground of challenge urged on behalf of the petitioner, namely, that the impugned notices were not duly served on the petitioner since they were affixed on the outer door of the residence of the petitioner without complying with the conditions set out in Order 5, rule 17, of the Code of Civil Procedure, which is made applicable by reason of section 63 of the Indian Income-tax Act, 1922. We may also point out that one more contention was urged on behalf of the petitioner that the petitioner was only one of the legal representatives of the deceased and service of the impugned notices on the petitioner alone was not sufficient to commence proceedings against the estate of the deceased for making reassessment of the income of the deceased as an individual. But in view of the specific case of the revenue as set out in the affidavit-in-reply and as asserted before us by the learned Advocate-General in the course of the arguments, namely, that the proceedings adopted by the revenue were not for reassessment of the income of the deceased as an individual but was for reassessment of the income of the Hindu undivided family of the deceased, it is not necessary to consider this contention advanced on behalf of the petitioner.

10. We, therefore, allow the petition and make the rule absolute by issuing a writ of mandamus quashing and setting aside the notices dated 24th March, 1962, issued under section 34(1) (a) as also a writ of prohibition prohibiting the first respondent from proceeding further with the reassessment proceedings pursuant to those notices. The respondents will pay the costs of the petition to the petitioner.

11. Petition allowed.


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