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Commissioner of Income-tax, Gujarat-i Vs. Sumantbhai C. Munshaw (Decd) - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-tax Reference No. 98 of 1975
Judge
Reported in[1981]128ITR142(Guj)
ActsIncome Tax Act, 1961 - Sections 142(2), 143, 143(2), 159, 159(2), 168, 250 and 260(1)
AppellantCommissioner of Income-tax, Gujarat-i
RespondentSumantbhai C. Munshaw (Decd)
Appellant Advocate G.N. Desai, Adv.
Respondent Advocate J.P. Shah, Adv.
Cases ReferredRavith Bibi v. Agrl
Excerpt:
direct taxation - assessment - sections 142 (2), 143, 143 (2), 159, 159 (2), 168, 250 and 260 (1) of income tax act, 1961 - return of income for assessment year in question filed by assessee on 25.03.1970 and he expired on 07.01.1971 - on basis of return notices issued under section 142 (2) assessment order passed against deceased assessee - x (deceased's widow) contended income-tax officer committed mistake in passing assessment order in name of dead person - whether tribunal rightly held that appellate assistant commissioner (aao) not competent to give direction to income-tax officer for making fresh assessment after limitation was over - aac finding that assessment proceedings were not continued against legal representatives and revenue cannot take plea that assessment was in.....p.d. desai, j.1. one s. c. munshaw was assessed to income-tax in the status of an individual up to the assessment year 1967-68. for the assessment year 1968-69, the previous year being the financial year ended on march 31, 1968, he filed a return of income on march 25, 1970. he died on january 7, 1971. on february 23, 1972, the ito passed an assessment order determining the total income of the deceased at rs. 1,50,410. in the assessment order, the name of the assessee was shown as 'shri s. c. munshaw'. 2. an appeal was carried to the aac against the aforesaid assessment order by 'shri s.c. munshaw (decd.), legal heir, renukaben s. munshaw'. the submission on behalf of the appellant was that after the death of munshaw, which was a fact within the knowledge of the ito, the assessment.....
Judgment:

P.D. Desai, J.

1. One S. C. Munshaw was assessed to income-tax in the status of an individual up to the assessment year 1967-68. For the assessment year 1968-69, the previous year being the financial year ended on March 31, 1968, he filed a return of income on March 25, 1970. He died on January 7, 1971. On February 23, 1972, the ITO passed an assessment order determining the total income of the deceased at Rs. 1,50,410. In the assessment order, the name of the assessee was shown as 'Shri S. C. Munshaw'.

2. An appeal was carried to the AAC against the aforesaid assessment order by 'Shri S.C. Munshaw (decd.), legal heir, Renukaben S. Munshaw'. The submission on behalf of the appellant was that after the death of Munshaw, which was a fact within the knowledge of the ITO, the assessment proceedings could have been continued only against the legal representative from the stage at which it stood on the date of death of the deceased and that that having not been done and an invalid assessment order having been passed against a dead person, the entire proceeding was bad in law. The stand of the department, on the other hand, was : (1) that the ITO, who passed the department order, was not aware of the death of Munshaw when he made the said order ; (2) that it was the responsibility of the legal representative of the deceased to inform the ITO about the death of the deceased and that sence she failed to do so, the assessment was validly completed against the deceased as if the provisions of s. 159(2) were non-existent or inapplicable ; (3) that, in any case, the proceeding was validly completed against the legal representative, who had received through her agents the notices issued under s. 142(2) of the I.T. Act, 1961 (hereinafter referred to as 'the Act'), in the name of the deceased and produced the books of account in the course of the assessment proceedings and (4) that, alternatively, the legal representative cannot be allowed to raise the objection as to the validity of the assessment iproceedings or the assessment order when 'she knowingly remained silent even when a number of notice were issued, served and complied with by her employees, etc.,...it is clear from their behaviour that they knew that the notices were meant for the legal heir or successor to the business and they submitted to the jurisdiction of the assessing officer'.

3. The AAC, in the course of his order dated January 27, 1973, observed that the following facts were not in dispute : (1) that a return of income for the assessment year in question was filed by the deceased assessee in his own name and under his own signature on March 25, 1970, and that he had thereafter expired on January 7, 1971 ; (2) that on the basis of the said return eleven notices under s. 142(2) were issued in the name of the deceased from time to time and that three of such notices were issued during the lifetime of the deceased and the remaining eight after his death; (3) that the notices issued during the lifetime of the deceased were received by one of his employees and those issued after his death, by some persons who were the employees of the deceased, but none of such notices was served on Smt. Renukaben herself ; (4) that the assessment order was passed on February 23, 1972 against the deceased in the status of an individual, and (5) that the legal heirs of the deceased were 'stated to be his widow, Smt. Renukaben S. Munshaw, and their minor son'.

4. On the question of the knowledge of the ITO with regard to the death of Munshaw, the AAC found that the record and proceedings clearly indicated that the ITO knew about the death of the assessee and that he was proceeding on the assumption that Smt. Renukaben was his legal representative. In arriving at this conclusion, the AAC relied, inter alia, upon the following facts and circumstances : (1) on January 21, 1971, that is to say, within two weeks of the death of Munshaw, Smt. Renukaben had filed an application describing herself as the legal heir of the deceased for extension of time to file a return of income for the assessment year 1970-71, and the return of income for the said assessment year was also filed by her in the same capacity on March 30, 1971, these proceedings had, although they are in respect of a subsequent assessment year, taken place before the assessment order in question was passed on February 23, 1972 ; (2) in the record of assessment proceedings for the assessment year 1968-69, there were a number of tax deduction certificates on which tax credit had been given and three out of those tax deduction certificates were signed by Smt. Renukaben as the legal heir of Munshaw ; and (3) since certain dividend warrants (tax deduction certificates ?) were not available, duplicates of those documents were obtained and filed and along with them an indemnity bond signed by Smt. Renukaben was also presented, which was accepted by the ITO.

5. On the question of the validity of the continuation of the assessment proceeding and the making of the assessment order in the name of Munshaw after his death, even though the fact of such death was known to the ITO, the AAC found that s. 159(2) was an enabling provision which authorised the ITO to continue an assessment proceeding taken against the deceased against his legal representative and that thereunder it was no part of the responsibility of the legal representative to come forward and to give an express intimation to the ITO in regard to the death of the deceased. In the instant case, in any event, when the fact of the death of the assessee was within the knowledge of the ITO, he was not justified in proceeding further with the assessment against the deceased by totally ignoring the said fact merely because no formal intimation was sent by the legal representative.

On the question whether, in spite of the aforesaid flaw, the assessment could still be held to be valid, having regard to the overall conduct of Smt. Renukaben, the AAC expressed the following view :

'I agree with the ITO that the manner in which the notices were received by certain people, who were formerly the employees of the deceased, and then manner in which the books of account were even produced in response to those notices, does indicate that Smt. Renukaben received the notices and complied with them and she must have done so, acting as a legal heir of the late S. C. Munshaw.'

6. According to the AAC, however, such conduct itself could not lend validity to an assessment proceeding which was a 'nullity' having been continued against a dead person in complete disregard of the procedure laid down in s. 159(2) and to an assessment order passed against a dead person and, that too, not on account of a clerical mistake, which had resulted in the name of the legal representative not being shown in the assessment order, but after full knowledge about the death of the assessee. The circumstances of the case, in the opinion of the AAC, clearly showed that even after coming to know about the death of Munshaw, the legal representative' and instead went on to issue notices in the name of the deceased person, which were, in fact, accepted by those very persons who used to receive such notices earlier when the deceased was alive. The AAC proceeded to observe :

'It is true that ordinarily Smt. Renukaben should have objected to the issue of all notices in the name of the deceased. She was advised by experts and these experts could have brought the defect to the notice of the ITO. This, however, does not mean that Smt. Renukaben was required by law to bring the defect to the notice of the ITO. The ITO has obviously committed a mistake in passing an asstt. order in the name of a dead person and he cannot now seek support under the plea that the legal heir could have pointed out the mistake earlier or should have done so.'

The AAC finally summed up his conclusions in the following words :

'.....it has always been clearly understood that this section (section 159) introduces a fiction, viz., that the income of the deceased is to be assessed as if it were the income of the legal representative. It has moreover been accepted that in such cases the assessment has to be made on the legal representative in respect of the income of the deceased. It is the legal representative, on whom the assessment is made and if an assessment is made on the deceased, it will be a nullity......It is, therefore, absolutely clear that the assessment made by ITO in the name of the deceased person is not a valid assessment and the fact that the legal representative, Smt. Renukaben, received the notices in question or that she could have pointed out the mistake to the ITO at an earlier stage does not help to validate the assessment.'

Having regard to the aforesaid findings, the AAC set aside the assessment order and proceeded to give the following further directions :

'The ITO is directed to proceed afresh with the assessment with the fresh issue of notices u/s. 143(2) on the legal representatives after determining who are the legal representatives. The assessment should then be framed by him on the legal representatives in respect of the income of the deceased.'

7. A further appeal was carried by Smt. Renukaben against the aforesaid decision of the AAC to the Income-tax Appellate Tribunal. The sole contention in the appeal was that the AAC having declared the assessment to be invalid on the grounds stated by him, he should have annulled the assessment and ought not to have directed the ITO to start the proceeding afresh against the legal representative. The argument, in other words, was that since the purported assessment made against the deceased within the time limited by law was found to be invalid, the AAC had no power, authority and jurisdiction to give a direction to make a fresh assessment on the legal representative after the time-limit for completion of assessment in respect of the assessment year in question had already expired. The contention on behalf of the department, on the other hand, was that the assessment proceedings were validly initiated during the lifetime of the deceased and that the assessment was not ab initio void and that, therefore, if the AAC found any legal or procedural defect in the course of the assessment proceeding after the death of the assessee, it was competent for him to set aside the assessment and direct a fresh assessment. The Tribunal held that 'the Appellate Assistant Commissioner was justified in holding that the assessment made by the Income-tax Officer was null and void but having done so he was not justified in setting aside the assessment and giving an opportunity to the department to make a fresh assessment'. In the view of the Tribunal, once the assessment was found to be a nullity, it was not competent for the AAC to give a further direction to make a fresh assessment since 'the case was barred by limitation on that day'. In terms, the Tribunal found that the assessment was a nullity and that no fresh assessment could be made and that, therefore, the order of the AAC directing the making of a fresh assessment was not in accordance with law.

At the instance of the Commissioner, the Tribunal has stated a case in respect of the following question :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Appellate Assistant Commissioner was not competent to give a direction to the Income-tax Officer for making the fresh assessment after the limitation for making a valid assessment was over ?'

8. In order to appreciate the real point in controversy between the parties, it would be necessary to recall that s. 153, which prescribes the time-limit for completion of assessments and reassessments, in so far as it is relevant, provides in sub-s. (1) that no order of assessment shall be made under s. 143 at any time after the expiry of three years from the end of the assessment year in which the income was first assessable, where such assessment year is the assessment year commencing on the 1st day of April, 1968. Sub-section (3), in so far as it is relevant, provides, however, that the provisions of sub-s. (1) shall not apply where the assessment is made on the assessee or any person in consequence of or to give effect to any finding or direction in an order made under s. 250 and that such assessment may be completed at any time.

9. In the instant case, in view of the foregoing provisions, any fresh assessment on the legal representative in respect of the income earned by the deceased in the previous year relevant to the assessment year 1968-69 would not obviously be within the power, authority and jurisdiction of the assessing authority, unless it is found that such assessment is in consequence of or to give effect to any direction validly issued by the AAC in an order made in the course of the assessee's appeal.

10. Against the background aforesaid, it is the contention of the assessee, which has found favour with the Tribunal, that the impugned assessment having been found to be null and void, the only course open to the AAC was to annul the same and that he had no power, authority and jurisdiction to give a further direction to initiate a fresh assessment proceeding against the legal representative in view of the fact that : (1) by virtue of the provisions of sub-s. (1) of s. 153, on the date on which the said direction was given, such proceeding was bared, and (2) the bar could not have been lifted by virtue of the provisions of sub-s. (3) of s. 153 inasmuch as in an appeal arising our of the assessment proceedings, which is held to be a nullity, no direction as to a fresh assessment could have been validly given.

11. The contention on behalf of the department, on the other hand, is that : (i) having regard to the provisions of s. 159, the liability of the deceased to pay income-tax on the income earned during the relevant previous year was passed on to his legal representative and that the proceedings taken against the legal representative and that in view of the fact that, in the instant case, Smt. Renukaben is found to have received through her agents the notices under s. 143(2) issued against the deceased and to have complied with them acting as the legal representative of the deceased and to have actively participated in the assessment proceeding as such, the assessment proceeding should be held to have been continued against the legal representative from the stage at which it stood on the date of death of the deceased ; (ii) although the ITO might have, at the highest, committed an irregularity, or even an illegality, in the course of the assessment proceeding in having not formally amended the deceased and in having failed to issue a notice to her and in passing the assessment order in the name of the deceased, the error committed by him was not so fundamental as to make the proceeding a nullity having regard to the aforesaid facts and that, in that view of the matter, the AAC was perfectly justified in giving the direction that he did and the fresh assessment was not barred by virtue of the provisions contained in sub-ss. (1) and (3) of s. 153 ; and (iii) in any event, the legal representative having received the notices and having complied with them and having participated as a legal heir of the deceased in the assessment proceeding before the ITO without raising any objection whatever at any stage of the said proceeding, she is precluded from raising an objection as to the validity of the assessment proceedings and the order, and that it is not fair and reasonable to allow abandoned.

These rival contentions, when examined closely, raise the following questions for consideration :

(1) What is the distinction between a nullity, illegality and irregularity

(2) Is an assessment proceeding/order against a dead person necessarily a nullity for all purposes

(3) If an assessee dies during the pendency of the assessment proceedings is continued and an assessment order made against the deceased by the ITO with full knowledge that the assessee had died, but without any objection having been raised by the widow of the deceased who, purporting to act as his legal heir, complies with the notices issued in the name of the deceased and participates in such assessment proceedings without raising any objection as to the validity of such proceedings, are the assessment proceedings and the consequential assessment orders a nullity or an illegality or an irregularity in the course of assessment

(4) Can such an assessment proceeding and the course of assessment order be challenged as a nullity by the person who purported to act as the legal representative during the course of the assessment, or is such a person precluded from challenging the entire proceeding as a nullity and

(5) Is it permissible for the AAC hearing an appeal against such assessment order to set aside the order and to remand the case to the ITO who concluded the assessment for disposal of the case in terms of the relevant legal provisions, because, under such circumstances, there is no inherent lack of jurisdiction but a mere illegality or irregularity in the course of the proceedings

12. The determination of these questions, which lie at the heart of the question referred for our opinion, depends primarily on the scope and effect of the provisions of s. 159 and, to some extent, also on ascertaining the concept of nullity, illegality and irregularity as understood in law.

13. It requires to be recalled that in Ellis C. Reid v. CIT (1930) 5 ITC 100 (Bom), the Bombay High Court pointed out that according to the law as it then stood, where a person died after the commencement of the assessment year but before his income of the previous year was assessed, his executor was not liable to pay the tax and if the death occurred whilst assessments were pending, the proceedings could not be continued and the assessment could not be made after the person's death. This lacuna was removed by the enactment of s. 24B in the Indian I.T. Act, 1922, which made the legal representative liable to pay the tax which might be assessed after his death. The liability, though absolute, was, however, limited to the extent to which the estate of the deceased person was capable of meeting the charge. The machinery for assessment of the income of a deceased person after his death was also provided and the ITO was authorised to assess the total income of the deceased person as if the legal representative were the assessee. When the present Act was enacted, s. 159 occurring in Chap. XV which is entitled 'Liability in Special Cases', made a provision to meet with a similar situation. Under the Act, the words 'legal representative' have the meaning assigned to them in the Code of Civil Procedure (s. 2(29)) and, accordingly, in so far as it is relevant for the purposes of the present case they mean a person who, in law, represents the estate of a deceased person and include any person who intermeddles with the estate of the deceased. Where an assessee dies, his legal representative becomes 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 (s. 159(1)). The liability of a legal representative is, however, limited to the extent to which the estate is capable of meeting the liability (ss. 159(6)), unless the legal representative, while his liability for tax remains undischarged, 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. Even in such exceptional cases, however, the liability is limited to the payment of tax only and it is confined to the value of the asset so charged, disposed of, or parted with (s. 159(4)). For the purpose of making an assessment of the income of the deceased and levying any sum in the hands of the legal representative, any proceeding taken against the deceased before his death is deemed to have been taken against the legal representative and it may be continued against the legal representative from the stage at which is stood on the date of the death of the deceased and all the provisions of the Act are to apply accordingly (s. 159(2)). The legal representative, for the purposes of the Act, is deemed to be an assessee (s. 159(3)). The income of a deceased can be assessed only under this section and the legal representative has the right to reimbursement and to cover any sum paid by him under the Act from the estate and to retain our of any monies that may be in his possession or may come to him as a legal representative an amount equal to the sum so paid. The department has a right to recover all dues from the property under the control or management of the legal representative (s. 159(5)).

14. Having noticed the relevant provisions of law, let us at this stage as certain the true meaning which the words 'nullity', 'illegality' and 'irregularity' bear in the eye of law. A nullity results from an error which is incurable and, therefore, fatal to the proceeding (see Aiyer's law Terms and Phrases, 6th Edn., p. 485). An illegality occurs when there is a breach of some provision of law and an irregularity, which is usually, amendable, occurs when some error of procedure is committed in the course of a proceeding (See Chaube Jagdish Prasad v. Ganga Prasad Chaturvedi, AIR 1959 SC 492). When there is a contravention of some provision of law, the question often arises whether the act done in the breach of such provision is perforce a nullity. If the provision is only directory, an act done in contravention thereof is manifestly not a nullity. However, if the provision is couched in a mandatory form, prima facie, it would be a nullity. Every act done in breach of a mandatory provision, however, is not necessarily a nullity. In Dhirendra Nath Gorai v. Sudhir Chandra Ghosh : [1964]6SCR1001 , the following passage from the decision is Ashutosh Sikdar v. Behari Lal Kirtania ILR [1907] Cal 61 was cited with approval to bring about the distinction between a nullity and an irregularity (p. 1304 of AIR 1964 SC) :

''...... no hard and fast line can be drawn between nullity and an irregularity ; but this much is clear, that an irregularity is a deviation from a rule of law which does not take away the foundation or authority for the proceeding, or apply to its whole operation, whereas a nullity is a proceeding that is taken without any foundation for it or is so essentially defective as to be of no avail or effect whatever, or is void and incapable of being validated.''

What is a workable test to distinguish a nullity from an irregularity The following passage from the decision in Holmes v. Russel [1841] 9 Dowl 487, which provides the clue, was cited with approval in Dhirendra Nath : [1964]6SCR1001 :

It is difficult sometimes to distinguish between an irregularity and a nullity ; but the safest rule to determine what is an irregularity and what is a nullity is to see whether the party can waive the objection ; if he can waive it, it amounts to an irregularity ; if he cannot, it is a nullity.'

15. A waiver, as observed in Dhirendra Nath : [1964]6SCR1001 , is an intentional relinquishment of a known right. But can an objection as to jurisdiction be waived Jurisdiction ordinarily means the authority to act in the matter and not the power to do or order an act (See Anowar Hussain v. Ajoy Kumar Mukherjee : 1965CriLJ686 ). There cannot be a waiver of an objection to jurisdiction, for, consent cannot give jurisdiction whether there is none. In Dhirendra Nath : [1964]6SCR1001 , the following observations were made in this context (p. 1305) :

'Where the court acts without inherent jurisdiction, a party affected cannot by waiver confer jurisdiction on it, which it has not. Where such jurisdiction is not wanting, a directory provision can obviously be waived. But a mandatory provision can only be waived if it is not conceived in the public interest, but in the interest of the party that waives it.'

16. It would thus appear to be well settled that where an authority, who does not lack inherent jurisdiction, acts in contravention of a mandatory provision, it would be open to the aggrieved party to waive its objection to such breach if the provision is not conceived in the public interest but in the interest of the party waiving it. The underlying principle appears to be that everyone has a right to waive and to agree to waive the advantage of a law or rule made solely for the benefit and protection of the individual in his private capacity, which may be dispensed with without infringing any public right or public policy. In other words, if the statutory conditions are inserted simply for the security or benefit of the party to the proceeding and no public interests are involved, such conditions will not be considered as indispensable and either party may waive them without affecting the jurisdiction of the authority seized of the proceeding.

17. We may next consider whether the continuation of a proceeding and the making of an order against a dead person is a nullity for all purposes. In a recent judgment in N. Jayaram Reddi v. Revenue Divisional Officer and Land Acquisition Officer, Kurnool : [1979]3SCR599 , this question fell for consideration in the context of an appellate decree on the following facts. After an award under s. 18 of the Land Acquisition Act, 1894, was made by the Subordinate Judge, two appeals came to be preferred before the High Court which can be conveniently styled as 'Government appeal' and 'claimants' appeal'. One Y. Prabhakar Reddi (hereinafter referred to as 'Reddi'), who was a party to both those appeals, which were cross-appeals arising out of the same award, died during the pendency of the appeals. Upon an application made to the High Court in the claimants' appeal, his legal representatives were brought on record. Admittedly, however, the legal representatives were not brought on record in the Government appeal, where Reddi was one of the respondents, till both the appeals were disposed of by a common judgment, nearly five years after his death. By the common judgment the claimants' appeal was dismissed but the Government appeal was partly allowed and the compensation payable in respect of the acquired land was reduced. Thereupon, the original claimants as well as the heirs of Reddi preferred an appeal to the Supreme Court. The contention on behalf of the appellants was that as the heirs of Reddi were not brought on record within the prescribed period of limitation after his death, the Government appeal abated not only against Reddi but it also abated as a whole and that, therefore, the judgment of the High Court partly allowing the Government appeal was liable to be set aside. The Supreme Court held that since an application to bring on record the legal representatives of Reddi was not made in the Government appeal within the specified time limit, the appeal automatically abated as against the deceased respondent. However, the same could not be said with regard to the Government appeal as a whole. P. N. Shinghal J. held that since the question of abatement of the said appeal as a whole was not examined by the High Court, there was no justification for such an argument before the Supreme Court. Shinghal J., however, proceeded to examine the contention that the High Court's decree was a nullity because it was passed against a dead person, on the assumption that the Government appeal deserved to be dismissed as a whole because of its abatement against the deceased respondent. In this context, the learned judge made the following pertinent observations (p. 1396(2)) :

18. It has to be appreciated that a decree against a dead person is not necessarily a nullity for all purposes. It will be sufficient to say that such a decree has been held to be a nullity because it cannot be executed against his legal representative for the simple reason that he did not have a full opportunity of being heard in respect of it, and the legal representative cannot be condemned unheard. So if a respondent to an appeal dies, and the appeal abates because of the failure (sic) his legal representative on the record within the time limited by law, and the appellate court loses sight of that development or ignores it, (sic) will still be permissible for the court hearing the appeal to bring his legal representative on the record on an application to that effect and to examine any application that may be made for condonation of the delay. It is also permissible, and is in fact the common practice, to remand the case for disposal according to law to the court in which it was pending at the time of the death of the deceased party. The law has therefore provided, and accepted, modes for reopening and hearing the appeal in such cases'.

Then, following the further observations which throw considerable light on the question whether the decree against a dead person is a nullity for all purposes or whether an objection as to its invalidity can be waived by the legal representative (p. 1397(1)) :

'The basic fact remains that a decree against a dead person is treated as a nullity because it cannot be allowed to operate against his legal representative when he was never brought on the record to defend the case... So while the law treats such a decree as a nullity qua the legal representative of the deceased defendant or respondent, there is nothing to prevent him from deciding that he will not treat the decree as a nullity, but will abide by it as it stands, or as it may be modified thereafter on appeal. If a legal representative adopts that alternative or course of action, it cannot possibly be said that his option to be governed by the decree is against the law or any concept of public policy or purpose, or the public morality. It is thus a matter entirely at the discretion of the legal representative of a deceased respondent against whom a decree has been passed after his death to decide whether he will raise the question that the decree has become a nullity, at the appropriate time, namely, during the course of the hearing of any appeal that may be filed by the other party, or to abandon that obvious technical objection and fight the appeal on merits. He may do so either because of his faith in the strength of his case on the merits, or because of incorrect legal advice, or for the reason that he may not like to rely on a mere technical plea, or because in the case of cross-appeals, he may have the impression that bringing the legal representative of the deceased respondent on record in an appeal by a co-appellant will ensure for the benefit of or be sufficient for purposes of the cross-appeal. An abandonment of a technical plea of abatement and the consequential dismissal of the appeal, is therefore, a matter at the discretion of the legal representative of the deceased respondent and there is no justification for the argument to the contrary. It is equally futile to argue that an appellate court is denuded of its jurisdiction to hear an appeal in which one of the respondents has died and the right to sue does not survive against the surviving defendant or defendants alone merely because no application has been made to bring his legal representative on the record when no objection to that effect is raised by anyone'.

19. Having further held that it will not be fair to draw an inference as to the abandonment of such a plea of abatement unless there is clear, sufficient and satisfactory evidence to prove that the legal representative of the deceased respondent was aware of it and that he abandoned it wilfully, the learned judge proceeded to examine the facts of the case and found that having regard to the following circumstances, there was no doubt that any plea that may have been available to the legal representatives of Reddi in the Government appeal because of its abatement was wilfully abandoned by them and it would not be fair and reasonable to allow them to take up the dispute at a later stage merely because the decision of the High Court had gone against them : (1) the legal representatives of Reddi were brought on record in the claimants' appeal and the said appeal, therefore, was full and complete and it did not abate ; (2) the legal representatives were, however, not brought on record in the Government appeal and although they knew that they were not so brought on record and that, therefore, the said appeal stood abated against them, they did not make an application to the High Court for dismissal of the appeal on the ground that it could not survive against the surviving respondents because of that basic defect ; (3) the said position continued for a long period of almost five years and even when the appeals came on for hearing, no objection was taken to the hearing of the Government appeal inspite of the fatal defect in its constitution ; (4) the High Court, in fact, heard without any objection, not only the counsel for the appellants in the Government appeal, but also the counsel for the respondents in the said appeal who appeared also for all the appellants (including the legal representatives of Reddi) in the claimants' appeal ; (5) it would not be unfair to assume, under the aforementioned circumstances, that out of the two courses of action open to the legal representatives, namely : (i) to move the High Court for the dismissal of the Government appeal, and (ii) to allow that appeal to be heard and decided on the merits and to abide by any decree that might be passed in the two appeals, the legal representatives did not choose to adopt the first course of action and that they wilfully chose the second course of action ; and (6) it was a proper conclusion to reach, on the facts and the circumstances of the case, that the legal representatives of Reddi wilfully abandoned any plea that might have been available to them on the basis of the abatement of the Government appeal against the deceased respondent. In fine, the learned judge observed (p. 1398(2)) :

'It has to be appreciated that a point of defence which has been wilfully or deliberately abandoned by a party in a civil case at a crucial stage, when it was most relevant or material, cannot be allowed to be taken up later, at the sweet will of the party which had abandoned the point, or as a last resort, or as an after-thought. In fact, in a case where a point has been wilfully abandoned by a party, even if, in a given case, such a conclusion is arrived at on the basis of his conduct, it will not be permissible to allow that party to revoke the abandonment if that will be disadvantageous to the other party.'

20. D. A. Desai J., in his separate but concurring judgment, noted that there was sufficient notice to the counsel-in-charge of the Government appeal that Reddi, who was one of the respondents in his appeal, had died and that there was inadvertence, if not downright indifference, in not bringing the legal representatives on record in the Government appeal. The learned judge, however, pointed out that although both the appeals were heard together and were disposed of by a common judgment, no contention was taken on behalf of the respondents in the Government appeal with regard to the appeal having abated on account of the failure to bring the legal representatives of Reddi on the record of the said appeal within the prescribed time. In fact, the Government appeal was allowed to be proceeded in the presence of all the parties including the legal representatives of Reddi who were appellants in the claimants' appeal and which ultimately ended in a judgment adverse to them. The consequence of the failure to raise the relevant contention at the appropriate time, according to the learned judge (p. 1401(2)) :

'...... has been examined by my learned brother in detail and I am in agreement with his conclusion'.

21. It would thus appear to be a settled legal position in civil law : (1) that a court is not denuded of its jurisdiction to hear a case in which one of the defendants has died and the right to sue does not survive against the surviving defendant or defendants alone, merely because no application has been made to bring the legal representative of the deceased on the record, when no objection to that effect is raised by anyone ; (2) that a decree against a dead person is not necessarily a nullity for all purposes ; (3) that a decree against a dead person is treated as a nullity qua the legal representative because it cannot be allowed to operate against him when he was not afforded a full opportunity of being heard in respect of it ; (4) that there is nothing to prevent the legal representative, who has been condemned unheard, from abandoning a technical plea of abatement and from deciding that he will not treat the decree as a nullity, but will abide by it as it stands, or as it may be modified thereafter on appeal ; (5) that it is thus a matter entirely at the discretion of such legal representative to decide whether he will raise an objection that the decree has become a nullity at the appropriate time ; (6) that if such legal representative opts to be governed by the decree, it cannot possibly be said that the exercise of his option is against the law or any concept of public policy or public morality ; (7) that it would not be fair to draw an inference as to the abandonment of such a plea, however, unless there is clear, sufficient and satisfactory evidence to prove that the legal representative was aware of it and abandoned it wilfully ; (8) that, however, when the legal representative, who is present before the court in another capacity or in a cognate proceeding, does not raise the plea of abatement and allows the proceeding to continue against the deceased without any objection and is heard by the court and invites a decision on merits, it would be proper to conclude that the legal representative wilfully abandoned the plea of abatement and chose to be governed by the decree that might be passed against the deceased in the proceeding ; and (9) that a point of defence that has been wilfully or deliberately abandoned by a party at a crucial stage cannot be allowed to be taken up later as a last resort or as an after-thought if that will be disadvantageous to the other party.

22. It is obvious, therefore, that a case in which the aforesaid principles are attracted will be treated in the civil law as an exception to the general rule that a decree passed against a dead person without bringing his legal representative on record being a nullity, it does not bind the estate. Having regard to the fact that even where a defendant has died and the right to sue does not survive on account of the failure to bring his legal representative on record within the time limited by law, the court is not denuded of its inherent jurisdiction to hear the case and to make, in accordance with the law, appropriate orders of remand or restriction of the case to file upon being moved, and in view of the further fact that a plea as to abatement is capable of being waived, a decree against a dead person in such a case would be a mere irregularity and not a nullity. In any event, in such a case, the legal representative will be precluded from urging at a later stage that the proceeding taken against the deceased party and the decree passed against him are a nullity if it is found that such a plea, if allowed to be raised, would put the other party to a disadvantage.

23. In First Add. ITO v. Suseela Sadanandan : [1965]57ITR168(SC) Subba Rao J., speaking for the Supreme Court, observed that the principle laid down in the context of suits or appeals, namely, that the party bona fide impleaded one of the legal representative represented the estate, the decree obtained therein is binding on the other legal representatives of the deceased, is one of general application and that there was no reason why the said principle should not be invoked in the case of assessment of income from the estate of a deceased person in the hands of his legal representatives. It would be safe to conclude, on a parity of reasoning, therefore, that the aforesaid principles enunciated in N. Jayaram's case : [1979]3SCR599 , although they are laid down in the context of suits or appeals, have a general application and that they would be applicable even in a proceeding for the assessment of the income of a deceased person from the estate in the hands of his legal representative. Therefore, if in a given case it is shown that the legal representative (which term would include plurality of persons) of a deceased assessee, who was present before the ITO either voluntarily or in response to a notice issued against the deceased but served upon him or his agent, allows the assessment proceeding to continue against the deceased without any objection and lets the ITO make an assessment order against the deceased, albeit, after affording to him a full opportunity of being heard, it would not be open to him to take up a plea at the appellate stage, as a last resort or as an after-thought, that the proceeding taken and the assessment order made against the deceased are a nullity, especially when the consequence of permitting him to raise such a plea would be to debar a fresh assessment on him. Such a case constitutes an exception to the general rule that an assessment against a dead person is a nullity and though gross irregularity is involved, especially when there is apparent indifference and not mere inadvertence on the part of the ITO, the assessment would be still valid and effective qua the legal representative.

24. Having examine the problem from this broad angle, let us consider it independently within the confines and framework of the income-tax law. It is well-settled that the scheme of the I.T. Act is that the liability to tax arises latest on the last day of the accounting year although the rate of tax for the year of assessment may be fixed later and the assessment will necessarily be made after the close of that year. In other words, there is a present liability-a perfected debt-to pay income tax on the last day of the accounting year, though it becomes payable after it is quantified in the course of the assessment proceeding (See Kesoram Industries and Cotton Mills Ltd. v. CWT : [1966]59ITR767(SC) ). The true legal position, therefore, is that when an assessee dies after the close of the accounting year but before the actual assessment of income takes place, he leaves behind him a liability in regard to the payment of tax leviable on such income.

25. Now, the rights and liabilities which a dead man leaves behind him ordinarily pass on to some person whom the dead man, or the law on his behalf, has appointed to represent him in the word of the living. Such representative bears the persona of the deceased and has vested in him all the inheritable rights and has imposed upon him all the inheritable liabilities of the deceased. He is in some sort identified by the law with him he represents. The legal personality of the dead man thus survives his mutual personality, until his obligations being duly performed, his representation among the living is no longer called for (See Salmond on Jurisprudence, 12th Edn., p. 443).

26. As regards income-tax liability, however, as earlier pointed out in the absence of appropriate provisions for collecting tax from the estate of a deceased person in the Indian I.T. Act, 1922, prior to its amendment by the Indian I.T. (Second Amend.) Act, 1933, it was held in Reid's case [1930] 5 ITC 100 (Bom) that the executors under the will of the taxpayer were not liable to pay tax in respect of the income of the deceased in the previous year, notwithstanding that he died while the assessment proceedings were pending, because the proceedings could not be continued and the assessment could not be made after the taxpayer's death. The lacuna in the 'machinery of assessment' was rectified by the enactment of s. 24B by the Indian I.T. (Second Amend.) Act, 1933 (see CIT v. James Anderson : [1964]51ITR345(SC) ]. By the incorporation of s. 24B, the Legislature extended the legal personality of a deceased assessee under the Act, which had ceased on his death and, therefore, the income received by him before his death or, if he died during the previous year, by his heirs and legal representatives after his death in that previous year, became assessable to tax in the relevant assessment year [See CIT v. Amarchand N. Shroff : [1963]48ITR59(SC) ].

27. Section 159 of the present Act achieves the same object, albeit with some distinctions, which are not necessary to be noticed, as they are not relevant for the purposes of the present case. The object of s. 159, therefore, is to provide a machinery for the assessment of tax on the income of a deceased person on whom the tax had been originally charged. Thereunder, it is expressly recognised that upon the death of the assessee, the liability to pay any sum which the deceased would have been liable to pay if he had not died, is that of his legal representative and for the purposes of the Act, the legal representative is treated as an assessee. If at the date of death of the deceased assessee, a return in respect of the income earned by him in the previous year had already been filed and the assessment proceeding had commenced, it would not be necessary to start the proceeding afresh against the legal representative since any proceeding taken against the deceased prior to the date of his death is by, a fiction, deemed as having been taken against the legal representative. From that stage onwards, however, the proceeding will have to continue against the legal representative who, in the eye of law, represents the legal personality of the deceased assessee. For this purpose, it would be necessary to determine who the legal representative is and that would be an issue to be decided in accordance with law in the course of the assessment proceeding. Once that has been done, all further steps in the proceeding will have to be taken against the legal representative or legal representatives, as the case may be, and the provisions of the Act will apply accordingly. A notice, if any, under s. 143(2) will, therefore, have to be served on such legal representative and if the assessee has left behind more than one legal representative, on all the legal representatives [See Suseela Sadanandan : [1965]57ITR168(SC) ], in order to complete the assessment. Besides, the assessment order, when ultimately made, would also have to be made against the estate of the deceased as represented by the legal representative. If these steps have been taken, the legal representative would become liable to pay the sum, which the deceased would have paid if he had not died, in the like manner and to the same extent as the deceased, the liability of such legal representative being ordinarily limited to the extent to which the estate is capable of meeting the same.

28. The basic scheme underlying this provision, which extends the legal personality of a deceased person for the purpose of assessment of tax, proceed on a recognition of the audi alteram partem rule which mandates that no man shall be condemned unheard. Therefore, although the natural personality of the deceased person has disappeared, the legal representative, who represents him in the world of living, is treated as the assessee and he is afforded a full opportunity of being heard before an assessment is made which is binding on the estate.

29. The foregoing discussion shows that s. 159, which merely prescribes the method for making assessment of tax in a special case, does not bear upon the initial jurisdiction of the taxing authority but deals with matters incidental to it. If the assessing authority, in the exercise of his jurisdiction, omits to take one or more of the various procedural steps therein laid down or in taking any of such steps commits an error or even deviates from the statutory mandate, the assessment would be null and void, only if the omission, error or breach, as the case may be, is so fundamental as could not be waived because it affects inherent jurisdiction. The legal representative has a right to waive the advantage of any of the statutory provisions made solely for his protection or benefit and not conceived in public interest. Therefore, if the legal representative (which term includes plurality of persons) is present before the taxing authority in some capacity or voluntarily appears in the proceeding without service of notice or upon service of notice not addressed to him but to the deceased assessee, and does not object to the continuance of the proceeding against the deceased person and is heard by the ITO, in regard to the tax liability of the deceased and invites an assessment on merits, such a legal representative must be taken to have exercised the option of abandoning the technical plea that the proceeding has not been continued against him, although, in substance and reality, it has been so continued. If and when an assessment order is consequently made in such a proceeding in the name of the deceased assessee, even that would not be a nullity qua the legal representative, not only because he was afforded a full opportunity of being heard in respect of it but also because he having not raised an objection at the appropriate time with regard to the continuance of the assessment proceeding against the deceased person, he must be taken to have known the inevitable outcome of the assessment being made in the name of the deceased and to have opted to treat such an assessment as having been made as the legal representative against him and to waive any objection as to its nullity on the said ground. Such an exercise of option on his part is not against public policy or public morality because the waiver is of a statutory provision which is conceived not in public interest but in the interest of the legal representative. It is obvious, therefore, that under such circumstances, the contravention of the relevant statutory provision would be a mere irregularity may be a gross irregularity, but not a nullity.

30. It would be convenient at this stage to refer to some of the decided cases in which the question whether if one or more of the essential steps envisaged in such a machinery section are not taken and the assessing authority acts in breach of the said section or any part thereof, the assessment proceeding is rendered invalid, has come to be considered in the context of s. 24B of the Indian I.T. Act, 1922.

31. Maharaja of Patiala v. CIT : [1943]11ITR202(Bom) is a case which bears close resemblance to the instant case. The late Maharaja of Patiala, who had income from property and business in British India, died on March 23, 1938. On November 23, 1938, the ITO, Bombay, who was the assessing authority, sent two printed notices under s. 22(2) and s. 34 of the Indian I.T. 1922, addressed to the Maharaja of Patiala requiring him to make a return of his total income for the assessment years 1937-38 and 1938-39. Two returns signed by the Foreign Minister in response to those notices were sent to the ITO. After some correspondence was exchanged, two assessment orders each dated September 10, 1940, were passed for the respective assessment years 1937-38 and 1938-39. Against the name of the assessee in both of them was written : 'His Highness Maharaja Sir Bhupindra Singh, late Maharaja of Patiala'. The notices for payment of tax were addressed to the Foreign Minister on behalf of the late Maharaja. Subsequent representations were made by the Foreign Minister to the ITO to reduce the amount assessed on the grounds of mistake and an appeal was preferred to the Assistant Commissioner for a further reduction of the amount. In both Appellate Tribunal, one of the grounds which was raised for consideration was that a dead man had been assessed without complying with the provisions of s. 24B(2). The Tribunal held that there was gross irregularity in the matter of assessment, but as, in fact, substantial justice was done, it recorded its finding against the assessee. One of the questions which came to be referred by the Tribunal at the instance of the assessee to the Bombay High court was whether, in the circumstances found by the Tribunal, the assessment was not made in accordance with the provisions of s. 24B of the Indian I.T. Act and whether it was for that reason invalid. Beaumont C.J., in the course of his judgment, observed that the provisions of s. 24B(2) were attracted in the case and that the ITO was entitled to serve on the executor, administrator or other legal representative of the deceased Maharaja a notice under s. 22(2) or under s. 34, as the case might be, and then proceed to assess the total income of the deceased Maharaja, as if such executor, administrator or other legal representative were the assessee. No attempt to observe the provisions of that sub-section were, however, made by the ITO who had served the notice on the successor, Maharaja, without showing in what capacity. The learned Chief Justice then proceeded to observe as follows (p. 228) :

'But the Tribunal have found, as a fact, that the present Maharaja is the legal representative of the deceased Maharaja, and although it would obviously have been better so to describe him in the notice, I am not prepared to say that the notice was bad, if it was served on the legal representative, merely because it omitted to state that it was served in that capacity. It should have been stated that it was served on the legal representative of the late Maharaja, and that the return required was of the late Maharaja's income. It was not so stated, and the present Maharaja himself may have had taxable income for the years in question ; but I think there is a good deal of force in the contention of the Tribunal that any irregularities in this respect were waived by the Maharaja, because returns of the late Maharaja's income were made by the Foreign Minister on behalf of the Maharaja, and then subsequently corrections were made in the assessment at the instance of the Maharaja. There is no doubt that the present Maharaja knew perfectly well that what was being assessed was the income of his predecessor.'

The learned Chief Justice then considered the question of the validity of the actual assessment which was made on the deceased Maharaja. In this connection he observed as follows (p. 228) :

'It is, of course, wholly irregular to assess a deceased person. The assessment should have been made on the legal representative in respect of the income of the deceased. However, there again, the Patiala authorities seem to have accepted the view that it was an assessment made on the agent in respect of the income of the deceased person, because they have actually appealed against the assessment, and if the assessment was an assessment on a dead man, it was obviously a nullity, and there is nothing to appeal from.'

32. The learned Chief Justice, though he was at pains to observe that the did not wish to give any countenance to the idea that the provisions of s. 24B need not be strictly complied with, concluded that in the particular facts of the case, and having regard to the fact also that the question was merely of academic interest, having regard to the questions answered in the reference, the assessment, though not strictly made in accordance with the provisions of s. 24B, was, in the circumstances, valid so far as that section was concerned.

In his concurring judgment, Kania J. dealt with the question in the following terms (p. 231) :

'On the first question, on looking at the notice it is clear that it is addressed only to His Highness the Maharaja of Patiala. It does not on its face disclose whether it was intended for the late Maharaja or for the ruling Maharaja. It does not refer at all to any legal representative of any party. On behalf of the Commissioner it was argued that the section requires that a notice should be served on the legal representative and it was not necessary that on its face it should be addressed to the legal representative. It was contended that it was therefore, sufficient if it was in fact served on the legal representative and was understood by the party receiving it as served on him in that character. I think there is considerable force in that contention, particularly in the present case as on the facts on record the present Maharaja had not disputed the validity of the notice till the matter; finally came before the Tribunal. The second point, however, appears to be more difficult to get over at first sight. The assessment order clearly discloses the name of the late Maharaja, Sir Bhupindra Singh, as the assessee, and that is certainly bad. But the notice directing payment is addressed to the Foreign Minister evidently under instruction from the present Maharaja. In the matter of this assessment having regard to all the circumstances, although there is gross irregularity, if other things were against the assessee, on this ground alone I would not have perhaps disturbed the assessment order. I must however put on record my opinion that the issue of the assessment order in the name of the late Maharaja was highly irregular and should not in the ordinary course and circumstances be validate lightly.'

33. This decision is a clear authority for the proposition that a notice issued in a name which would apply both to the deceased assessee as well as to his legal representative and which does not on the face of it refer at all to the legal representative of the deceased, though not in accordance with the requirements of s. 24B(2), would not be bad if it is treated a having been addressed to him by the legal representative and it was no more than an irregularity, which could be waived. The decision is also an authority for the further proposition that though it is wholly irregular to assess a deceased person, the assessment order would not be necessarily bad and that if the legal representative treats the same as an assessment made not on the deceased but on the legal representative or other person liable to be taxed in respect of the income of the deceased person, such assessment order would not be disturbed.

34. In Chooharmal Wadhuram v. CIT : [1971]80ITR360(Guj) , this court held that where a person dies leaving more than one legal representative, a notice ITO must proceed to assess the total income of the assessee by serving a notice under s. 22(2) or s. 34 of the Indian I.T. Act, 1922, as the case may be, on all the legal representatives. If the notice is served on only one legal representative, there would be no complete representation of the estate and the proceeding would be wholly invalid as not being in compliance with the requirement of s. 24B(2). Even in that decision, however, certain exceptions to the aforesaid general rule were envisaged and it was pointed out that the rule was not required to be applied 'with unmitigated rigour in all kinds of cases irrespective of their peculiar facts'. Three such exceptional cases were illustrated in the said decision : (1) where, even though there are several legal representatives, one may represent the whole interest of the deceased such as when one legal representative is managing the entire estate of the deceased ; (2) where though one legal representative is served, he appears in the proceedings, with the consent, express or implied, of the other legal representatives, and (3) where the ITO bona fide and diligently believes one or more persons to be the only legal representatives of the deceased and initiates proceedings by serving notices on them and subsequently it is found that besides those served, there were also other legal representatives of the deceased. Having illustrated such exceptional situations, this court proceeded to observe (p. 374) :

'These are some kinds of case where the assessment would be valid even if one or some only of the legal representatives are served with notice. They constitute exceptions to the general rule which requires that where an assessee dies leaving more than one legal representative, the Income-tax Officer must proceed to assess the income of the deceased by serving notice on all the legal representative. These exceptions proceed on the same principle on which the general rule is based, namely, that there must be complete representation of the estate of the deceased in the proceedings before the Income-tax Officer and it is because in the cases falling within the exceptions one or more legal representative completely represent the estate of the deceased that it is held that service on them is enough to bind the estate of the deceased.'

35. This decision illustrates that thought the compliance with the requirement of s. 24B(2) with regard to service of notice on all the legal representatives of the deceased is a sine qua non to the assessment or reassessment of the income of the deceased assessee, in some kinds of cases the assessment or reassessment would be valid even if one or some only of the legal representatives are served with the notice.

36. In Estate of Late Rangalal Jajodia v. CIT : [1971]79ITR505(SC) , one R had filed his income-tax and excess profits tax returns for two assessment periods under the provisions of the Indian I.T. Act, 1922, and the Excess Profits Tax Act, 1940, respectively. Notices under ss. 22(4) and 23(2) of the Indian I.T. Act, 1922, were issued to R who complied with the same. Before the assessments could be completed, however, R died leaving him surviving S, a son by his predeceased wife, A, his second wife, and children by her. Under the will of R, A was appointed as an executrix and B as an executor and S was disinherited. The assessing authority issued a notice to S to show cause why the assessment on the deceased should not be made on him as the legal representative under s. 24B(3). S objected stating that the executors were the proper persons against whom proceedings should be taken and pointing out that A and another person were the executors. Since, however, a copy of R's will was not produced, the assessments were completed without issuing notice to the executors against the assessee who was described as 'the estate of late R by legal heirs and representatives S, son of R, A wife of R, and her children.' S appealed and at the hearing produced a copy of the will. The AAC set aside the assessments and directed the officer to make fresh assessments on the executors in accordance with s. 24B. The officer thereupon gave a notice to the executors. Whereas the other executor, B, informed the officer that he had refused to act as such, A requested the officer to furnish her with copies of the returns, notes of examination and correspondence between R and the department to enable her to make representations. The officer took the view that under s. 24B it was not necessary to go through all the formalities once again and completed the assessments on 'the estate of the late R by executors A and another.' The assessments were made more than four years after the end of the assessment years. A appealed to the AAC who held that the assessments were validly made on a valid direction of the AAC but set aside the assessments directing the officer to complete then after giving A a fresh opportunity to object to the assessment. The Appellate Tribunal also held on appeal that the assessments were saved from the bar of limitation by the second proviso to s. 34(3). On a reference, the High court held that s. 24B(3) was attracted, that the assessments were not made on the executors in proper compliance with the procedure prescribed thereunder and that the direction and finding of the AAC were outside the scope of the second proviso to s. 34(3). Both the sides carried the matter in appeal to the Supreme Court. The submission on behalf of the revenue was that the second proviso to s. 34(3) saved the assessment from the bar of limitation because the second assessment order was made in consequence of a finding or direction given by the AAC against A and another and also because A was a person intimately connected with the assessment inasmuch as the first assessment was made, inter alia, on her. The submission on behalf of A, on the other hand, was that she was not an assessee because there was no proceeding in law against her and that she was also not intimately connected with the assessment and that, therefore, the second proviso to s. 34(3) did not apply. The Supreme Court observed that the first assessment was completed under s. 24B through the legal heirs and representatives as including A and that the said assessment was set aside on an appeal preferred by S because no notice was given to A, although the assessment proceeding was against her as a legal representative. Then follow the following conclusions on the applicability of the second proviso to s. 34(3) (pp. 511, 513 of 79 ITR) :

'The lack of a notice does not amount to the revenue authority having had no jurisdiction to assess, but that the assessment was defective by reason of notice not having been given to her. An assessment proceeding does not cease to be a proceeding under the Act merely be reason of want of notice. It will be a proceeding liable to be challenged and corrected. Similarly, if there is a mistake as to name or there is a misdescription of the name, the proceeding will be liable to be challenged and corrected by giving notice to the assessee subject to such just exceptions as an assessee can take under law. The direction given by the Appellate Assistant commissioner was to make fresh assessment on Aruna Devi in accordance with the provisions of the Act......We are, therefore, of opinion that the second proviso to section 34(3) of the Act applies to the present appeals because, first, the proceedings against Rangalal Jajodia commenced on filing of returns before the income-tax authorities ; secondly, the assessment proceedings continued after the death of Rangalal Jajodia against the legal representatives, Shankarlal Jajodia and Aruna Devi; thirdly, the assessment proceedings on being set aside and not cancelled pursuant to the appeal filed by Shankarlal Jajodia on the ground that notice was not given to Aruna Devi were continued, and, fourthly, the setting aside of the assessment was only on the ground that notice was not given to Aruna Devi and, therefore, the finding and direction was vital to the assessment proceedings. The High Court was in error in holding that the assessment proceedings were barred by limitation.'

On the question of the applicability of s. 24B, the holding was in the following terms (p. 513) :

'The High Court held that section 24B of the Act applied but Aruna Devi should have been given opportunities to object to the assessment by repeating the entire procedure of section 24B of the Act as during the life-time of the deceased......We are of opinion that the High court correctly held that section 24B of the Act applies to the present case.'

In view of the aforesaid findings, the appeal filed by the revenue was allowed and that filed by A was dismissed.

37. This decision is important in more than one respect. It establishes that an assessment proceeding does not cease to be one under s. 24B merely for reason of want of notice on the executor who alone can represent the estate and that similar is the position if there is a mistake or misdescription of the name of the legal representative in the assessment order. Such errors or irregularities do not affect the inherent jurisdiction of the revenue authorities to assess but merely makes the assessment defective and liable to be challenged and corrected. It also establishes that if such an assessment, when challenged in appeal, is set aside and not cancelled on the ground of want of notice, and a finding or direction to make a fresh assessment after service of notice is given, such fresh assessment would not be barred and it would be saved by the second proviso to s. 34(3).

38. These three decision clearly support the view which we have taken as regards the true scope and ambit of s. 159 and the consequences flowing out of non-observance or breach of any of its provisions. They lay down that an error or omission in taking one or more of the various procedural steps prescribed under the said section or even a breach of the statutory injunction contained therein does not necessarily affect the inherent jurisdiction of the taxing authority and that, in certain cases subject to other just exceptions open under law, the resultant defective assessment can be substituted by a fresh assessment undertaken pursuant to a finding or direction of a higher authority without any inhibition of time limit and that, in others, the assessment would still be valid and effective, notwithstanding the defect, depending upon the conduct of the parties and other relevant circumstances.

39. Counsel for the assessee, however, relied upon the third exception enumerated in Chooharmal's case : [1971]80ITR360(Guj) and strenuously contended that, on the principle underlying the said exception, in a case where the ITO proceeds with impunity to assess a deceased person, even after he fully knows the factum of death, the assessment cannot be held to have been made bona fide so as to be valid and effective against the legal representative, irrespective of the conduct of the legal representative in the course of such a proceeding. We are unable to agree. Chooharmal's case : [1971]80ITR360(Guj) deals with a totally different situation where one or some only of the legal representatives of the deceased are served with notice and proceeds to consider 'some kinds of cases' constituting an exception to the general rule requiring service of notice on all the legal representatives. The bona fides of the ITO were held to be relevant in the context of one of the exceptions to the general rule therein considered. The consideration, which was held relevant under those circumstances, would not necessarily be material in a totally different situation. Chooharmal's case does not deal with a situation which we are considering. The instant case is more akin to Maharaja of Patiala's case : [1943]11ITR202(Bom) in the income-tax law and Reddi's case. : [1979]3SCR599 , in the civil law and falls within the exception therein recognised. It is significant to note that in both those cases, the proceedings taken and orders made against a dead person were held to be valid and effective against the legal representative, although the ITO in one case and the appellant, State, in the other, were fully aware of the death.

40. Counsel also relied upon Saharangshur Kanta Acharya v. Collector of Malda : [1963]47ITR754(Cal) , Ravith Bibi v. Agrl ITO : [1964]52ITR471(Mad) , Jai Prakash Singh v. CIT and I. M. Thapar v. CIT : [1979]116ITR797(Cal) in support of the contention that a fundamental defect in the assessment such as the one which we are considering is a nullity and not an irregularity and that under such circumstances the assessment can be only annulled and not merely set aside. We shall briefly consider those decisions.

41. In Sahasrangshi's case : [1963]47ITR754(Cal) , which is a decision of a single judge, an assessment order was made on the successor-in-interest of the deceased without giving the name of any executor, administrator or legal representative. One of the heirs had knowledge of the pendency of the proceeding and notice was received on his behalf by his attorney who did not object. Objection was raised only when the demand notice was issued. It was contended by the revenue in the course of a writ petition instituted by the said heir that his conduct precluded him from getting relief in writ jurisdiction. This contention was rejected on the ground that taxation of a citizen should be made strictly in accordance with law and that there does not seem to be any bounden duty on the part of the tax-payer to point out the infirmities of the revenue authorities, in time to save limitation. From the judgment it does not appear that, though the concerned heir knew about the pendency of the assessment proceeding as he was serve with the notice, he had actually participated therein and invited an assessment order. That is a material distinguishing fact, Besides, the decision in Maharaja of Patiala's case : [1943]11ITR202(Bom) was not cited and considered. There is now a later judgment of the Supreme Court in Reddi's case : [1979]3SCR599 , which has considered an applied the principle of waiver if certain facts and circumstances are established. The decision of the Supreme Court in Rangalal Jajodia : [1971]79ITR505(SC) also has its own bearing on the effect of a defect in the assessment proceeding arising out of want of notice to the legal representative and misdescription or mistake of name in the assessment order. Having regard to all these circumstances, the decision in Sahasrangshu's case : [1963]47ITR754(Cal) , therefore, is not helpful.

42. In Ravith Bibi's case : [1964]52ITR471(Mad) , which too was decided by a single judge, a best judgment assessment was made under the Madras Agrl. I.T. Act, 1955, without serving notice on the guardian of a minor appointed by the court and it was held to be invalid. It was found that under the law, the tax was required to be levied only from the guardian of a minor, that notice should, therefore, have issued to the guardian and not to the minor direct and that service of such notice on the uncle or other relative of the minor would not be sufficient. This case does not at all deal with the situation which we are considering and has not relevance. Even then we cannot help pointing out that the observation therein made that lack of notice on the guardian resulted in lack of jurisdiction if lack of inherent jurisdiction is meant thereby is a proposition of doubtful validity, having regard to the decision of the Supreme Court in Rangalal Jajodia : [1971]79ITR505(SC) .

43. In Jai Prakash Singh's case , the fact of the death of the assessee and the names of ten legal representatives were intimated to the ITO and still the assessment was completed without bringing all the legal representatives on record and without service of notice upon all of them. On appeal, it was contended that the assessment was wholly invalid and without jurisdiction. But the contention was rejected on the ground that there was an irregularity and not a nullity since it was not found that any of the land the assessment was set aside and a fresh assessment was ordered after service of notice on all the legal representatives. The Tribunal concurred in the decision of the appellate authority. On a reference, it was held that since the entire body of legal representatives of the deceased assessee was not served and one of the legal representatives who was served, was not proved to have represented the other legal representatives, the assessment was null and void and that fresh assessment could have been ordered only if law permitted and there was no bar. This case is almost on all fours with Chooharmal's case : [1971]80ITR360(Guj) and what we have stated above while dealing with Chooharmal's case would apply even to this decision.

44. In I. M. Thapar's case : [1979]116ITR797(Cal) , the deceased had left behind a will under which two executors were appointed. Probate of the will had not been obtained and administration of the estate was not completed during the relevant year. The assessment was made in the same name of the estate of the deceased as represented by executors as well as by legal representatives. It was held that executors having been appointed by the will and the administration having not been completed, they alone could represent the estate, and that having regard to the specific statutory provisions of s. 168, executors alone could have been assessed, since it was not found that any of the legal representatives has intermeddled with the estate. It was further held that if a person, who is not legally liable to be assessed, is included in the assessment and is treated as an assessee, he would be subject to various obligations and liabilities and that, therefore, his name could not be shown as an assessee even by way of abundant caution. An assessment of that nature would not be a mere irregularity but affected the substance of the matter and it was invalid. The main question which we are considering herein did not fall for consideration in that case which considered the question of nullity in a different context. So far as the finding on the question whether the inclusion in the assessment of the name of a person, who is not liable to pay tax, by way of abundant caution is justified and its consequence on the assessment proceeding, is concerned, we must say that the decision in question having not considered the decision in Rangala Jajodia's case : [1971]79ITR505(SC) , its persuasive value is considerably weakened.

45. Having examined the legal position bearing upon the question under consideration, we must now turn to the question of its applicability on the facts and in the circumstances of the case. In this we are handicapped because though the Tribunal has written an elaborate order, it has failed to find the basic and material facts and to examine and consider the aspect of 'nullity' in its true and proper perspective on the basis of the facts so found and in the light of the rival submissions of both sides. The Tribunal, with respect, failed to perceive the distinction between a nullity and an irregularity, as explained above, and it also failed to take into account the aspect one in the face, having regard to the finding recorded by the AAC and the contentions advanced on behalf of the revenue before the various authorities, including the Tribunal. The AAC, as earlier pointed out, has found that as many as eight notices issued after the death of Munshaw in his name were received by persons who were the employees of the deceased and that though none of them was served on his widow, the manner in which the books of account were produced in response to those notices showed that she received those notices and complied with them acting as a legal heir of the deceased. The findings recorded by the AAC while considering the question of the knowledge of the ITO with regard to the death of Munshaw shows that the assessing authority had before it material disclosing that the widow was representing herself to be the legal heir of the deceased for the purposes of assessment and that in the record of the assessment proceeding for the assessment year in question itself she had produced tax deduction certificates and an indemnity bond signed and executed by her as the legal heir of the deceased. The AAC has also found that the widow could have objected to the issue of all the notices in the name of the deceased but she failed to do so, although she was advised by experts. It was an admitted fact, according to the AAC, that the legal heirs of the deceased were 'stated to be' the widow and a minor son. Above all was the fact that the appeal against the assessment order was filed by the widow in the name of the deceased in her capacity as the legal heir and that it has not been her case that she is not the assessee or any person intimately connected with the assessment within the meaning of s. 153(3). In our opinion, the Tribunal was required to take into account and record its own finding on all these and other, if any, facts and circumstances, found or appearing from the record, because they are extremely relevant and material and then to judge whether the assessment against the deceased is a nullity or an irregularity. In the absence of those findings, we are unable to examine ourselves whether the assessment is a nullity or an irregularity and, on that basis, to answer the question posed for our opinion. It is obvious that if the assessment was not a nullity, the AAC would be competent to give a direction as to fresh assessment even after the time-limit therefore had expires, subject, of course, to any other just exception that could be taken under the law. However, the Tribunal having failed to find the basic facts and having further failed to reach its ultimate conclusion upon applying the correct legal test to the totality of facts found, we find it difficult to answer the question referred for our opinion.

46. Under such circumstances, two courses are open to us, namely, to call for a supplementary statement, or to decline to answer the question and to leave the Tribunal to take appropriate steps to adjust its decision under s. 260(1), as observed in CIT v. Indian Molassess Co. P. Ltd : [1970]78ITR474(SC) . On the facts and in the circumstances of the case, we adopt the second course and decline to answer the question and leave it to the Tribunal to adjust its decision under s. 260(1) in the light of the observations made in this judgment.

47. Before parting with the case, we must mention that it was forcefully urged on behalf of the assessee that the AAC has found as a matter of fact that the assessment proceedings were not continued against the legal representative and that the assessment was a nullity and that since that finding was not challenged by the revenue by preferring an appeal against the order directing fresh assessment, it is really not open to the revenue to take up the plea that the assessment was completed in accordance with law and that it was not a nullity. We are unable to accept this submission. The findings on which reliance has been placed on behalf of the assessee are not pure findings of fact. The question whether the assessment proceeding was, in substance and reality, continued against the legal representative and whether the whole proceeding including the assessment order is a nullity is a mixed question of law and fact to be answered in the light of the foregoing discussion. The revenue has been contending all throughout that the assessment was not null and void on the facts and in the circumstances of the case and that contention was raised even before the Tribunal to sustain the direction of the AAC with regard to fresh assessment. The revenue, therefore, has not at any stage conceded or acquiesced in the position that even on the application of the correct legal test to all the material facts emerging from the record, the assessment is a nullity. True it is that even the revenue has failed to perceive the true implications of law and fact arising in the case and it has, therefore, acquiesced in the order of the AAC with regard to fresh assessment after the determination of legal representatives which, on the consistent stand adopted by it, it could possibly have challenged as unwarranted. To that extent alone, therefore, the revenue must be held bound by the AAC's order and not on the wider question which falls for decision herein.

48. As a result of the foregoing discussion, we decline to answer the question referred to us by the Tribunal. In the circumstances of the case, there will be no order as to the costs of this reference.


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