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Commissioner of Income-tax Vs. Kailasho Devi Burman and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 90 of 1968
Judge
Reported in[1978]115ITR732(Cal)
ActsIncome Tax Act, 1922 - Sections 23, 23(3), 25A and 29
AppellantCommissioner of Income-tax
RespondentKailasho Devi Burman and ors.
Appellant AdvocateBalai Lal Pal and ;Ajoy Mitter, Advs.
Respondent AdvocateN. Banerjee, Suhrit Mitter and ;R.L. Sinha, Advs.
Cases ReferredIn Edwards v. Bairstow
Excerpt:
- ramendra mohan datta, j. 1. i think the tribunal has totally failed to draw the irresistible inference from the facts placed before it. therewas no scope for vacillation or giving the benefit of doubt to the assessee. the only conclusion that could be reached from the admitted facts was that the notice of demand was duly and properly served on the assessee. the tribunal definitely misdirected itself and committed an error on the face of the record by taking the statement of the counsel as evidence before it. the statement of the counsel was to the effect that there was no such person by the name of phool singh who had authority to receive any such notice on behalf of the assessee. that could not have been relied on by the tribunal as evidence before it. if that was the position then the.....
Judgment:

Ramendra Mohan Datta, J.

1. I think the Tribunal has totally failed to draw the irresistible inference from the facts placed before it. Therewas no scope for vacillation or giving the benefit of doubt to the assessee. The only conclusion that could be reached from the admitted facts was that the notice of demand was duly and properly served on the assessee. The Tribunal definitely misdirected itself and committed an error on the face of the record by taking the statement of the counsel as evidence before it. The statement of the counsel was to the effect that there was no such person by the name of Phool Singh who had authority to receive any such notice on behalf of the assessee. That could not have been relied on by the Tribunal as evidence before it. If that was the position then the assessee should have come forward to deny such service on cogent evidence and until that was done the Tribunal would have the only option to proceed on the basis of the acknowledgment receipt which showed that the demand notice was duly served on the assessee. If the Tribunal had done so it would have reached the inevitable and inescapable conclusion that the demand notice had been duly and properly served. The Tribunal ought not to have misled itself by relying on the slip which contained a misleading note by an inspector that the correct name of the assessee was 'Rash Behari Burman 'and not' Rash Behari Das Barman'. The Tribunal ought to have taken note of the fact that the assessee had all throughout been assessed as 'Rash Behari Das Burman' and the returns filed by the assessee himself would have made the position absolutely clear and free from any doubt. In my opinion, the Tribunal has misdirected itself by taking into consideration irrelevant evidence and by discarding material and legal evidence before it.

2. The facts remained that the assessee filed the return for 1955-56 byshowing his status as HUF. The assessment form annexed to the demandnotice showed that the advance taxes were paid by the assessee in respectof such return. It must follow, therefore, that such advance taxes werepaid on the basis of his status as HUF and the amount so paid was dulytaken into account in arriving at the balance figure mentioned in thedemand notice. That being the position, it could hardly be. contended thatthe assessment order was not properly signed.

3. The Tribunal committed an error on the face when it failed to take into consideration that all that was required under Section 23(3) of the I.T. Act, 1922, was that (a) the assessment must be in writing, and (b) the determination of the amount must be on the basis of such assessment, and that the said requirements were duly complied with as would appear from the records and from the body of the notice of demand which was duly served on the assessee. Accordingly, the requirement of Section 29 was duly complied with. Under such circumstances, the inevitable conclusion that could be arrived at by the Tribunal was that the assessment was duly andproperly made on the assessee by showing his status as an HUF for the assessment year 1955-56.

4. Neither the Act nor the Rules envisage that the assessment order must be signed. All that is required is that the game must be in writing and the sum payable is to be determined on the basis of such assessment. It is nowhere mentioned that the assessment order would have to be served on the assessee. All that is required is that the notice of demand specifying the sum payable should be served on the assessee in the prescribed form and would be accompanied by an assessment form. If the Act has not required the assessment order to be signed I do not see any reason how the Rules framed thereunder could provide for such requirement.

5. The Tribunal failed to appreciate the scope of Section 29 of the I.T. Act, 1922, and as such misdirected itself by going into the question as to whether the assessment order was duly signed or not. It failed to appreciate that unless an assessment order was made in writing and until and unless the determination took place in pursuance thereof the question of the issue of the notice of demand could not arise. The notice of demand was to be issued after the said requirements were complied with and then the same would be served upon the assessee in the prescribed form specifying the sum payable.

6. For all the above reasons I see no difficulty in answering question No. 1 in the affirmative. That being the position, question No. 2 must necessarily be answered also in the affirmative because the status of HUF was not changed in respect of the said years. The two questions are, therefore, answered in the affirmative and it is ordered that there will be no order as to costs.

Hazra, J.

7. On the application of the CIT, West Bengal-III, Calcutta, two questions of law arising out of the consolidated order of the Tribunal have been referred to this court by the Tribunal, Calcutta, Bench 'B', under Section 256(1) of the I.T. Act, 1961. The questions are:

'1. Whether, on the facts and in the circumstances of the case, there was a valid assessment on an HUF for the assessment year 1955-56 ?

2. If the answer to question No. 1 is in the affirmative then whether, on the facts and in the circumstances of the case, the assessments for 1958-59 to 1962-63 in the status of HUF are valid ?'

8. These references relate to the assessment years 1958-59 to 1962-63. The relevant previous years are the corresponding B. S. years 1364 to 1368.

9. The assessee was one Rash Behari Das Burman. The following genealogical table will indicate the family to which Rash Behari Das Burman belonged.

RAJA DAMODAR DAD BURMAN

________________________________________

| | | | |

Purushottom Lalit Gopinath Madhu- Jogadish

(1) (2) (3) (4) (5)

|

|

|_____________________________

| |

Bonamali Rash Behari

| Kailasho Devi

Madan Mohan |

____________|_____

| |

Dinanath Rabindranath

(born in or (born in or

about 1942) about 1946)

10. The parties are governed by the Mitakshara School of Hindu Law. Madhusudan filed a partition suit in the High Court, at Calcutta on November 30, 1927. On December 13, 1937, the High Court decreed and ordered that certain lots of properties would be allotted to the respective parties. Bonamali and Rash Behari were allotted some properties jointly. On April 1, 1951, there was a partition of those joint properties between Bonamali and Rash Behari.

In this reference we are concerned with only Rash Behari.

11. After partition Rash Behari submitted returns on the basis of HUF. Assessments were made on him as an individual. We are not concerned with the assessments for the assessment years prior to 1955-56. In question No. 1, we are concerned only with the assessment year 1955-56. The answer to question No. 2 will depend upon the answer to question No. 1.

12. I shall now turn to the statement of the case. In the statement of thecase, it is stated as follows :

In the assessment year 1955-56, Rash Behari submitted a return dated November 14, 1957, describing himself as karta of the HUF. An assessment was said to have been made for this year as HUF, The order in the records of the ITO does not bear any signature. There is no signed copy of the assessment form. There is a demand notice dated April 10, 1958, with some initial or signature on it. The demand notice bears the name of the assessee as 'Rash Behari Das Burman'. This name is title same as in the return dated November 14, 1957. According to the assessee, neither the statutory notice nor the 'demand notice' nor the 'assessment order' had been received. In the records of the ITO there is an acknowledgment slip dated April 25, 1958, signed by one Phool Singh. According to the assessee.there was no such person who had any authority to receive any notice on his behalf. There was no information before the Tribunal as to whether the demand raised in the said demand notice had been paid by the assessee. Copies of the 'assessment order', the 'assessment form' and the 'demand notice' for 1955-56 are annexed hereto as annexures with the statement of the case.

13. On the question whether there was an assessment on the family for the assessment year 1955-56, the conclusions of the Tribunal as stated in the statement of the case were:

'(1) There was no signed assessment order.

(2) Even if a demand notice is taken to exist in this case, the assessment is invalid as, in spite of there being a positive demand thereunder, it had not been served on the assessee.'

14. I think I shall quote here the relevant portion of the order of the Tribunal which has been annexed to the statement of the case. The relevant portion of the order of the Tribunal is as follows:

'We may first consider the question as to whether there was actually an assessment on any HUF of Rash Behari Burman. It is not the case of the department that there was any such assessment except for 1955-56. For that year, when we looked into the records as pointed out earlier, we find that there is no assessment order or any assessment form which has been signed by the ITO. There is, however, a demand notice but it is not clear whether the said demand notice has been signed by Shri S. K. Mullick who was then the ITO. There is an acknowledgment slip showing the service of a copy of this demand notice on Rash Behari Das Burman, One Paool Singh had signed the acknowledgment under date 25-4-1958. According to the counsel for the assessee before us there was no such person who had any authority to receive any notice on behalf of the assessee. We have no information as to whether the demand which has been raised under the said notice has been paid by the assessee. The whole case of the department has to rest on the demand notice where the status has been taken as HUF, if we take the view that there is a signed demand notice on record. Even assuming that there is a valid demand notice on record, having been signed by the ITO, we are unable to hold that the said demand notice was served on the assessee. We consider that on the facts here, we could give benefit of doubt to the assessee and hold that it is not possible to take the demand notice as having been served on the assessee. Our doubts arise because there is a slip on the record which runs as follows :

'Enquired. The assessee is there. The correct name is Rash Behari Burman and not Rash Behari Das Burman......Under the above reasons we have to hold that there is no proof of the assessee having been assessed actually under the status HUF for any year....... Our findings are,(1) there is no assessment as there is no signed assessment order, and (2) if one is taken to exist in this case, it is invalid as, in spite of there being a positive demand thereunder, it had not been served on the assessee '.'

I will first consider the second conclusion or second finding of the Tribunal. Is the Tribunal right in law in coming to such a conclusion ?

15. With regard to this point Mr. B.L. Pal for the department has submitted as follows : There is no legal requirement under the I.T. Act, 1922, to communicate the assessment order to the assessee. The validity of the assessment order does not depend upon its communication to the assessee. Even if the demand notice was not served on the assessee that will not affect the validity of the assessment order.

16. In my view, there is great force in the above contention of Mr. Pal. This will be clear from s, 23 and Section 29 of the I.T. Act, 1922 (hereinafter referred to as 'the Act'), which apply in the instant case.

17. I will read the relevant portion of Section 23 of the Act.

'23. Assessment.--(1) If the Income-tax Officer is satisfied without requiring the presence of the assessee or the production by him of any evidence that a return made under Section 22 is correct and complete, he shall assess the total income of the assessee, and shall determine the sum payable by him on the basis of such return.

(2) If the Income-tax Officer is not satisfied without requiring the presence of the person who made the return or the production of evidence that a return made under Section 22 is correct and complete, he shall serve on such person a notice requiring him, on a date to be therein specified, either to attend at the Income-tax Officer's office or to produce, or to cause to be there produced, any evidence on which such person may rely in support of the return.

(3) On the day specified in the notice issued under Sub-section (2), or as soon afterwards as may be, the Income-tax Officer, after bearing such evidence as such person may produce and such other evidence as the Income-tax Officer may require, on specified points, shall, by an order in writing, assess the total income of the assessee, and determine the sum payable by him on the basis of such assessment.'

18. Now, I will come to Section 29 of the Act. This section provides as follows :

'29. Notice of demand.--When any tax, penalty or interest is due in consequence of any order passed under or in pursuance of this Act, the Income-tax Officer shall serve upon the assessee or other, person liable to pay such tax, penalty or interest a notice of demand in the prescribed form specifying the sum so payable.'

19. Thus, under Section 23 it is the duty of the ITO to assess the total income of the assessee and determine the sum payable by him on the basis of such assessment.

20. Under Section 29, notice of demand for payment of tax shall be served upon the assessee when any tax is payable by him in consequence of the order passed under or in pursuance of the Act. The Act does not provide for service of the assessment order on the assessee. But the Act provides for service of the notice of demand upon the assessee. When is the notice of demand to be served It has to be served when income-tax or penalty or interest is due by the assessee under or in pursuance of the Act. Therefore, the Tribunal is not right in its conclusion that even if demand notice is taken to exist in this case the assessment is invalid as assessment order has not been served on the assessee. Service of assessment order is not incumbent on the assessee. It may be that copy of the assessment order is usually served along with the demand notice. It is desirable to do so ; but the Act does not envisage that service of assessment order must be made as otherwise the assessment would become invalid.

21. In this connection, Mr. B. L. Pal has referred to us a decision of the Kerala High Court in Commr. of Agrl. IT v. K. H. Parameswara Bhat : [1974]97ITR190(Ker) . The headnote of that case runs thus :

'There is no provision in the Agrl. I.T. Act, 1950, nor in the Rules, that an assessment order should be communicated to the assessee, though the Act envisages service of the assessment order. Notwithstanding the fact that the order is not communicated, it is a valid order. The noncommunication of the assessment order, made after return was filed, cannot have the effect of keeping the assessment proceedings pending and there will be no lack of jurisdiction or any other impediment in taking reassessment proceedings under Section 35 of the Act.'

22. At pages 191-192 of 97 ITR the learned judges held :

'But, it is of course not only desirable but necessary that an order of assessment should be communicated to the assessee. The Act itself envisages service of the assessment order. Sub-section (3) of Section 31 for instance provides that an appeal from the order of assessment shall be presented within a period of thirty days from the date of service of the order. Apart from this, the assessee is entitled to know the reasoning for imposing tax or penalty on him and he would be able to exercise his right of appeal, if any, only if the order is communicated to him. But the question is not whether it is either desirable or necessary that an order of assessment should be communicated, but whether the lack of communication of the order would makethe order void or would have the result of keeping the assessment proceedings pending.'

23. The learned judges further held at page 192 of 97 ITR :

'Notwithstanding the fact that the order had not been communicated,it is a valid order.'

24. Although in that decision the learned judges considered the Agrl. I.T. Act,I accept the principle of law laid down in that decision. In my view, theconclusion of the Tribunal on this point is neither right nor the same isaccording to law.

25. I will now turn to the other conclusion of the Tribunal, viz., thatthere was no assessment as there was no signed assessment order. Was theTribunal right in its conclusion in this respect ?

26. I will here consider the effect of the notice of demand which the Tribunal found to be in existence in this case. The finding of the Tribunal is that there was a demand notice which was signed by the ITO, but according to the Tribunal it is not clear whether S. K. Mullick, who was then the ITO signed the demand notice. It has been contended by Mr. Pal that the observation by the Tribunal that it was not clear whether the demand notice was signed by S. K. Mullick who was then the ITO is perverse. I think there is great force in the contention of Mr. Pal on this point. The Tribunal says, 'it is not clear'. So I take it that there is no definite finding of the Tribunal that the demand notice was not signed by the ITO, S. K. Mullick. In any event there was no evidence before the Tribunal to the effect that the demand notice was not signed by S. K. Mullick. On the other hand, the Tribunal found that there was a demand notice signed by an ITO.

27. Mr. Pal has also submitted that the Tribunal also found an acknowledgment slip which showed service of the copy of the demand notice on Rash Behari. One Phool Singh signed the acknowledgment on April 25, 1958. According to the argument of the counsel for the assessee who appeared before the Tribunal, there was no such person authorised to accept the notice of demand on behalf of the assessee. On that argument the Tribunal observed :

'We are unable to hold that the said demand notice was served on the assessee.'

28. Mr. Pal has contended that the said finding of the Tribunal is perverse as there is no evidence before the Tribunal to come to that finding. I think Mr. Pal is correct in his submission, because the Tribunal had before it a signed acknowledgment form and one Phool Singh had signed the acknowledgment on behalf of the assessee. Who was this Phool Singh Why should Phool Singh sign the receipt for acknowledgment of notice of demand upon the assessee The Tribunal did not consider 'these aspects but came to its conclusion on the argument of the counsel.

29. On the other hand, it appears from the reference application under Section 256(1) of the I.T. Act, 1961, by the CIT wherein the facts which are admitted and/or found by the Tribunal and which are necessary for drawing up a statement of the case are stated that ' the acknowledgment is signed by one Phool Singh on April 25, 1958. Records show this Phool Singh to have received a number of notices on behalf of the assessee on widely separated dates. The order sheet for the assessment year 1955-56 shows that the assessment for the year was made on March 28, 1958'. But the Tribunal did not consider the above facts and did not make any reference to the same either in its order or in the statement of the case. The finding of the Tribunal that the demand notice was not served on the assessee is not based on legal evidence and seems to me to be perverse. The Tribunal itself was in doubt and that is why the Tribunal said that on the facts of the case the Tribunal would give the benefit of doubt to the assessee and held that it was not possible to take the demand notice as having been served on the assessee. In my view, there is no room for giving any benefit of doubt to the assessee by the Tribunal in such a case. The Tribunal is not interpreting a fiscal enactment which is open to doubt and construing the same as beneficial to the subject. It seems to me that the Tribunal has based its decision partly on conjectures, surmises and suspicions and partly on evidence. In such a situation an issue of law arises and a finding of the Tribunal can be interfered with. The finding may also be interfered with if it be found to be so unreasonable that no person acting judicially and properly instructed as to the relevant law could have arrived at it. [ See Rameshwar Prasad Bagla v. CIT : [1973]87ITR421(SC) .

30. In my view, the existence of demand notice and the acknowledgment slip showing service of the notice of demand signed by Phool Singh on April 25, 1958, presupposes an assessment order passed under or in pursuance of the I.T. Act. Unless an assessment order was passed under or in pursuance of the Act the question of a notice of demand in the prescribed form specifying the sum payable by the assessee could not arise [See V. S. Sivalingam Chettiar v. CIT : [1966]62ITR678(Mad) ].

31. With regard to the method prescribed by the Act for making assessment to tax, the Privy Council has observed in CIT v. Khemchand Ramdas [1938] 6 ITR 414:

'...the method prescribed by the Act for making an assessment to tax, using the word 'assessment' in its comprehensive sense as including the whole procedure for imposing liability upon the taxpayer. The method consists of the following steps. In the first place the taxable income of the taxpayer has to be computed. In the next place the sum payable by him on the basis of such computation has to be determined. 'Finally, a notice of demand in the prescribed form specifying the sum so payable has to beserved upon the taxpayer. The second of these steps involves the determination of two sums, namely, the sum payable for income-tax and the sum payable for super-tax. The notice of demand in the prescribed form also provides for the sums payable for income-tax and super-tax being specified separately.'

32. Thus, the existence of quantification of the amount of tax on the basis of the assessment order and the issuing of the notice of demand would indicate that there was an assessment order passed under or in pursuance of the Act.

33. Mr. Pal has rightly contended that the court may presume that official acts are duly and properly done. There is no reason why this presumption should not be applied in the instant case. It seems to me that the conclusion of the Tribunal is such that no person acting judicially and properly instructed as to the relevant law could have come to such determination. In Edwards v. Bairstow [1955] 36 TC 207 ; 28 ITR 579, the House of Lords laid down the same principles. In that case. Lord Simonds observed that even a pure finding of fact may be set aside by the court if it appears that the Commissioners have acted without any evidence or upon a view of the facts which could not reasonably be entertained.'

34. Mr. R. L. Sinha for the assessee has argued that since there is no assessment order or any assessment form which is signed by the ITO there is no assessment and this finding of the Tribunal is conclusive. According to Mr. Sinha on this finding we must hold that for the year 1955-56 the assessee was not assessed. It is difficult to accept this submission of Mr. Sinha as there is the existence of the notice of demand. This presupposes the existence of a valid assessment order.

35. The question No. 1 is a question of law, viz., whether there was valid assessment on a HUF. The notice of demand clearly shows that the status of the assessee was the HUF. Mr. Sinha has cited two cases, viz,, Badri Prosad Bajoria v. CIT : [1967]64ITR362(Cal) . Sivalingam Chettiar v. CIT : [1966]62ITR678(Mad) .

36. In Badri Prosad's case : [1967]64ITR362(Cal) , Masud J. held 1

'It cannot be denied that an order, before it is made effective, must be served on the person against whom the order is made. Thus, from the point of view of the person who is affected by the order, the order is made when it is communicated to him. But this does not mean that, until an order is communicated, the order is not made at all. Notice under Section 29 of the I.T. Act presupposes an order of assessment under Section 23(1) or Section 23(3). Notice under Section 29 can only be served after an order of assessment is made.'

37. In 7.5. Sivalingam Chettiar's case : [1966]62ITR678(Mad) the learned judges held:

'Learned counsel for the assessee also adds that 'the orders on his individual returns being prejudicial to him, it is but necessary in order toinvest them with validity that they should have been communicated to him. The question is not free from difficulty; but, having regard to the scheme of the Act, we are of the view that failure to serve notices of the orders had not the effect of rendering them invalid.'

38. Again, the learned judges held :

'Wherever orders are made under the Act, which affect the assessee in some form or other, it has provided for service of notice and the remedy there against. Section 29 requires notice of demand to be served on an assessee ; but the section makes it a condition that a notice of demand will be required to be served only when any tax, penalty or interest is due in consequence of any order passed under or in pursuance of the Act.'

39. In my view, the above cases cited by Mr. Sinha do not support the conclusion of the Tribunal. In my view the other conclusion of the Tribunal is also perverse.

40. In this view of the matter question No. 1 must be answered in the affirmative and in favour of the department and against the assessee.

41. In view of my answer to the first question in the affirmative that for the assessment year 1955-56 there was a valid assessment on the HUF the second question must also be answered in the affirmative and in favour of the revenue. The reason is that under the provision of Section 25A(1) of the Indian I.T. Act, 1922 :

'Where, at the time of making an assessment under Section 23, it is claimed by or on behalf of any member of a Hindu family hitherto assessed as undivided that a partition has taken place among the members of such family, the ITO shall make such inquiry there into as he may think fit and, if he is satisfied that the joint family property has been partitioned among the various members or groups of members in definite portions he shall record an order to that effect...'

42. On the admitted facts of this case no such finding was given by the ITO at any time nor the family applied for it. So, under Sub-section (3) of Section 25A :

'Where such an order has not been passed in respect of a Hindu family hitherto assessed as undivided, such family shall be deemed, for the purposes of this Act, to continue to be a Hindu undivided family.'

43. In this view of the matter, the other points raised on behalf of the assessee as to partition decree are not relevant. In the premises, the second question must also be answered against the assessee. We answer the question accordingly.

44. There will be no order as to costs.


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