1997 (6) TMI 8 - HC - Income Tax

Summary

Issues Involved:
1. Maintainability of the appeal u/s 249(4) of the IT Act.
2. Validity of the intimation issued u/s 143(1)(a) of the IT Act when the HUF ceased to exist.

Summary:

Issue 1: Maintainability of the Appeal u/s 249(4) of the IT Act

The court examined whether the second respondent's view that the appeal was not maintainable due to non-payment of tax was justified. Section 249(4) of the IT Act mandates that no appeal shall be admitted unless the tax due on the income returned is paid. The court noted that the petitioner disputed the tax liability on the grounds that the intimation was issued without authority, as the HUF had ceased to exist. The court held that the right to appeal should not be deprived when the very liability is disputed. Therefore, the interpretation of Section 249(4) should be liberal to serve the object of the right of appeal. The court concluded that the second respondent's order rejecting the appeal was erroneous in law and thus liable to be quashed.

Issue 2: Validity of the Intimation Issued u/s 143(1)(a) of the IT Act

The court considered whether it was permissible for the first respondent to issue an intimation u/s 143(1)(a) treating the return filed as one on behalf of the HUF, given that the HUF ceased to exist upon the death of Smt. Godavari Bai. The court referred to the case of CWT vs. G.E. Narayana, which held that an assessment order cannot be made if the HUF is not in existence at the time of making the assessment order. The court found that the petitioner had informed the first respondent about the death of Smt. Godavari Bai and the cessation of the HUF through a note annexed to the return and a subsequent letter. The court held that the first respondent's refusal to consider this information was erroneous in law. Consequently, the intimation issued was unsustainable, and the first respondent should have rectified the error u/s 154 of the Act.

Conclusion:

1. The court quashed the intimations, Annexures B and C, both dated 22nd March 1993, and the orders Annexure F dated 21st July 1993, Annexure G dated 21st July 1993, and Annexure H dated 19th April 1994.
2. The respondents were directed to refund the advance tax paid for the assessment years 1991-92 and 1992-93 within three months.
3. The petitions were allowed, and the rule issued was made absolute.
4. No order was made as to costs.