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Issues involved:
The validity of assessment u/s 143(3) of the Income-tax Act, 1961 without service of notice u/s 148. Formation of association of persons in a transaction of purchase and sale of land. Validity of Assessment u/s 143(3) without Notice u/s 148: The Income-tax Officer made a best judgment assessment u/s 144 as an "association of persons" due to non-service of notice u/s 148 on all four individuals. However, the notice was refused and not served on two deceased individuals and one who was in Delhi at the time. The cancellation of assessment u/s 146 due to non-service of notice on the assessee was upheld. The subsequent assessment made on the return filed by one individual, who voluntarily associated himself, was deemed valid only for him. The Tribunal erred in holding the assessment invalid for this individual but not binding on the others, as no notice was served on them. Thus, the first question was answered in favor of the Department regarding the individual who received the notice. Formation of Association of Persons: The Department failed to establish that the four individuals formed an association with the purpose of earning income when purchasing the land. The transaction seemed to be a joint venture of owning property rather than forming an association for income. The sale of land after eight years, even when divided into plots, did not indicate an initial intent to earn profits. The individuals were co-owners who jointly invested in the property without forming an association for income. Citing a relevant case law, it was concluded that the individuals did not form an association for income. The Tribunal correctly held that no association of persons was formed in the transaction. Thus, the second question was answered against the Revenue. In conclusion, the High Court answered both questions of law as detailed above.
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