1979 (9) TMI 11 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the notice under Section 35 of the T.N. Agrl. I.T. Act, 1955.
2. Competency of Chidambaranatha Mudaliar to represent the trusts.
3. Requirement for separate notices for each assessment year and each trust.
4. Validity of reassessment orders.
5. Amendment of Section 4(b) of the Act (not pressed).

Detailed Analysis:

1. Validity of the Notice under Section 35 of the T.N. Agrl. I.T. Act, 1955:
The petitioners contended that the notice under Section 35 was invalid as it was addressed to Chidambaranatha Mudaliar, who was not competent to represent the trusts. The court held that the notice was indeed invalid because it was not addressed to Sambandamurthi Mudaliar, the sole trustee as per the will and the provisions of the Act. The court emphasized that a valid notice under Section 35 is a condition precedent for reopening assessments, citing precedents like Narayana Chetty v. ITO and CIT v. K. Adinarayana Murthy. The court concluded that the reassessment proceedings based on an invalid notice were illegal and void.

2. Competency of Chidambaranatha Mudaliar to Represent the Trusts:
The court examined the will dated April 21, 1940, executed by Ramaswami Mudaliar, which specified that Sambandamurthi Mudaliar was the trustee. The court found no evidence of any change in trusteeship that would authorize Chidambaranatha Mudaliar to act as trustee. Despite affidavits filed by Chidambaranatha Mudaliar in previous years, the court held that Sambandamurthi was the rightful trustee. The court criticized the Agrl. ITO for not verifying the proper trustee before issuing the notice.

3. Requirement for Separate Notices for Each Assessment Year and Each Trust:
The court agreed with the petitioners that separate notices should have been issued for each assessment year and each trust. The court noted that the notice issued under Section 35 was for clubbing together the income of both trusts, which was inappropriate. The court emphasized that separate returns were required for each assessment year and each trust, as indicated by the prescribed Form No. 11 under Rule 14 of the Agrl. I.T. Rules.

4. Validity of Reassessment Orders:
The court found that the reassessment orders were invalid due to the invalid notice under Section 35. The court also noted that the Agrl. ITO had improperly clubbed the trusts together without proper inquiry into the trusteeship. The reassessment orders were therefore quashed.

5. Amendment of Section 4(b) of the Act:
This issue was not pressed by the petitioners during the arguments, and thus, the court did not address it in detail.

Conclusion:
- W.P. No. 493 of 1977: Allowed with costs. The reassessment orders were invalid due to the improper notice and lack of proper inquiry into the trusteeship.
- W.P. No. 495 of 1977: Dismissed with costs. The best judgment assessment for the Samaya Improvement Trust for the year 1974-75 was upheld as no return was filed despite notice.