1980 (7) TMI 68 - HC - Income Tax

Summary

Issues Involved:
1. Knowledge of ITO about the death of the assessee.
2. Validity of continuation of assessment proceedings against a deceased person.
3. Competence of AAC to direct fresh assessment after setting aside an invalid assessment.
4. Distinction between nullity, illegality, and irregularity in assessment proceedings.
5. Waiver of objection by legal representative regarding the validity of assessment proceedings.
6. Applicability of Section 159 and Section 153 of the Income Tax Act.
7. Jurisdictional and procedural aspects of assessment against a deceased person.

Detailed Analysis:

1. Knowledge of ITO about the death of the assessee:
The AAC found that the ITO knew about the death of the assessee and was proceeding on the assumption that the widow was his legal representative. This conclusion was based on facts such as the widow filing an application as the legal heir shortly after the death and signing tax deduction certificates as the legal heir.

2. Validity of continuation of assessment proceedings against a deceased person:
The AAC concluded that Section 159(2) of the Income Tax Act allows the ITO to continue assessment proceedings against the legal representative of the deceased. However, the ITO, despite knowing about the death, continued the proceedings against the deceased, which was deemed invalid. The AAC stated, "The ITO has obviously committed a mistake in passing an assessment order in the name of a dead person."

3. Competence of AAC to direct fresh assessment after setting aside an invalid assessment:
The Tribunal held that once the assessment was found to be a nullity, the AAC was not justified in setting aside the assessment and directing a fresh assessment. The Tribunal stated, "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."

4. Distinction between nullity, illegality, and irregularity in assessment proceedings:
A nullity results from an error that is incurable and fatal to the proceeding. An illegality occurs when there is a breach of some provision of law, and an irregularity occurs when some error of procedure is committed. The court cited the distinction from Dhirendra Nath Gorai v. Sudhir Chandra Ghosh, stating, "An irregularity is a deviation from a rule of law which does not take away the foundation or authority for the proceeding."

5. Waiver of objection by legal representative regarding the validity of assessment proceedings:
The court examined whether the legal representative, by participating in the proceedings without objection, waived the right to challenge the validity of the assessment. The court noted, "A waiver is an intentional relinquishment of a known right," and concluded that if the legal representative does not raise an objection at the appropriate time, they might be deemed to have waived the objection.

6. Applicability of Section 159 and Section 153 of the Income Tax Act:
Section 159 allows the continuation of assessment proceedings against the legal representative of a deceased person. Section 153(1) prescribes the time limit for completion of assessments, but Section 153(3) provides that this limit does not apply where the assessment is made in consequence of or to give effect to any finding or direction in an order made under Section 250. The court stated, "In the instant case, any fresh assessment on the legal representative in respect of the income earned by the deceased... 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."

7. Jurisdictional and procedural aspects of assessment against a deceased person:
The court emphasized that the continuation of proceedings and the making of an order against a dead person is not necessarily a nullity for all purposes. The court cited N. Jayaram Reddi v. Revenue Divisional Officer, stating, "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."

Conclusion:
The court declined to answer the question referred by the Tribunal and left it to the Tribunal to adjust its decision under Section 260(1) in light of the observations made. The court emphasized the need for the Tribunal to find basic and material facts and to examine the aspect of "nullity" in its true perspective. The court noted that the findings of the AAC on the knowledge of the ITO and the conduct of the legal representative were crucial and needed proper consideration.