1990 (9) TMI 130 - AT - Income Tax

Assessment Notice, Assessment Proceedings, Original Assessment, Reassessment Notice, Reassessment Proceedings

Issues Involved:
1. Validity of reassessment proceedings under section 147 of the IT Act.
2. Legality of the notice issued under section 148 to a deceased person.
3. Failure to disclose material facts leading to income escapement.
4. Merits of the assessment of on-money payment.

Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147 of the IT Act:
The primary objection raised by the assessee was against the decision of the CIT(A) upholding the reassessment proceedings' validity under section 147. The assessee argued that the reassessment was initiated based on an affidavit by M.T. Samant, which alleged that the assessee paid Rs. 9,20,000 as on-money for the purchase of a flat. The assessee contended that the proceedings were invalid as the notice under section 148 was issued to a deceased person. The tribunal found that the notice issued was indeed invalid, rendering the reassessment proceedings void ab initio.

2. Legality of the Notice Issued under Section 148 to a Deceased Person:
The tribunal examined whether the notice under section 148 issued to the deceased assessee was valid. It was undisputed that the notice dated 14-3-1989 was issued to Smt. Jerbanoo N. Wadia, who had died on 27-10-1987. The ITO had prior knowledge of her death, as evidenced by a letter dated 30-10-1987 from the assessee's son. The tribunal referred to multiple judicial precedents, including Shaikh Abdul Kadar v. ITO and P.N. Sasikumar v. CIT, which held that a notice issued to a deceased person is null and void. The tribunal concluded that the notice was fundamentally defective and could not be cured by section 292B, which addresses procedural irregularities, not fundamental defects.

3. Failure to Disclose Material Facts Leading to Income Escapement:
The tribunal also considered whether there was a failure on the part of the assessee to disclose material facts. The assessee had provided full details about the sale and purchase of the flats in her letter dated 27-6-1983, accompanying her return for the assessment year 1983-84. The tribunal noted that the ITO had the duty to investigate these details during the original assessment. The tribunal cited Burlop Dealers Ltd. and Calcutta Credit Corpn. Ltd., emphasizing that if the ITO fails to investigate, it cannot be attributed to the assessee's failure to disclose. The tribunal found no evidence of non-disclosure of primary facts by the assessee.

4. Merits of the Assessment of On-Money Payment:
Although the tribunal found the reassessment proceedings void, it briefly addressed the merits of the case. The assessee argued that the affidavit by M.T. Samant, which claimed receipt of on-money, was contradictory and unreliable. The tribunal noted that the affidavit contained inconsistencies regarding the total consideration received and the breakdown of payments. The tribunal also considered the cross-examination of Samant, which revealed his lack of knowledge about his tax returns and capital gains. The tribunal found no substantial evidence to support the revenue authorities' orders and concluded that the assessment of on-money payment could not stand on merits.

Conclusion:
The tribunal concluded that the reassessment proceedings were ab initio void due to the invalid notice issued to a deceased person. Additionally, there was no failure on the part of the assessee to disclose material facts. The tribunal allowed the appeal, setting aside the reassessment.

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