1984 (1) TMI 116 - AT - Wealth-tax

Summary

Issues Involved:
1. Validity of assessments made by the WTO for the years 1970-71 to 1975-76 under Section 16(3) read with Section 17 of the Wealth Tax (WT) Act, 1957.
2. Proper service of notices under Section 17 of the WT Act on all legal heirs of the deceased.
3. Compliance with natural justice principles in the assessment proceedings.

Detailed Analysis:

1. Validity of Assessments under Section 16(3) read with Section 17 of the WT Act:

The appeals by the Revenue were directed against the consolidated order of the AAC dated 11th Nov., 1982, which annulled the assessments made by the WTO for the assessment years 1970-71 to 1975-76 under Section 16(3) read with Section 17 of the WT Act, 1957. The AAC concluded that the initiation of proceedings under Section 17 for all six assessment years was bad in law due to the lack of valid service on all legal heirs, thereby annulling the assessments.

2. Proper Service of Notices under Section 17 of the WT Act on All Legal Heirs:

The AAC found that the WTO did not make diligent inquiries to identify all legal heirs of the deceased, Hazura Singh. Notices issued under Section 17 for the relevant years were not served on all legal heirs, which included his daughter Miss Dalip Kaur, and the heirs of his son Sarwan Singh, who died shortly after Hazura Singh. The AAC observed that all legal heirs were residing at the same address, and the WTO failed to make efforts to ascertain the complete list of legal heirs, thus rendering the assessments invalid.

The Revenue argued that the AAC erred in annulling the assessments based on the Supreme Court judgment in Mrs. Suseela Sadanandan & Anr., and suggested that any irregularity should have led to setting aside the assessments for de novo proceedings. However, the AAC's decision was supported by multiple judgments, including Chooharmal Wadhuram (decd.) vs. CIT and Jai Prakash Singh vs. CIT, which emphasized the necessity of serving notice on all legal representatives to ensure complete representation of the estate.

3. Compliance with Natural Justice Principles:

The AAC's decision was further justified by the principle that failure to serve notice on all legal representatives constitutes a violation of natural justice, invalidating the assessment proceedings. The Gujarat High Court in Chooharmal Wadhuram and the Gauhati High Court in Jai Prakash Singh held that assessments without proper notice to all legal representatives are invalid.

The Tribunal upheld the AAC's decision, noting that the WTO's failure to identify and serve notice on all legal heirs, despite clear indications of their existence, invalidated the assessments. The Tribunal also dismissed the Revenue's reliance on Section 42C of the WT Act and the Supreme Court judgment in Kapurchand Shrimal vs. CIT, as these did not apply to cases with inherent jurisdictional defects due to improper notice service.

Conclusion:

The Tribunal confirmed the AAC's annulment of the assessments for the years 1970-71 to 1975-76 due to the WTO's failure to serve notice on all legal heirs, thus violating principles of natural justice and rendering the proceedings invalid. The appeals by the Revenue were dismissed.