1985 (11) TMI 89 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the assessment made on a deceased person.
2. Error in not quashing the assessment by the Commissioner (Appeals).
3. Error in setting aside the assessment and directing the ITO to make a fresh assessment after hearing the assessee.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Made on a Deceased Person:
The primary issue was whether the assessment made by the Income Tax Officer (ITO) on the deceased individual, Puran Chand, was valid. The assessment for the year 1975-76 was initially completed on 23-9-1978 in the name of Puran Chand Laxmi Chand, despite Puran Chand having died on 24-3-1974. The return of income for this year was filed by Laxmi Chand, one of Puran Chand's sons, on 16-6-1975. The assessment was later canceled upon an application under section 146 of the Income-tax Act, 1961. A fresh assessment proceeding was initiated, and a draft assessment order was prepared, still showing the name of the assessee as Puran Chand Laxmi Chand. The ITO completed the assessment on 24-9-1981, showing the name of the assessee as 'Shri Laxmi Chand legal heir of late Shri Puran Chand.' The Tribunal held that the assessment should have included all legal representatives, and since it did not, the assessment was a nullity.

2. Error in Not Quashing the Assessment by the Commissioner (Appeals):
The Commissioner (Appeals) did not accept the assessee's claim that the assessment was void ab initio. The Commissioner (Appeals) reasoned that the original assessment made under section 144 was not on a dead person but in the trade name of Puran Chand Laxmi Chand, and business was being carried on in that name. The Commissioner (Appeals) also noted that even if the original assessment was made on a dead person, the assessee could have appealed at that stage but did not. The Tribunal, however, found that the Commissioner (Appeals) erred in not quashing the assessment, as the assessment should have been made by impleading all legal representatives, and the failure to do so invalidated the assessment.

3. Error in Setting Aside the Assessment and Directing the ITO to Make a Fresh Assessment:
The Commissioner (Appeals) set aside the assessment and directed the ITO to make a fresh assessment after hearing the assessee. The Tribunal found that this decision was incorrect. The Tribunal referred to several judicial precedents, including the Gauhati High Court's decision in Jai Prakash Singh v. CIT, which held that if the estate of a deceased is to be assessed, it must be fully represented by all legal representatives. The Tribunal concluded that the ITO failed to show that Laxmi Chand was managing the entire estate, and thus, the assessment made in his name alone was a nullity. The Tribunal annulled the assessment, emphasizing that the appellate authorities cannot nullify the provisions of limitation for assessment by merely setting aside the assessment and directing fresh proceedings.

Conclusion:
The Tribunal allowed the appeal, annulling the assessment on the grounds that all legal representatives were not impleaded in the assessment proceedings, and the ITO failed to establish that Laxmi Chand represented the entire estate of the deceased. The Tribunal emphasized the legal duty to annul such assessments and not merely set them aside for fresh proceedings.