1970 (10) TMI 4 - HC - Income Tax

Whether the Income-tax Officer initiated the proceedings by serving the notice under section 34(1)(a) on one Daulatram, believing Daulatram to be the sole legal representative of Chooharmal Wadhuramn, who was the original assessee - validity of proceedings

Summary

Issues Involved:
1. Validity of assessment proceedings initiated under Section 34(1)(a) of the Income-tax Act.
2. Requirement of serving notice on all legal representatives of a deceased person under Section 24B(2) of the Income-tax Act.

Detailed Analysis:

1. Validity of Assessment Proceedings Initiated Under Section 34(1)(a):

The primary issue in this case was whether the assessment proceedings initiated under Section 34(1)(a) were valid when the notice was served only on one of the legal representatives of the deceased, Chooharmal Wadhuram. The Income-tax Officer issued notices addressed to "Chooharmal Wadhuram, legal representatives-Daulatram and others" but served them only on Daulatram, not on the other legal representatives, which included three other sons and a widow named Lilavati.

2. Requirement of Serving Notice on All Legal Representatives Under Section 24B(2):

The court examined Section 24B(2) of the Income-tax Act, which was introduced to address the gap identified by the Bombay High Court in Ellis C. Reid v. Commissioner of Income-tax. Section 24B(2) mandates that the notice under Section 34 must be served on the executor, administrator, or other legal representatives of the deceased. The court emphasized that the term "legal representative" should be interpreted to include all legal representatives when there are multiple, as per Section 13(2) of the General Clauses Act.

The court cited the Federal Court's decision in Tirtha Lal v. Bhusan Moyee Dasi and the Privy Council's decision in Khiarajmal v. Daim to support the principle that all legal representatives must be brought on record to ensure complete representation of the deceased's estate. The court also referred to the Supreme Court's observations in First Additional Income-tax Officer v. Mrs. Suseela Sadanandan, which supported the necessity of serving notices on all legal representatives.

The court acknowledged exceptions to this general rule, such as when one legal representative manages the entire estate or when one represents the estate with the consent of the others. However, in this case, the court found no evidence that Daulatram managed or administered the entire estate or represented the estate with the consent of the other legal representatives.

The court also rejected the revenue's argument that the assessment could be valid against Daulatram alone, emphasizing that the assessment must be made on all those who represent the deceased's interest or estate wholly and completely. The assessment cannot be valid against one legal representative and invalid against another.

The court concluded that the proceedings for the assessment years 1946-47 and 1947-48 were not validly initiated by serving notices on Daulatram alone, as there were other legal representatives who were not served.

Conclusion:

The court held that the assessment proceedings under Section 34(1)(a) were not validly initiated because the notices were not served on all the legal representatives of the deceased, Chooharmal Wadhuram. The answer to the fifth question was in the negative, and there was no order as to costs.