1971 (2) TMI 34 - HC - Income Tax

Assessee dies before filing the returns - whether fresh notice u/s 34(1A) should be served on legal representatives Held, no - recovery procedings when assessmet was set aside

Issues Involved:
1. Validity of the certificate proceedings for recovery of tax dues.
2. Requirement of serving a fresh notice under section 34(1A) of the Indian Income-tax Act, 1922, on the heirs of the deceased assessee.
3. Availability of relief under Article 226 of the Constitution of India.

Detailed Analysis:

1. Validity of the Certificate Proceedings for Recovery of Tax Dues:
The petitioners challenged the certificate proceedings initiated for the recovery of tax dues. The court noted that the assessment order had been set aside and the Income-tax Officer was directed to make a fresh assessment. Consequently, the certificate proceedings could not proceed against the petitioners. The court discussed whether the certificate proceedings should be quashed or kept in abeyance until a new assessment order was passed. The court referred to section 220 of the Indian Income-tax Act, which stipulates that an assessee can only be in default after failing to pay the sum due pursuant to a valid assessment order. The court concluded that since the entire assessment had been set aside, the petitioners could not be treated as assessee in default, and thus, the certificate proceedings were liable to be quashed. The court cited the Supreme Court decision in Income-tax Officer v. Seghu Buchiah Setty to support its conclusion.

2. Requirement of Serving a Fresh Notice Under Section 34(1A) on the Heirs:
The petitioners contended that the assessment could not be made against them without serving a fresh notice under section 34(1A) of the Indian Income-tax Act, 1922. The court examined section 24B of the Indian Income-tax Act, 1922, which deals with the tax liability of deceased persons' legal representatives. The court observed that sub-section (3) of section 24B applied to cases where a person dies without furnishing a return required under section 22, which includes requirements under section 34(1A). The court rejected the petitioners' argument that a fresh notice was necessary, noting that the Supreme Court in K. S. Rashid & Son v. Income-tax Officer had clarified that the procedure under section 34(1A) included the requirements of section 22. Therefore, the court held that the revenue was competent to proceed without serving a fresh notice under section 34(1A) on the heirs.

3. Availability of Relief Under Article 226 of the Constitution:
The petitioners sought relief under Article 226 of the Constitution, challenging the assessment proceedings. The court noted that the petitioners had availed themselves of the alternative remedies provided by the Income-tax Act and were actively pursuing them. The court referred to the Special Bench decision in Sheo Nath Singh v. Appellate Assistant Commissioner of Income-tax, emphasizing that the petitioners could have raised the issue of the necessity of a fresh notice as early as 1958. Given the petitioners' conduct and the availability of alternative remedies, the court held that they were not entitled to relief under Article 226 on the assessment issue. The court distinguished the Supreme Court decision in Hirday Narain v. Income-tax Officer, Bareilly, noting that the facts were different as the petitioner in that case had not pursued the alternative remedy.

Conclusion:
The court quashed the certificate proceedings in Certificate Case No. 820-ITC/64-65 and restrained the respondents from proceeding with such certificate. However, the court refused to quash the assessment proceedings, allowing the respondents to initiate fresh certificate proceedings after a valid assessment order, should the petitioners default. The rule was made absolute to the extent indicated, with no order as to costs.

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