9911796707
TMI Blog1988 (8) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... truly all material facts necessary for assessment of their net wealth, the net wealth chargeable to tax had escaped assessment for all those four years. He recorded the reasons for such belief as under: "While scrutinising the books of accounts of Sagar branch, and Bhopal in the asst. yr. 1977-78, it was found that the firm is making reserves under various heads like rejected Beedies, Bonus Act, Annual Leave Wages etc., year after year, both by the ITO and the appellate authorities, the assessee could not specify the year to which such reserve is created." He, therefore, issued notices to the assessees on 21st March, 1980 for the asst. yr. 1971-72, which were served on 27th March, 1980 upon one Mohd. Islam, who was an employee of the firm M/s Kale Khan Mohd. Hanif and is not to be confused with the assessee Mohd. Islam. Similarly, the notices for the asst. yrs. 1972-3, 1973-74 and 1974-75 were issued on 5th May, 1980 and served upon one Nabi Mohd. another employee of the said firm on 22nd May, 1980. The assessees filed letters dt. 1st March, 1984 before the WTO in respect of initiation of the reassessment proceedings for these years which were identical in terms. The relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of reassessment proceedings was also, just and proper. Hence, the assessees have again come up in appeals before the Tribunal. 5. The finding of the AAC as to valid service of notices is assailed before us. It is contended by the learned counsel for the assessees that Mohd. Islam and Nabi Mohd. were servants of the firm of which the assessees were partners and they had no authority to accept the service of the notices. Developing the argument on this footing, it is argued by the learned counsel that it is an condition precedent to the validity of any "back assessment" that the notice should have been served on the assessee and non-service or invalid service of the notice rendered the assessments illegal and void. Such illegality, according to him, could not have been waived in law by the assessees and even otherwise it was not waived by them. He referred to the letter dt. 1st March 1984, relevant portion of which has been reproduced above, according to which the assessees knew about the reassessment proceedings through their counsel, Shri R.N. Gupta C.A., which they protested at the first instance and subject to their right of challenging the validity of the proceedings, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milarly, after recording statement of Mohd. Islam, the CWT(A) had in that case taken that Mohd. Islam was also duly authorised for receiving the notices. 7. From this material, it is contended by the learned Departmental Representative the notice should be taken as validly served. He made reference to the following observations of the Hon'ble Supreme Court in CIT vs. Kurji Jinabhai Kotecha (1977) CTR (SC) 137: (1977) 107 ITR 101 (SC): "Law will miss its paramount object if it is not consistent with morality, and any interpretation by Courts cannot lead to a result where continuation of illegal activity or benefit attached to it is given recognition." He contention is that there cannot be direct evidence of authorisation by the assessees to Mohd. Islam and Nabi Mohd. For receiving notices and such authorisation should be inferred from the course of conduct of these two persons, vis-a-vis the assessees. According to him, any secret arrangement between the parties for such authorisation must be unveiled and reasonable inference therefrom should be taken. It is also his contention that at least it should be taken that the assessee waived service of the notices by voluntarily part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings for reassessment. In this connection, following observations of the Hon'ble Supreme Court in CIT vs. Thayaballi Mulla Jeevaji Kapasi (1967) 66 ITR 147 (SC), though with reference to s. 34 of the IT Act, 1922, are pertinent: "Service of notice prescribed by s. 34 of the IT Act, for the purpose of commencing proceedings for reassessment, is not a mere procedural requirement, it is a condition precedent to the initiation of proceedings for assessment under s. 34. If no notice is issued or if the notice issued is shown to be invalid, then the proceedings taken by the ITO, without a notice or is pursuance of an invalid notice would be illegal and void: see Narayana Chetty vs. ITO (1959) 35 ITR 388 (SC)." 11. As has been seen above, there was no valid service of notices on the assessees and, therefore, the proceedings taken by the WTO were illegal and void. 12. By letter dt. 1st March, 1984 referred to above, it cannot be said that the assessees waived service of notice upon them. It has been held by the Full Bench of Assam High Court in Tansukrai Bodulal vs. ITO (1962) 46 ITR 325 (Ass.) that mere filing of return under protest will not amount to a waiver by the assessee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset or wealth of the firm and, therefore, addition on account thereof to the wealth of each of the partners of the firm was deleted. The said order of the Tribunal was followed by the Tribunal in the appeals of some of the assessees relating to the asst. yr. 1976-77 vide order dt. 17th Oct., 1983 in WTA Nos. 35 to 38/Ind/83. Again on that strength of the order of the Tribunal dt. 11th Oct., 1983, the departmental appeals in the cases of some of the assessees relating to the asst. yr. 1978-79 were dismissed vide order dt. 16th May, 1986 in WTA Nos. 62 to 66, 69, 70 and 90/Ind/84. Similar point again came for consideration before the Tribunal in the case of the assessee Mohd. Hanif relating to asst. yrs. 1973-74 and 1974-75 in WTA Nos. 276 and 277/Ind/85. In those appeals the Tribunal in the order dt. 25th Sept., 1986 held that the live link or the rational nexus between the material on record and formation of belief that wealth had escaped assessment as per s. 17(1)(a) of the WT Act was really missing in that case. Thus, the same ground for reopening was criticised by the Tribunal and it was held that there was no material to show that the WTO has reason be believe that the net we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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