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TMI Blog1968 (10) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... thers. When the deceased retired from the said two firms, the assessment proceedings for the assessment years 1947-48 and 1948-49 had not yet commenced and, subsequent to his retirement, notices under section 22(2) of the old Act for the assessment years 1947-48 and 1948-49 were sent to the deceased at the address of the said two firms, namely, 79, Masjid Bunder Road, Bombay-3. Both the notices were issued in the name of the deceased and while the notice for the assessment year 1947-48 was served on 8th August, 1947, the notice for the assessment year 1948-49 was served on 18th October, 1948. The deceased was admittedly alive at the date when these two notices were served at the address of the said two firms. It is apparent that these two notices were served on the deceased at the address of the said two firms since no notice of the retirement of the deceased from the said two firms was given to the revenue authorities and the revenue authorities were therefore legitimately under the impression that the deceased still continued to be a partner in the said two firms. On service of the notice for the assessment year 1947-48, Nagindas Jadavji filed a return on behalf of the deceased o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the old Act a certificate under his signature specifying, in the aggregate, Rs. 2,19,248-5-0 made up of Rs. 83,453-6-0 in respect of the assessment year 1947-48 and Rs. 1,35,794-15-0 in respect of the assessment year 1948-49, as arrears of tax due from the heirs and legal representatives of the deceased. The Additional Collector, Bombay, by his letter, dated 7th December, 1954, forwarded the said recovery certificate to the Collector, Bhavnagar District, who is the first respondent before us and the first respondent proceeded to recover from the petitioners the amount specified in the said recovery certificate as if it were an arrear of land revenue. The first respondent by an order dated 21st December, 1954, attached the properties of the petitioners and by another order, dated 1st December, 1955, restrained petitioners Nos. 2 and 3 from transferring and/or alienating the attached properties by way of mortgage, gift, or sale or in any other manner. The attached properties consisted of a building situate at Jamadar Street, Bhavnagar, and another building known as Navnidh Nivas situate near Kala Nala in Bhavnagar. The petitioners filed their objections against the attachment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t upon the reduction of the assessment of the said firm by the Appellate Assistant Commissioner in the appeals preferred by the said firm, the Income-tax Officer passed orders dated 8th February, 1963, rectifying the orders of assessment in respect of the income of the deceased under section 35(5) and reducing the assessable income of the deceased to Rs. 35,629 and Rs. 86,042, respectively, for the assessment years 1947-48 and 1948-49. The tax liability of the deceased under the rectified order of assessment for the assessment year 1947-48 was already met by the said firm and therefore only the tax liability under the rectified order of assessment for the assessment year 1948-49 remained to be paid by the petitioners as heirs and legal representatives of the deceased. That tax liability amounted to Rs. 41,228 as appears from the fresh notice of demand dated 11th April, 1963, issued by the revenue authorities, annexure " E " to the petition. The first respondent thereafter proceeded further with the recovery proceedings in so far as the tax liability of Rs. 41,228 for the assessment year 1948-49 remained unpaid by the petitioners. The first respondent heard the petitioners in rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be treated as defaulters and recovery proceedings instituted against them : no such fresh notice of demand was at any time served on the petitioners. (D) The properties sought to be attached and sold in recovery proceedings belonged to petitioners Nos. 2 and 3 subject to the right of residence of the first petitioner in regard to the building known as Navnidh Nivas, situated near Kala Nala and they were not liable to be attached and sold in recovery of the tax dues of the deceased." We shall examine these grounds in the order in which we have set them out. Re Ground A(1) : The question which arises under this head of challenge is whether the order of assessment for the assessment year 1948-49 could be validly made after the death of the deceased without any notice to the petitioners as heirs and legal representatives of the deceased. The order of assessment being made under section 24B, the determination of this question depends on a true interpretation of that section. Section 24B, sub-sections (2) and (3), provides the machinery for assessment of the income of a deceased person in these terms : " 24B. (1) ..... (2) Where a person dies before the publication of the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retirement from the said two firms and the revenue authorities were therefore entitled to presume that the deceased continued to be a partner in the said two firms and service of the notice under section 22(2), at the address of the said two firms would be proper and effective service on him. The notice under section 22(2) must therefore be held to have been duly served on the deceased on 18th October, 1948. Section 24B, sub-section (2) had consequently no application on the facts of the present case and the petitioners could not found on that sub-section to support their contention that no order of assessment could be made without issuing notice to the petitioners as heirs and legal representatives of the deceased. The case fell to be governed by section 24B, sub-section (3), and since the deceased died without furnishing a return which he was required to furnish under the provisions of section 22, the Income-tax Officer was entitled to make assessment of the total income of the deceased and determine the tax payable by him on the basis of such assessment under section 24B, sub-section (3). The Income-tax Officer had certainly power under section 24B, sub-section (3), if he though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... davji being incompetent to file the return for the assessment of the income of the deceased was that there was no valid return of income filed for the assessment of the income of the deceased and the Income-tax Officer was entitled to proceed on the basis that there was no return of income before him. If there was no return of income filed before him, the Income-tax Officer could proceed to make a best judgment assessment and in the present case the Income-tax Officer had no difficulty at all in making the assessment since, as pointed out above, the only income which was to be included in the assessment of the deceased was his share in the profits of the said two firms, and the amount of that share was determinable in the assessment proceedings of the said two firms under section 23(5)(a). The assessment of the deceased was not made on the basis of the return filed by Nagindas Jadavji but it was made on the basis of his share in the profits of the said two firms as determined in the assessment proceedings of the said two firms. This contention urged on behalf of the petitioners also therefore fails and must be rejected. Re Ground (B) : It is now well settled that it is only whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same view. This view also finds support from the following observations of Hidayatullah J. in Income-tax Officer, Kolar Circle v. Seghu Buchiah Setty : " Further still, when the notice of demand is not complied with, the assessee can be treated as a person in default and he is liable to pay a penalty equal to the tax debt under section 46(1) of the Income-tax Act. Lastly, on the failure of the assessee to pay after a notice of demand is issued, the recovery proceedings can be started within a time limit and the amount of tax can be treated as an arrear of land revenue. ...... the notice of demand is a vital document in many respects. Disobedience to it makes the assessee a defaulter. It is a condition precedent to the treatment of the tax as an arrear of land revenue. " If therefore we find in the present case that the notice of demand was not served on the petitioners, the petitioners could not be treated as defaulters and no recovery proceedings could be initiated against them. We must, therefore, proceed to examine the question whether the notice of demand in the present case was served on the petitioners. Now, so far as this question is concerned, the learned Advoca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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