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TMI Blog1978 (7) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... or the said assessment year under s. 34 and computed the same to be Rs. 22,18,546. Being aggrieved by the order of reassessment the legal heirs and representatives of the assessee preferred an appeal contending, inter alia, that they had not been brought on record and that the reassessment had been made on the deceased without giving any reasonable opportunity to his legal heirs and representatives. The AAC allowed this appeal and set aside the assessment. The ITO was directed to make a fresh reassessment in accordance with law. Thereafter, on July 28, 1962, the ITO issued a notice under s. 22(4) to the legal representatives of the said assessee, who, however, did not comply with such notice. On August 13, 1962, total income of the deceased for the said assessment year was reassessed at Rs. 22,46,546. The legal representatives of the assessee thereafter made an application under s. 27 of the Act on October 16, 1962, contending, inter alia, that the notice under s. 34(1A) was issued at a time when proceedings under s. 34(1)(a) for the same year were pending and, accordingly, the initiation of proceedings under s. 34(1A) was void ab initio. The ITO rejected the said application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, the Tribunal was right in holding that in view of the default of the legal heirs in respect of the notice that was served on them in the aforesaid proceedings and no sufficient cause having been shown for such default, the Income-tax Officer's order under section 27 of the said Act refusing to re-open the assessment was in order ?" The assessee also made an application under s. 66(2) of the Indian I.T. Act, 1922. Pursuant to the said application this court directed the Tribunal to draw up a statement of case and refer an additional question. This is the subject-matter of Income-tax Reference No. 469 of 1972 intituled G. D. Jatia, Legal Representatives of K. L. Jatia (Decd.) v. CIT, also before us. The said question is as follows : " Whether, on the facts and in the circumstances of the case, the service of notice under s. 22(4) of the Indian Income-tax Act, 1922, upon the heirs and legal representatives of Kanailal Jatia, deceased, was valid in law?" In order to appreciate the controversy in the present reference, it is convenient to refer to the relevant sections, all contained in Chap. IV of the Indian I. T. Act, 1922, under the general heading " Deductions and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... too low a rate, or have been made the subject of excessive relief under the Act, or excessive loss or depreciation allowance has been computed,....... he may, in cases falling under clause (a) at any time...... serve on the assessee, or, if the assessee is a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 22 and may proceed to assess or re-assess such income, profits or gains or recompute the loss or depreciation allowance ; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under the sub-section :...... (1A) If, in the case of any assessee, the Income-tax Officer has reason to believe-- (i) that income, profits or gains chargeable to income-tax have escaped assessment for any year in respect of which the relevant previous year falls wholly or partly within the period beginning on the 1st day of September, 1939, and ending on the 31st day of March, 1946 ; and (ii) that the income, profits or gains which have so escaped assessment for any such year or years amount, or are likely to amount, to one la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions were in existence. The deceased-assessee was served with a notice under s. 22 and he had filed a return on which an assessment had also been made. Dr. Pal contended that in sub-s. (2) of s. 24B, s. 34 of the Act has been specifically mentioned whereas in sub-s. (3) of s. 24B there was no reference whatsoever to s. 34 or 34(1A). Therefore, non-compliance with a notice under s. 34(1A) by not furnishing a return pursuant thereto would not give the ITO jurisdiction to proceed under s. 34B(3). Dr. Pal next contended that the impugned reassessment has been made in the hands of the legal representatives of the assessee after serving a notice under s. 22(4). This notice under s. 22(4) not being preceded by a notice under s. 22(2) was invalid and the ITO had no jurisdiction to proceed thereunder and make a best judgment assessment under s. 23(4). Mr. Suhas Sen, learned counsel for the revenue, has contended on the other hand that the reassessment made in the instant case was proper, justified and lawful. The liability of an estate for taxes due from the deceased has been clearly laid down in s. 24B. The rest of the said section provided the machinery of such assessment an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t starts with a notice under section 34 of the Indian Income-tax Act...... all the relevant provisons of that Act apply as effectively as where the assessment starts with a notice under section 22(2)...... in the ordinary course." (d) Gursahai Saigal v. CIT [1963] 48 ITR 1 (SC). This decision was cited on behalf of the revenue. Approving the decision of the Privy Council in Mahaliram Ramjidas' case [1940] 8 ITR 442, the Supreme Court observed as follows (p. 7 of 48 ITR 1 (SC)) : "........ we are dealing here with a provision which lays down the machinery for the assessment of interest...... The proper way to deal with such a provision is to give it an interpretation which, to use the words of the Privy Council in Mahaliram Ramjidas's case, [1940] 8 ITR 442, 'makes the machinery workable,...........'." (e) K. S. Rashid and Son v. ITO [1964] 52 ITR 355 (SC). This decision was cited by the revenue for the following observations of the Supreme Court on s. 34(1A) : " It is true that section 34(1) uses the clause ' as if the notice were a notice issued under that sub-section ' and section 34(1A) does not ; but the two provisions were not inserted in the Act at the same time ; sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. R. Mukherjee's case [1956] 30 ITR 535 (Cal) was approved by the Supreme Court. The relevant observations of the Supreme Court are as follows : " The notice issued by the Income-tax Officer did not specifically refer to section 34(1)(a) of the Income-tax Act : it did not set out the clause under which it was issued. But on that account the proceeding under section 34 is not vitiated. It was held by the Calcutta High Court in P. R. Mukherjee v. Commissioner of Income-tax [1956] 30 ITR 535 that it is not necessary or imperative that a notice under section 34 must specify under which of the two clauses, clause (a) or clause (b) of sub-section (1) of section 34, the notice is issued. The main notice to be issued in a case under section 34 is the notice under section 22(2) and section 34 merely authorises the issue of such a notice." (h) Kalawati Devi Harlalka v. CIT [1967] 66 ITR 680 (SC). This was cited on behalf of the revenue to show the wide connotation of the expression " assessment ". The relevant observations of the Supreme Court are as follows : " In C. A. Abraham v. Income-tax Officer [1961] 41 ITR 425), this court observed : ' A review of the provisions of Chapter IV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notice under s. 34(1A) served on the deceased prior to his death the reassessment could be proceeded with on the legal representatives. In our view, in such a case the proceedings could be validly continued and reassessment could lawfully be made on the legal representative of the deceased. In spite of the issue of a notice under s. 34(1A), the assessee did not file a return. Therefore, under s. 24B(3), the ITO could make the reassessment calling upon the legal representatives to furnish accounts, documents or other evidence which he could have required from the deceased-assessee by an appropriate notice under the provisions of ss. 22 and 23. In the instant case, if we equate a notice under s. 34(1A) with a notice under s. 22(2) following the Supreme Court decision in Kantamani's case [1967] 63 ITR 638 (SC), the preconditions laid down in s. 24B(3) can be said to exist and the ITO had jurisdiction to make the reassessment. A notice under s. 22(4) had already been served on the assessee before his death which was also not complied with and, therefore, a further notice under s. 22(4) may not have been required to be issued on the legal representatives. By another appropriate not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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