9911796707
TMI Blog1985 (9) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... s spread over at different places including Varanasi, Delhi and Calcutta. After the death of Raja Sir Moti Chand in 1934, the business of the family virtually came to a close and a separation took place between two branches ; one consisting of Shri Gokul Chand and his sons and the other consisting of Shri J.B. Gupta and his sons. They held equal share in the family assets. Due to certain accounting differences, a suit of partition, being suit No. 49 of 1936 was filed by Shri J.B. Gupta against his uncle Shri Gokul Chand in 1936. A preliminary decree was passed by the trial court of Varanasi in March 1941 confirming undisputed half share of each branch in the family properties. Ultimately, the dispute went in appeal before the Hon'ble Supreme Court being Misc. Civil Appeal No. 1219 of 1967 on various accounting matters including the date of separation disputed to be in 1934 or in 1938. The Supreme Court referred the matter to an arbitrator. The award of the arbitrator given on 28-4-1973 was confirmed by the Supreme Court on 16-7-1973. The effect of this award was that the family was disrupted on the above date. An order under section 143(3)/171 of Income-tax Act, 1961 ('the Act') wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of capital gain, which he computed at Rs. 25,98,450 in the assessment year 1967-68. The order of the ITO was set aside by the Tribunal vide latter's order dated 20-6-1974. 6. Subsequently, the ITO became conscious of the fact that the capital gains was not taxable with reference to the date of the award, but with reference to the date when the possession of the property was transferred. This is clear from the language of section 45 of the Act, which subjects any profits or gains to capital gains which arises from the transfer of a capital asset effected in the previous year and such gain is deemed to be the income of the previous year in which the transfer takes place. Since the transfer of the property was held to have taken place on 20-12-1963, the ITO felt that the capital gains was taxable in the assessment year 1964-65. The original assessment for the assessment year 1964-65 was made on 11-2-1969. No such profit or gain was brought to tax in that assessment. This order was subsequently revised on 27-12-1973 under section 254 of the Act consequent to the order of the Tribunal dated 29-9-1973. Up to this date, the question of taxation of the capital gains did not arise. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us members of the family. It was, however, submitted that the claim of partial partition under section 171 was made before the ITO for the first time on 12-2-1980. The second objection before the IAC was that there was no omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year 1964-65, and, therefore, it could not be said that the income chargeable to tax had escaped assessment for the above reasons. It was contended that in the circumstances the ITO did not have jurisdiction to initiate action under section 147(a) of the Act as was supposed to be done. It was further submitted that the assessee did not know the date of the transfer, which was only known when the Addl. District Judge had passed his order on 18-3-1975. On the other hand, it was submitted that the fact of possession was within the knowledge of the ITO as the latter had been following proceedings before the arbitrator as well as before the Supreme Court throughout the period with a view to safeguard the interests of the revenue. It was, therefore, submitted that the ITO could not assume jurisdiction for reopening the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Supreme Court in the case of Kalloomal Tapeswari Prasad (HUF) v. CIT [1982] 133 ITR 690. It was held in this case that an order under section 171 is necessary even in the case of partial partition. 11. The Commissioner (Appeals), however, agreed with the contention of the assessee that the service of the notice on Shri B.D. Agrawal was not in accordance with the procedure laid down in section 283(1). Section 283(1) reads as under: "(1) After a finding of total partition has been recorded by the Income-tax Officer under section 171 in respect of any Hindu family, notices under this Act in respect of the income of the Hindu family shall be served on the person who was the last manager of the Hindu family, or, if such person is dead, then on all adults who were members of the Hindu family immediately before the partition." There was no dispute before the Commissioner (Appeals) that a finding of total partition had been recorded by the ITO under section 171 in respect of the assessee on 27-4-1976. We have already quoted this order of the ITO in full above. There was also no dispute before him that the karta of the family Shri J.B. Gupta had died on 13-8-1974. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferring to Shri B.D. Agrawal, he submitted that this gentleman had appeared before the AAC and that Shri Raj Kumar had admitted the service of the notice. He further submitted that if there was any irregularity in the service of the notice, it was only a procedural irregularity, which could be condoned under section 292B of the Act. He also referred to another decision of the Madhya Pradesh High Court in Dr. H.R. Rai v. CIT [1984] 145 ITR 809. It was held in this case that even if there was any procedural irregularity in the service of the notice in that it was not served by the serving officer on the assessee personally or on an agent empowered to receive service, that irregularity lost all significance once the notice was received by the assessee and was acted upon by him before the ITO without raising any objection. 13. In reply, the learned counsel for the assessee submitted that in the first place notice issued on 20-8-1976 was invalid inasmuch as it did not specify the status in which the return was required. To this there was a reply from the learned departmental representative that the notice mentioned the permanent account number of the assessee, which was the number of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings under section 147 were wholly invalid and the petitioners could not be assessed in pursuance of those notices. Reference may also be made to the decision of the Allahabad High Court in Madan Lal Agarwal v. CIT [1983] 144 ITR 745. It was held in this case that it is well settled that the issue of a valid notice to the assessee under section 148 within the period specified under section 149 of the Act, is a condition precedent for the validity of any assessment to be made against an assessee under section 147. Where the notice issued to an assessee is vague. It would not be possible to rely upon it to sustain an assessment made under section 147. A notice contemplated by section 148 is a jurisdictional notice for initiating proceedings for making an assessment under section 147 and any defect in the notice cannot be cured by anything done by the ITO subsequently. A vague notice is an invalid notice and in such a case the vagueness cannot be removed by reference to other documents on the record. Similarly, if a notice itself is otherwise bad in law, the invalidity thereof cannot be cured by any act of the assessee to whom the said notice is issued including the filing of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , who have come to age of discretion. 18. We also do not think that the department can seek shelter behind section 292B. That section condones the invalidity which arises merely by reason of any mistake, defect or omission in a notice, if in substance and effect it is in conformity with or according to the intent and purpose of the Act. We do not think that the non-service of the notice on all the adult members of the family in terms of section 283(1) in the manner stated above could be called only a mistake, defect or omission and that too being in substance and effect in conformity with or according to the intent and purpose of the Act. 19. We, therefore, upheld the finding of the Commissioner (Appeals) on the ground that neither a valid notice has been issued to the assessee nor it has been validly served. Service on Shri B.D. Agrawal was of no consequence. Admittedly, there was no family in existence. He could not, therefore, represent the family as he purported to do. He was only authorised by Shri J.B. Gupta. That authority also came to an end with his death in 1974. Even if it may be assumed that Shri B.D. Agrawal had been representing the family before the income-tax an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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