1996 (3) TMI 7 - SC - Income Tax

Non-service of s.143(2) notices on most legal representatives does not invalidate tax assessments when one representative received notices and participated

Commissioner of Income-Tax Versus Jai Prakash Singh

The SC held that assessments for the relevant years were not invalidated by non-service of s.143(2) notices on nine of ten legal representatives where one ... Non-service of notice - section 143(2) - violation of the principles of natural justice - Whether, the Tribunal was correct in holding that non-service of notice under section 143(2) of the Income-tax Act, 1961, against nine out of the ten legal representatives of the deceased, Shri B. N. Singh, did not invalidate the assessment orders of the Income-tax Officer relating to the assessment years 1965-66, 1966-67 and 1967-68 and that it was at best an irregularity for which the Appellate Assistant Commissioner was justified in setting aside the assessments and it was not a case fit for cancellation of the assessments ? HELD THAT:- It is true that the returns were signed only by Jai Prakash Singh and not by the other nine legal representatives, but it should also be remembered that when notices under sections, 142(1) and 143(2) were issued to Jai Prakash Singh, he appeared through his authorised representative and produced the relevant books and account on the basis of which assessments were made. Jai Prakash Singh did not raise an objection before the Income-tax Officer that unless and until notices to all the other legal representatives are sent, assessment orders cannot be made. He raised this question for the first time in the appeals preferred by him before the Appellate Assistant Commissioner and thereafter before the Tribunal. It appears rather curious that Jai Prakash Singh who had voluntarily filed the returns of income should raise this issue ; no other legal representative of B. N. Singh has come forward with such a plea. We do not wish to go into the question whether jai Prakash Singh should at all have been allowed to so turn round and raise this plea in appeal, for the reason that the said issue is not before us in these appeals. Appeals are accordingly allowed, the judgment of the High Court set aside and the question referred answered in the affirmative, i.e., in favour of the Revenue and against the assessee. Issues Involved:1. Validity of assessment orders without notice to all legal representatives.2. Interpretation of 'assessee' and 'legal representatives' under the Income-tax Act.3. Applicability of Section 159 of the Income-tax Act.4. Compliance with procedural requirements and principles of natural justice.5. Jurisdiction and liability to pay tax despite procedural irregularities.Issue-wise Detailed Analysis:1. Validity of Assessment Orders Without Notice to All Legal Representatives:The primary issue was whether the assessment orders made by the Income-tax Officer without serving notice to all legal representatives of the deceased, B. N. Singh, were null and void or merely irregular. The High Court held that the absence of notice to all legal representatives rendered the assessment a nullity. However, the Supreme Court disagreed, stating that the assessments were not null and void but merely defective or irregular. The Court emphasized that the returns were voluntarily filed by one of the legal representatives, Jai Prakash Singh, and that no objection was raised during the assessment proceedings regarding the lack of notice to other legal representatives.2. Interpretation of 'Assessee' and 'Legal Representatives' Under the Income-tax Act:The Court examined the definitions of 'assessee' and 'legal representatives' as provided in clauses (7) and (29) of section 2 of the Income-tax Act. An 'assessee' includes every person in respect of whom any proceeding under the Act has been taken, while a 'legal representative' has the meaning assigned to it in section 2(11) of the Code of Civil Procedure, 1908. The Court noted that these definitions were crucial in determining the validity of the assessment orders.3. Applicability of Section 159 of the Income-tax Act:Section 159 of the Income-tax Act was pivotal in this case. It states that where a person dies, his legal representatives are liable to pay any sum which the deceased would have been liable to pay. The Court highlighted that for making an assessment of the income of the deceased, any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative. The legal representative is deemed to be an assessee for the purposes of the Act. The Court concluded that the failure to serve notice to all legal representatives did not nullify the assessment but rendered it irregular.4. Compliance with Procedural Requirements and Principles of Natural Justice:The assessee's counsel argued that the lack of notice to all legal representatives violated the principles of natural justice, making the assessments null and void. However, the Court referred to previous judgments, including Chatturam v. CIT and Maharaja of Patiala v. CIT, to establish that procedural irregularities do not affect the jurisdiction to assess or the liability to pay tax. The Court held that the assessments were not void but could be corrected by remitting the matters to the Income-tax Officer for fresh assessments with notice to all legal representatives.5. Jurisdiction and Liability to Pay Tax Despite Procedural Irregularities:The Court reiterated that the liability to pay tax arises from the charging sections of the Income-tax Act, and procedural provisions are merely machinery to determine the quantum of tax. Referring to the decision in Estate of Late Rangalal Jajodia v. CIT, the Court emphasized that an omission to serve notice or a defect in service does not erase the liability to pay tax. Such omissions or defects render the proceedings irregular but not void or illegal.Conclusion:The Supreme Court allowed the appeals, set aside the judgment of the High Court, and answered the question in favor of the Revenue and against the assessee. The Court held that the assessment orders were not null and void but merely irregular, and the Revenue was entitled to its costs, quantified at rupees ten thousand consolidated.