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

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 ... Nullity of assessment - irregular/defective assessment - legal representative - assessee - principles of natural justice - charging sections versus machinery provisionsNullity of assessment - legal representative - irregular/defective assessment - principles of natural justice - charging sections versus machinery provisions - Validity of assessment orders completed without serving notice on nine of the ten legal representatives of the deceased - HELD THAT: - The Court held that assessments completed on the basis of returns voluntarily filed by one legal representative, and after service of notices and participation by that representative, are not nullities merely because notices were not served on the other legal representatives. The liability to pay tax arises from the substantive charging provisions and is not conditional upon strict compliance with every procedural machinery provision; defects or omissions in notice procedure render the proceedings defective or irregular but do not erase the substantive liability. The Court relied on earlier authorities to show that absence or defect in notice does not oust jurisdiction to assess where the substantive charge exists, and that such procedural infractions can be remedied by further proceedings rather than declaring the assessment void: Chatturam v. CIT was cited for the distinction between charging sections and machinery provisions; Maharaja of Patiala v. CIT was cited for the proposition that defects in notice under provisions corresponding to section 159 may be waived and do not necessarily invalidate an assessment; and Estate of Late Rangalal Jajodia v. CIT was cited for the principle that lack of notice renders an assessment defective but not void. Applying these principles to the facts-death of the original assessee, voluntary filing by one legal representative, production of books on notice to that representative, and absence of any contemporaneous objection that notices be served upon all legal representatives-the Court concluded that the proper remedy was to treat the assessments as irregular/defective and permit remedial steps (fresh assessment/notice) rather than hold them void ab initio.Assessments completed without notice to all legal representatives are not null and void but at worst irregular/defective and amenable to rectification.Final Conclusion: The High Court's conclusion that the assessments were null and void is set aside; the question is answered in favour of the Revenue and against the assessee, holding the assessments irregular/defective rather than void. 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.