1986 (3) TMI 130 - AT - Income Tax

Invalid Tax Assessment Nullified for Failure to Notify Legal Heirs: Importance of Legal Procedures

The ITAT Cochin allowed the appeal, emphasizing the necessity of following legal procedures and ensuring proper representation in assessment proceedings ... Assessment, Notice Issues:1. Validity of gift-tax assessment procedure and notice issuance.2. Legal representation in assessment proceedings.3. Relevance of legal precedents in annulment of assessment.4. Compliance with legal requirements in assessment proceedings.Detailed Analysis:1. The appeal concerned the validity of the gift-tax assessment procedure and notice issuance for the assessment year 1977-78. Late Dr. A. O. Mathew had made gifts of immovable properties to his daughters and grand-daughters before passing away intestate. The issue arose when one of the daughters, Smt. Elizabeth Raju, filed a gift-tax return after his demise. The GTO completed the assessment without issuing notices to all legal heirs, leading to a challenge by the assessee.2. The primary contention was regarding legal representation in the assessment proceedings. The assessee argued that the return filed by Smt. Elizabeth Raju as a legal representative of late Dr. A. O. Mathew was not valid in law. The GTO's failure to inquire into the legality of the return and the subsequent assessment proceedings were deemed illegal by the assessee. The Commissioner (Appeals) had set aside the assessment order, directing the GTO to bring all legal heirs on record and issue notices to them before completing the assessment.3. The relevance of legal precedents in the annulment of assessment was a crucial aspect of the case. The Commissioner (Appeals) had relied on past judgments to support the decision of setting aside the assessment instead of annulling it. However, the ITAT Cochin disagreed with this approach, emphasizing that the assessment itself had become illegal and void due to the failure to issue notices to all legal representatives as required by law.4. The ITAT Cochin highlighted the importance of compliance with legal requirements in assessment proceedings. Citing the decision of the Kerala High Court in a similar matter, it was established that all legal representatives must be served with notice for the assessment to be valid. Since the assessment in this case was completed by issuing notice only to one legal representative, the ITAT Cochin concluded that the assessment was illegal and void, warranting annulment rather than mere setting aside.In conclusion, the ITAT Cochin allowed the appeal, emphasizing the necessity of following legal procedures and ensuring proper representation in assessment proceedings to maintain the validity of tax assessments.