TaxTMI 
TaxTMI 
1974 (4) TMI 5
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.... attorney was given to them. One of the terms of the agreement was that the company would get 50 per cent. of the net realisations while the other 50 per cent. would be given to the respective nine owners of the land in accordance with their shares in the land. It may be noticed that all the aforesaid nine members do not belong to the same family. During the assessment year 1953-54, Shri Suraj Narain, father of the petitioners in the second writ petition, filed a return of his total income in which he appended a note to the effect that he owned some lands and garden in the area in dispute inherited as ancestral property which were not taxable and some of those lands had been sold during the current year. A certificate had been filed from Delhi Land and Finance Ltd. (hereinafter referred to as " the finance company ") showing that a sum of Rs. 28,828-11-9 had been received by Shri Suraj Narain during that year. The Income-tax Officer concerned by his order dated 26th August, 1963, held that, during the accounting year, the assessee had sold some of his ancestral agricultural land for which he had received the amount mentioned as part payment and it was stated that the sale had been....
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....hri Bishan Narain and Shri Sham Narain (petitioners in the second writ petition). Raghubar Dayal had a son by name Shri Rajinder Narain, advocate, who has died, leaving behind him Ravinder Narain, advocate, who is the petitioner in the first petition. There was another family owning share in the land in dispute which was headed by Shri Girdhari Lal Kapur, another advocate, who died in 1928. He had four sons, namely, Inder Narain Rangi Lal, Jagan Nath and Murli Dhar. Inder Narain had died in 1954 and, on his death, his share devolved on his son, Shri Narain. The case of the petitioners is that in 1875, Munshi Tulsi Dhar, pleader, purchased a portion of the agricultural land in dispute, and another portion of the land now in dispute was purchased by Shri Girdhari Lal in the year 1908. It is alleged that the said agricultural land had been purchased as investment because in those days ownership of agricultural land gave the owner pride of possession and special status. After the death of Munshi Tulsi Dhar, the said land was inherited by his three sons, Salig Ram, Raghubar Dayal and Panna Lal. Thereafter, upon partition of the family property amongst the three brothers, Salig Ram recei....
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.... association of persons which had carried on the venture in the nature of development and sale of the land and that the information had been received on close examination of the agreement executed between the parties and that the notices were perfectly legal and valid. It is suggested that the association had not been assessed previously and, on its assessment, every members of it would be liable to tax on the profits of the association as a whole. A rejoinder to the said counter-affidavit has been filed on behalf of the petitioners. Mr. Manchanda learned counsel for the petitioners, has, in supporting the writ petitions, raised the following contentions: 1. The impugned notices ex facie show that they had not been issued to any association of persons as an assessee and as such they are not valid notices. 2. Assuming that the notices have been issued to the association, the department has exercised its option and assessed some of its members in their individual capacity and so it can thereafter not assess the association as well. 3. There is no association of members existing in law or fact, nor has any such association been formed for the purpose of producing business income a....
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....mention in this notice whatsoever of any association of persons formed to carry on the business which was sought to be assessed. The notices have been sent to each one of the ten parties mentioned therein. There is nothing else in the notice to indicate that the assessees were required to file a return in respect of income of the business of the purchase and sale of land described above. By a perusal of the said notice, it would be impossible for any of the parties (except by intuition or by a fresh reference to the Income-tax Officer concerned) to divine that these notices were not intended to deal with the income of the said persons only but to an association, a different assessee, which was supposed to have been formed by these persons by an agreement of July, 1949, or otherwise. Notices in respect of the other assessment years in dispute are in precisely the same language and are subject to the same comments. Section 147 of the Act prescribes that if the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer, or to disclose fully and trul....
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....us of 'Hindu undivided family' the notice is illegal and all proceedings taken under that notice are ultra vires and without jurisdiction "; and that even the submission of the return will not validate the illegality of the notice and the proceedings. In Prabhudas Jagjivandas v. Income-tax Officer, J. M. Shelat and P. N. Bhagwati JJ. (as they then were) held that when a firm is assessed as an unregistered firm in the original assessment proceedings, the notice under section 34(1)(a) must be issued against the firm and notice against an individual partner or partners of the firm cannot form a foundation for initiating proceedings for reassessment of the income, profits and gains of the firm and the fact that the firm had been dissolved did not make any difference. Their Lordships further held that even if a notice is issued against the firm, it can be served on one of the partners by addressing the envelope containing the notice to such partner and it may also be served personally on one of the partners but whatever be the mode adopted for effecting service on a partner, the notice must be against the firm and it must seek to reassess the income of the firm which has been assessed ....
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....erved that the notice under section 34 was not merely a procedural requirement and it was the foundation of the jurisdiction of the Income-tax Officer and if the impugned notices could not be said to be notices to the Hindu undivided family of the deceased, the revenue could not proceed to reassess the income of the Hindu undivided family of the deceased by relying on them. Mr. Dhebar has relied upon Radhey Lal Balmukand, In re, Gopaldas Parshottamdas v. Commissioner of Income-tax, Commissioner of Income-tax v. K. M. N. N. Swaminathan Chettiar and Mohd. Haneef v. Commissioner of Income-tax, to support the contention that there is no prescribed form of notice and it was not necessary to strike off the relevant entries contained in the notice and it was open to the assessee to score them and make a proper return according to law. The said authorities dealt with the notice issued under section 22(2) of the Act where the prescribed form was different. The said authorities are of no assistance to Mr. Dhebar in view of the clear decision of the Supreme Court in Commissioner of Income-tax v. K. Adinarayana Murty. I would also prefer to follow the view of the High Court of Gujarat in Prab....
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....ot any association of persons. Had it been intended to proceed against the association, not only notices would have been addressed to the association but its business activity, which was sought to be assessed, would certainly have been indicated. Further, if it is correct that the association had come into existence during the assessment year 1954-55 or earlier, and had been functioning and carrying on business, there is no reason why the notices had not been issued for the entire period from 1st April, 1954, to 31st March, 1961. The individuals had apparently received amounts from the finance company during 1954-55 and for three years from 1st April, 1958, to 31st March, 1961, and they had not received any income during the intervening three years from 1955 to 1958. This also points to the fact that notices were addressed only to the individuals in respect of the amounts received by them. There is nothing to indicate in the notices that they were addressed to or were intended for any association of persons. The Supreme Court in deciding the appeals of the petitioners against dismissal of the present writ petitions in limine has quoted one of the notices in extenso. The argument r....
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....her argued in the alternative that assuming that an association of persons existed, the department had exercised its option to assess the individuals. This is borne out by the assessment order passed by the Income-tax Officer on 26th August, 1953, in the case of Shri Suraj Narain. The order indicates that Suraj Narain had 1/16th share in the land and that he had inherited the land from his ancestors and some of the land had been entrusted to the finance company which had paid the assessee Rs. 28,828-11-9 during the accounting year. In response to the notice under section 23(3) of the Act of 1922, the assessee had filed a letter dated 5th August, 1953, narrating the history of the land to show that the land was ancestral and that he had merely converted his possession into cash and had not indulged in any business activity. In this case, the Income-tax Officer came to the conclusion that it was a non-business receipt which conclusion was perhaps legally wrong, but no appear against the same appears to have been filed. It has been suggested at the Bar that the plea of discovering an association of persons as distinct from the individual owners and the fresh method to assess the same ....