I.T.AS. NOS.2555/LB AND 2556/LB OF 1987-88, DECIDED ON 8TH MARCH, 1996. VS I.T.AS. NOS.2555/LB AND 2556/LB OF 1987-88, DECIDED ON 8TH MARCH, 1996., 1998 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 408 (1996)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 61, 62, 63, 65, 69 & 74---Notice and assessments against a dead person---Assessment was framed on 18-6-1987 under S.62/65 of the Ordinance for the year 1983-84---Another assessment for the year 1986-87 was also framed under S.63 on the same date---In reply to notice under S.61, assessee's son replied that assessee, his father, had expired in 1986 and filed return on behalf of his deceased father but failed to turn up in pursuance of notices issued---Assessing Officer accordingly proceeded to determine the income ---C.I.T.(A) partly agreed with the assessee's submissions and remanded the case for de novo proceedings in accordance with law---Held, assessments being against a dead person were not competent in fact as well as in law---Act of the Assessing Officer even after having been informed about the expiry of the assessee and his persistence in illegality cannot be allowed to perpetuate ---C.I.T.(A) definitely joined the illegal assessments by setting them aside instead of annulling same---Non-service of notices on all legal heirs was a jurisdictional defect which could not be ignored-- Assessments were declared to be nullity and were annulled in the .circumstances.

Jai Prakash Singh v. CIT. Assam (1978) 111 ITR 507 and Sajin Kumar Saraf v. CIT, Bengal-III (1978) 114 ITR 155 ref.

Ahmad Nouman, ITP for Appellant. Sabiha Muhajid, D.R. for Respondent.

Date of hearing: 24th December, 1996.

ORDER

NASIM SIKANDAR (JUDICIAL MEMBER). ---These further appeals arise out of the first appellate order dated 14-3-1988 recorded by CIT(A), Zone-II, Lahore in respect of the assessment years 1983-84 and 1986-87.

2. In the year 1983-84 an assessment order was recorded on 18-6-1987 under section 65/62 of the Income Tax Ordinance. The assessing officer noted that the assessee was a partner of a firm namely M/s. Ravi Tentage Industries to the extent of 85 %. It was further noted that assessment in respect of the firm for the year under review was reopened and completed under section 63/65 at net income of Rs.79,20,586. The assessee's share from said income was therefore determined at Rs.39,91,935 and, as said above, an assessment framed at that amount as income for the year on 18-6-1987.

3. On the same date i.e. 18-6-1987 another assessment for the year 1986-87 was framed under section 63 of the Income Tax Ordinance at total income .of Rs.5,92,349. The assessing officer observed that a notice under section 61 of the Ordinance was issued on 4-5-1987 for hearing on 10-5-1987. In reply to the notice the son of the assessee Mr. Ahmed Khalil intimated that the assessee Mr. Khalil-ur-Rehman, his father had expired in 1986. However, it appears that on service of another notice the said son of the assessee filed return on behalf of his deceased father though under his own signature declaring share income from the aforesaid firm only. According to the assessment order the son of the assessee was properly served for a number of other dates. However lie failed to turn up. Accordingly, the assessing officer proceeded to determine his income from the said firm Ms. Ravi Tentage Industries, Lahore at Rs.5,67,021. Earlier it was noted that the assessment in the case of the firm had also been completed under section 63 of the Ordinance on 18-6-1987. It was further noted that the assessee was also a partner of 50% share in another firm M/s. Quality Bans Store. However, allegedly, the assessee did not disclose his share income from this firm. Besides contemplating an action under section 111 of the Ordinance the assessee's share from that firm was determined at Rs.25,328 and added towards income from the other firm compute total income. from the year at Rs.5,92,349.

4. Before the first appellate authority it was pleaded that all proceedings before the assessing officer were coram non judice on account of their being against a dead man. It was further submitted that the assessee having already died on 23-5-1986 both the aforesaid assessments framed were totally illegal. It was further stated before the firm appellate authority that total income in the year 1983-84 was determined at Rs.2,47,406. However, after reopening the assessment in the case of the first and completing the same at a certain income, the assessing officer was obliged to serve notices on all the legal heirs of the deceased before completing the assessment. In the year 1986-87 similar submissions were made. Learned first appellate authority apparently partly agreed with the submission that the assessments completed on 18-6-1987 were made without issuing statutory notices and were therefore, improper and unjustified. However, learned first appellate authority only set aside the assessments and remanded the case "for de novo proceedings in accordance with law as warranted by the facts of the case". This has brought the assessee in further appeal before us.

5. Parties have been heard. Learned A.R. for the assessee vehemently contends that the assessment in the first year viz. 1983-84 was framed without issuance of notice whatsoever and therefore was not in accordance with law. It is also submitted that both the assessments in question framed on 18-6-1-987 being against a dead person were patently illegal and a nullity at law. It is submitted that after the assessing officer was duly informed of the death of the assessee, he ought to have served notices on all the legal heirs of the deceased assessee. Learned A.R. contends that a return filed by one of the legal heirs of the assessee namely Ahmad Khalil could not be taken as a valid return which was to be filed on behalf of all the legal heiress. For, according to the learned A.R the liability towards tax was to be discharged out of the whole estate of the deceased. Therefore, the service of notice and filing of return by only one of them was not binding upon the rest of the legal heirs on whom the estate of the deceased devolved on his death. In this connection reference is made to the provisions contained in section 74 of the Income Tax Ordinance. Reliance is also placed upon two reported decisions from Indian jurisdiction. In the first case a Division Bench of the Gauhati High Court in re; Jai Prakash Singh v. CIT, Assam reported as (1978) 111 ITR 507 observed that a notice under section 143(2) of the Indian Income Tax Act, 1961 issued only to one of the several legal representatives and thereupon the assessment framed was not valid. In the second case re: Sajjan Kumar Saraf v. CIT, Bengal-III cited as (1978) 114 ITR 155 a Division Bench of the Calcutta High Court observed that a notice issued in the name of the dead person was invalid. Also that a return filed in pursuance of such notice by one of the several legal representatives was partly valid. Their Lordships however further found that assessment could only be framed upon notice to all other legal representatives.

6. Learned D.R. supports the impugned order and states that setting aside of the assessment has not resulted into any prejudice to the assessee or his legal representatives. According to the learned D.R. the assessee can make all these submissions and raise the objections against competency of the assessing officer to proceed when it will participate in the preceding after remand.

7. Having heard the parties we are quite clear in our mind that both the assessments in issue framed on 18-6-1987 being against a dead person were not competent. The assessee already having died almost one year before 'framing of the assessments and the fact having been duly brought into the notice of the assessing officer, nothing could be more improper to still proceed against a dead person. The assessment order for the year 1983-84 does not speak of any notice to the assessee. It appears that the assessing officer, in a way passed an order consequential upon his framing of ex parte assessment against the registered firm M/s. Ravi Tentage Industries, Lahore in which the deceased assessee held 85 % share. The framing of an assessment in respect of a partner under the provisions of section 69 may be of consequential nature only, however, since the assessee in this case had already died and since the assessments in question purport to have been framed under section 62/65 of the Ordinance, we cannot condone the default in issuance of notice merely for the reason that the assessment in respect of a partner was only of a consequential nature. As found by their lordships in the first case relied upon by the assessee re: Jai Prakash Singh the notice to one of the several legal heirs in the year 1986-87 did not fulfil the legal requirements The provisions contained in section 143(2) of the Indian Income Tax Act 1961 are pari materia with those embodied in sections 61 and 62 of the Ordinance Their lordships observed that lack of service of a statutory notice takes away the jurisdiction of the authority concern to continue with the proceeding or to pass the order. Their lordships further ruled upon the duty of the first appellate authority where in such a situation the assessing officer had proceeded with framing of assessment. In the view of their lordships simple setting aside of the order would amount to nullity the provisions of limitation for framing of an assessment. Their lordships remarked:

"If the estate of a deceased assessee is to be assessed to income-tax, the estate must be fully represented by impleading all the legal representatives and serving notices under section 143(2) on all of them who represent the entire estate. If this were not done, the assessment proceedings and assessment orders passed therein would cease to be valid proceedings and valid orders in the eye of law. In such a case it is the legal duty of the Appellate Assistant Commissioner and the Appellate Tribunal to annul the assessment. After annulment of the assessment order if the law permits and there is no bar under the limitation prescribed by law, fresh assessment proceedings may be drawn up in appropriate cases. But the appellate authorities cannot nullify the provisions of limitation for assessment, as laid down in section 153, by passing an order setting aside the assessments by issuing notices on the remaining legal representatives. "

8. In the other case relied upon by the learned A.R. for the legal representatives of the assessee re: Sajjan Kumar Saraf almost a similar finding was recorded. In that case it was held that a notice issued to a dead person was bad and invalid notice. Also that no return could be filed pursuant to a notice which was non-existent in law. Their lordships also noted that where a return was filed by a Legal Representative in response to an invalid notice issued to the deceased and without disclosing that there were other legal representatives as well, the assessing officer could not ignore the same. However, even in such cases the assessment could be made only after bringing all the legal representatives on record.

9. This being the legal and factual situation, as said above, we will hold that the assessment framed without any notice in the year 1983-84 was of no legal consequence at all. Also that both the assessments being against a dead person were otherwise not competent in fact as well as in law. The act of the assessing officer in continuing proceedings even after having been informed that the assessee had long died before the issuance of the first notice under section 61 on 4-5-1987, his persistence in illegality cannot be allowed to perpetuate. Learned first appellate authority definitely connived the illegal assessments by setting them aside instead of annulling them. The assessee being a dead person at the relevant time, service of notices on all the legal heirs was a jurisdictional defect, which could not be ignored by the first appellate authority. Instead it allowed a fresh a lease of life to illegal proceedings commenced against a dead person by simply setting aside the assessments.

10. The: order of the first appellate authority being against the statutory protection of limitation prescribed for framing of assessment cannot be sustained. It shall accordingly be reversed. Both the assessments are declared to be a nullity and therefore annulled on account of their having no legal consequence whatsoever.

11. Both the appeals succeed in these terms.

C.M.S./419/Trib. Appeals accepted.