COMMISSIONER OF INCOME-TAX VS FATELAL, 1998 PTD-MADHYA-PRADESH-HIGH-COURT-INDIA 1552 (1996)

(a) Income-tax---

----Reference---Court satisfied about correctness of order of Tribunal Questions do not arise---Indian Income Tax Act, 1961, S.256(2).

(b) Income-tax---

----Assessment---Death of assessee---Correct legal heirs not ascertained and no notice served on them---Tribunal cancelling assessment---Justified.

(c) Income-tax---

----Rectification---Order under S.154 to rectify assessment order to substitute name of correct legal representative---Cannot make invalid order valid-- Indian Income Tax Act, 1961, S.154.

Where the Tribunal annulled the assessment holding that it is the duty of the Income-tax Officer to ascertain the legal heirs, in the event of death of an assessee, and serve notices on them, that if the Income-tax Officer does not implead real legal heir in assessment, the assessment is invalid' and that rectification would not render it valid, on an application to direct a reference:

Held, that the order of the Tribunal was justified.

Held also, that when the Court is satisfied about the correctness of the order of the Tribunal, questions do not arise.

Jai Prakash Singh v. CIT (1978) 111 ITR 507 (Gauhati) ref.

D.D. Vyas for the Commissioner.

Nemo for the Assessee

JUDGMENT

A.R. TIWARI, J. ---The applicant (Commissioner of Income-tax Bhopal has filed this application under section 256(2) of the Income Tax Act, 1961 (for short "the Act"), seeking a direction to the Tribunal to state the case and to refer the undernoted questions arising out of the order, dated September 17, 1987, passed by the Tribunal in I.T.A. No.743/lnd. of 1984 for the assessment year 1973-74 after rejection of the application registered as R. A. No. 145/Ind. of 1987 on November 29. 1988, for our consideration and opinion:

"(1)Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in not considering the fact that the information about execution of will by Smt. Rambhabai during her lifetime was brought to the notice of the Income-tax Officer after the assessment was completed?

(2)Whether on the facts and in the circumstances of the case the Tribunal is legally correct in holding that the order passed under section 154 could not make the already, invalid order passed to be valid as the facts of the case are quite different''

(3)Whether, on the facts and in the circumstances of the case,, the Tribunal is justified in law in not considering that it was a mistake apparent from the record and was liable for correction/rectification under section 154 as the facts of the will were not brought to the notice of the Income-tax Officer in the course of assessment proceedings and up to the date he completed the assessment?"

Briefly stated, the facts of the case are that the deceased Suit. Rambhabhai filed the return on May 29, 1975, in her individual status. The regular assessment was completed on May 29, 1975. The assessment was set aside by the Appellate Assistant Commissioner on January 25, 1979. In compliance with the direction, a fresh assessment was made and completed on February 28, 1981. Before completion, Smt. Rambhabhai died on August 22, 1980. The fact of her death was communicated to the Income-tax Officer by letter, dated December 15, 1980. The assessment proceedings continued. On an examination, her sons disclosed that Rambhabai had left a will. On acquisition of knowledge of existence of the will, the Assessing Officer rectified the mistake on April 10, 1981, and substituted the name of Smt. Kamlabai in place of Shri Fatelal, the legal representative of Rambhabai, under section 154 of the Act. The non-applicant filed an appeal which was allowed. The non-applicant then filed an appeal before the Tribunal contending that mere setting aside was not enough and that the assessment should be annulled. The Tribunal then allowed the appeal and annulled the assessment. The applicant then filed an application under section 256(1)'of the Act. The application was rejected. The applicant then filed - this application under section 256(2) of the Act and proposed the abovenoted questions.

We have heard. Shri D.D. Vyas, learned counsel for the applicant/Department. None appeared for the non-applicant/assessee.

The Tribunal declined to state the case and held as under:

"In the event of death of an assessee, therefore, it is settled law that it is the duty of the Income-tax Officer to make diligent inquiry .to ascertain the legal heirs and serve notices on them before completing an assessment on the estate of the deceased assessee. In the facts and circumstances of this case, the exact position as known to the Income-tax Officer and still he chose to make an invalid assessment in the name of Fatelal and did not implead in the proceedings the real-legal heir, Smt. Kamlabai. The order passed under section 154 could not make the already invalid order passed to be valid. Consequently, there is force in the prayer made on behalf of the assessee that the assessment made had to be annulled and not set aside. We annul the assessment and allow the appeal of the assessee. There is no need to go into the grounds on the merits which were not gone into by the Appellate Assistant Commissioner also."

In Jai Prakash Singh v. CIT (1978) 111 ITR 507 (Gauhati) it is laid down that 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 by serving notices under section 143(2) and that in default of such a procedure, the assessment proceedings would be invalid and would become liable to be annulled.

We are satisfied with the correctness of the order of the Tribunal. The question, as proposed, thus do not arise out of the order passed by the Tribunal.

Accordingly, we reject this application but with no order as to costs.

Counsel fee for the applicant is, however, fixed at Rs.750 if certified

M.B.A./1678/FCApplication rejected.