Section 246(1)(a) provides a right of appeal to an assessee aggrieved by any order of the assessing officer where the assessee denies his liability to be assessed under the Income Tax Act or objects to the status under which he is assessed. Therefore, any person on whom tax liability is sought to be recovered would be an assessee aggrieved entitled to file an appeal under section 246.
Section 246(1)(a) provides a right of appeal to an assessee aggrieved by any order of the assessing officer where the assessee denies his liability to be assessed under the Income Tax Act or objects to the status under which he is assessed. Therefore, any person on whom tax liability is sought to be recovered would be an assessee aggrieved entitled to file an appeal under section 246.
Under the provisions of sections 171(4) to (6) every member of the HUF is jointly and severally liable for tax on the assessed income of the HUF. The TRO has proceeded to demand the tax dues of the HUF from the appellant and by implication treated him as a member of the HUF of Shri R. The appellant will therefore, squarely fall within the definition of an 'assessee' under the Income Tax Act, 1961. According to the appellant, he had no knowledge about what had been done by Shri R, namely, obtaining of a certificate under section 230A in the name of the HUF but the assessment proceedings before the assessing officer and the revision before the Commissioner under section 264 only after receipt of the notice of demand from the TRO and on further investigation, he knew about the order of assessment on the HUF and the circumstances under which the same was made. The TRO sought to recover the tax dues of the HUF from the appellant. Section 246(1)(a) provides a right of appeal to an assessee aggrieved by any order of the assessing officer where the assessee denies his liability to be assessed under the Income Tax Act or objects to the status under which he is assessed. Therefore, any person on whom tax liability is sought to be recovered would be an assessee aggrieved entitled to file an appeal under section 246. The Commissioner (Appeals) was not correct in observing that the appellant should go before the TRO and state his objections to the demand. The TRO cannot decide the question as to whether the assessment made in the status of HUF was proper as the said question has already been decided by the order of assessment. The case is remanded to the Commissioner (Appeals) to decide the various grounds of appeal raised by the appellant before the Commissioner (Appeals) on merits after affording an opportunity of hearing to the appellant.
Benoy Kurian v. Agrl. ITO (1998) 234 ITR 617 (Ker), CIT v. Hindustan SteelLtd. (1989) 179 ITR 213 (Cal), CIT v. N. Ch. R. Row & Co. (1983) 144 ITR 557 (Cal) and Kikabhai Abdul Ali v. ITAT (1957) 32 ITR 762 (Bom) relied on.
1. This is an appeal by one Mr. Shankarrao Sathwane against the order dt. 1.12.98 of the Commissioner of Income tax (Appeals)-II, Nagpur in appeal No. 392/97-98. The appeal relates to the assessment year 1984-85.
2. We have heard the learned counsel for the assessee as well as the learned Departmental Representative. We have also perused the relevant material on record to which our attention was drawn during the course of hearing. The facts giving rise to the present appeal are as follows:- 3. An extent of 6.12 acres of agricultural lands in Somalwada, Tehsil Nagpur District, hereinafter referred to as 'the property' belonged to one Laxmanrao Sathwane. His four sons and a daughter and widow, viz., (1) Shriram Sathawane, (2) Shri Dhanaji Sathwane, (3) Jagoba Sathwane (4) Shankarrao Sathwane (son of a predeceased son Mr. Ramakrishna Sathwane), (5) Gunabai (Daughter) and (6) Banabai (Widow) became entitled to the property on his death intestate in the year 1973. By an agreement for sale dated 7.5.81, the legal heirs agreed to sell the property to Engineers Co-Operative Housing Society.
An application for a certificate under Section 230A of the Income tax Act, 1961 was made by one of the co-owners of the property Mr. Shriram Sathwane to the Income tax Officer for no due certificate and no objection for the proposed sale being registered. In the application the status of the applicant was, however, mentioned as HUF while the name of the applicant is mentioned as Shriram Laxmanrao Sathwane. The application was signed by Mr. Shriram Laxmanrao Sathwane as a Karta of HUF. The mode of acquisition of the property has been stated as 'forefather's land' The necessary certificate under Section 230A of the Act was issued by the Income tax Officer on 24.10.83. The sale deed was executed on 23.9.83 itself and presented for registration.
4. An order of assessment for the assessment year 1984-85 was passed by the Assessing Officer on 24.3.87. The order of assessment refers to the fact that there was a transfer by the assessee in the previous year relevant to the assessment year 1984-85 and the fact that the assessee is laible to tax on the capital gain arising out of the said transfer and a notice under Section 139(2) having been issued on 8.6.84. The order thereafter refers to notices dt. 30.7.85, 26.8.85, 15.10.85 and 20.11.86 issued under Section 142(1) and that the assessee failed to comply with all the notices and, thereafter, the Assessing Officer proceeded to make a best judgment assessment under Section 144 of the Income tax Act, 1961.
5. Mr. Shriram Laxmanrao Sathwane, thereafter, filed a revision petition dt. 22.2.88 under Section 264 of the I.T. Act before the Commissioner of Income tax, Nagpur on 22.2.88 praying that the exparte order of Assessment be set aside as he could not attend the hearing before the Assessing Officer due to his ignorance of the legal implications as he was illiterate and could not get proper legal counseling. The CIT by his order dated 12.8.91 dismissed the revision petition.
6. A notice of demand dt. 29.12.97 was served on the appellant in the present appeal, viz., Mr. Shankarrao Sathwane son of Ramkrishna Sathwane, (hereinafter referred to as 'the appellants') by the Tax Recovery Officer demanding payment of a sum of Rs. 1,45,552/- on or before 16.1.98 and threatening coercive steps in the case of default.
On receipt of this notice the appellant obtained copy of the order of assessment filed appeal before the CIT(A) against the order of assessment dated 24.3.87. The appellant contended before the CIT(A) that the property belonged to Mr. Laxmanrao Sathwane and the same was his self acquired property. Mr. Laxmanrao died intestats in the year 1999 and that the property devolved on his legal heirs as follows: LAXMANRAO SAT ______________________________________________________________________________ | | | | | | Vanabai Shreeram Ramkrishna Jagobaji Gunabai Doma (widow) (son) (son) (son) (Daughter) (son) | _______________________________________________________________________________ | | | | | Vatsalabai Shankararo Pralhad Omrao Indira Shakuntalabai (widow) (son) (son) (son) (Daughter) (daughter) Appelant (i) that there was never a HUF of Shriram Sathwane in eixtence which owned the property, and the Assessing Officer was not correct in assessing the entire capital gains in the hands of the HUF. (ii) that the appellant was a never a member of the so called HUF and that no opportunity had ever been afforded to him before treating him as a member of the HUF. (iii) that the order of assessment under Section 144 of the Income tax Act, 1961 was bad in law since notice Under Section 139(2) had been issued to Mr. Shriram Sathwane in his individual name and, therefore, the assessment order in the name of the HUF pursuant to such a notice was not valid.
As can be seen from the Genelogy tree that Laxmanrao Sathwane died in 1979 intestate and the property was stated to be his self acquired property. In such circumstances, the case of the appellant is that each co-owner takes the property in his own right as a legal heir of late Laxmanrao Sathwane and the property will never be a HUF property.
According to the appellant, therefore, such co-owner has to be assessed individually to capital gains only in respect of the share Which they received on transfer of the property. The assessment of the entire sale as by the HUF was not proper.
7. The CIT(A) held that the appellant should file his objections as mentioned in the grounds of appeal before the Tax Recovery Officer (TRO) and in case the TRO rejects his objections, follow the course open to him in law. He also held that the Assessing Officer has no-where in the assessment order given any finding that Shri Shankarrao Sathwane was a member of the HUF of Shriram Laxmanrao Sathwane. He accordingly rejected the appeal by the assessee as misconceived. In effect, the CIT(A) had questioned the locus standi of the appellant to file the appeal before him.
8. It is against this order of the CIT(A), the appellant has preferred the present appeal raising the following grounds of appeal:- "1.) The learned C.I.T.(A) erred in holding that the appellant had no locus standi as the A.O. had not given as finding that the appellant was a member of the HUF and thereby erred in dismissing the appeal.
2) The assessment made Under Section 144 by the A.O. in the status of HUF is bed in law as no notice Under Section 139(2) was served on the HUF. 3) The assessment made Under Section 144 in the status of HUF on the basis of an alleged notice Under Section 139(2) in the name of the individual is illegal, invalid and without jurisdiction.
4) The appellant was not given any opportunity before making the assessment Under Section 144 and before treating him as a member of the HUF of Shri Shriram Sathwane.
5) The assessment made including the whole-sale price for purpose of capital gain in the name of Sri Shriram Sathwane as HUF is invalid and illegal." On the first ground of appeal, we are in complete agreement with the submission of the learned counsel for the assessee. The definition of 'Assessee' contained in Section 2(7) of the Income tax Act, 1961 reads as follows: "2(7) "assessee" means a person by whom any tax or any other sum of money is payable under this Act, and includes - (a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person; (b) every person who is deemed to be an assessee under any provision of this Act; (c) every person who is deemed to be an assessee in default under any provision of this Act." Under the provisions of Section 171(4) to (6) of the I.T. Act, 1961, every member of the HUF is jointly and severally liable for tax on the assessed income of the HUF. The TRO has proceeded to demand the tax dues of the HUF from the appellant and by implication treated him as a member of the HUF of Shriram Sathwane. The appellant will therefore, squarely fall within the definition of an 'assessee' under the I.T.Act, 1961. According to the appellant, he had no knowledge about what had been done by Shri Shriram Sathwane, namely, obtaining of a certificate Under Section 230A in the name of HUF but the assessment proceedings before the Assessing Officer and the revision before the CIT under Section 264 only after receipt of the notice of demand from the TRO and on further investigation, he knew about the order of assessment on the HUF and the circumstances under which the same was made. The TRO sought to recover the tax dues of the HUF from the appellant. Section 246(i)(a) of the Act. 1961 provides a right of appeal to an assessee aggrieved by any order of the Assessing Officer where the assessee denies his liability to be assessed under the I.T.Act or objects to the status under which he is assessed. The following decisions of the Hon'ble High Court on which the learned counsel for the assessee relied have held that any person on whom tax liability is sought to be recovered would be an assessee aggrieved entitled to file an appeal under Section 246 of the I.T. Act, 1961.
In view of the above, we hold that the appellant had locus standi to file the appeal before the CIT(A) and the CIT(A) ought to have decided the appeal on merits rather than dismissing the appeal as misconceived holding the appellant did not have locus standi to file the appeal. The CIT(A) was not correct in observing that the appellant should go before the TRO and state his objections to the demand. The TRO cannot decide the question as to whether the assessment made in the status of JUF was proper as the said question has already been decided by the order of assessment. The first ground of appeal of the assessee is allowed.
9. With regard to the ground Nos. 2 to 5, they are regarding the merits of the case of the appellant. The CIT(A) did not decide any of the grounds of appeal raised before him. We, therefore, deem it proper to remand the case to the CIT(A) to decide the various grounds of appeal raised by the appellant before the CIT(A) on merits after affording an opportunity of hearing to the appellant. The other grounds of appeal, therefore, not no adjudication by us at present.