1. We find it expedient to pass a consolidated order in the three appeals which arise out of a common order of the CWT(A), dt. 3rd May, 2005 pertaining to the asst. yrs. 1993-94 to 1995-96.
2. The Revenue has raised two grounds of appeal in each of the assessment year which are common. The first ground in all the appeals relates to the decision of the CWT(A) in quashing the assessment framed by the AO under Section 16(3) of the WT Act. 1957 (in short 'the Act') on the ground that the initiation of proceedings under Section 17 of the Act was invalid. Since the fact position in all the years stand on identical footing, we hereinafter detail the facts in relation to the asst. yr. 1993-94. The assessee before us is an HUF. For the asst. yr.
1993-94 the AO issued a notice under Section 17(1) of the Act on the ground that certain wealth chargeable to tax had escaped assessment. In response the assessee filed a return of wealth on 13th March. 2002 in the status of an 'individual'. The AO made an assessment in the status of the HUF determining the chargeable wealth at Rs. 24,85,250 inclusive of the net wealth declared by the assessee in the return filed in the status of 'individual'. The assessee mounted challenge to the assumption of jurisdiction by the AO on the ground that the assessment was invalid as proper notice under Section 17(1) of the Act was not issued. The plea of the assessee before the CWT(A) was that notice was issued in the 'individual' status whereas the reasons were recorded in the status of HUF and even the assessment was framed in the status of HUF. Therefore, according to the assessee, the very basis for framing the assessment was invalid and hence the assessment proceeding deserved to be quashed. We find that the CWT(A), by way of the impugned order has upheld the plea of the assessee. The CWT(A) noted that issuance of a valid notice is a condition precedent for a valid assessment and in the instant case as the notice of assessment does not mention the correct status, the same is liable to be quashed. Against such a decision the Revenue is presently in appeal before us.
3. Before us, the learned Departmental Representative has vehemently argued that the reasons recorded by the AO for issuance of notice under Section 17 of the Act, dt. 31st May, 2001, which are placed at pp. 6 to 9 of the paper book duly records the status of the assessee as HUF. The learned Departmental Representative also pointed out to the copy of notices issued under Section 17 which are placed in the paper book at pp. 1 to 5 to point out that in fact no status has been mentioned therein but the said notice is addressed to the right person i.e. Shri Shingara Singh. The learned Departmental Representative submitted that in the return originally filed in response to notice under Section 17 on 13th March, 2002, the assessee did not declare any status and even in the revised return filed on 10th March, 2003, the status column was left blank. The learned Departmental Representative submitted that the variation in the notice issued and the reasons recorded were in the knowledge of the assessee even on 5th Dec, 2002 (as stated in the communication date of such date), copy of which was placed on record and therefore the assessee still chose to file a revised return on 10th March, 2003 in the status of 'individual' as claimed while the proceedings were for HUF. According to the learned Departmental Representative, a mere omission to mention the status in the notice issued under Section 17(1) does not render the entire proceedings is illegal and at best can be termed as an irregularity.
4. On the other hand, the learned Counsel for the respondent submitted that the CWT(A) was justified in holding that the assessment was bad in law since no valid notice in the status of HUF was issued to the assessee for initiating proceedings under Section 17 of the Act. The learned counsel, by referring to the letter dt. 15th Dec, 2002 of the assessee addressed to the AO pointed out that therein also the assessee submitted that there was inconsistency in proceedings inasmuch as notice under Section 17 of the Act dt. 31st May, 2001 was issued in the name of the 'individual' whereas a subsequent notice under Section 16(4) dt. 8th April, 2002 was issued in the name of the assessee HUF.The learned Counsel submitted that in fact such a communication, which is a part of assessment record, supports the plea of the assessee that it had brought to the notice of the AO such an infirmity and for that no remedial action was taken by the AO. In any case a mere filing of return in pursuance to a notice cannot provide a valid jurisdiction to the AO, which was otherwise lacking. In the instant case the assessee understood the notice dt. 31st May. 2001 as being issued in the status of 'individual'. The said notice having culminated, in an assessment in which status of HUF renders the impugned assessment as devoid of jurisdiction. In support, the learned Counsel has placed reliance on Bhagwan Devi Saraogi v. ITO , CIT v. K. Adinarayana Murty , Ravinder Narain v. ITO .
5. We have considered the rival submissions carefully and perused the orders of the lower authorities as well as the material placed on record to which our attention has been drawn during the course of hearing and proceed to dispose of the issue in the following lines. The crux of the issue relates to the validity of the assumption of jurisdiction by the AO to make the impugned assessment in pursuance to a notice issued under Section 17(1) of the Act on 31st May. 2001. The salient features relevant to decide the controversy are as follows. The assessment in this case has been framed in the status of HUF. The notice initiating proceedings under Section 17(1) is silent as to the status. The notice is addressed as under: On this basis it is argued by the assessee that the same is issued to the 'individual' and not 'HUF'. We find that the inference is appropriate and the assessee understood the notice to have been issued in the status of 'individual' since it complied with the said notice by filing a return of income in the status of 'individual'. This fact has been duly noted by the AO in the assessment order itself. In this background the issue to be examined is as to whether the AO assumed a valid jurisdiction under Section 17(1) to make the impugned assessment.
6. It is a trite law that 'individual' and 'HUF' are two separate taxable entities. For this proposition, a gainful reference can be made to the judgment of the Hon'ble Supreme Court in the case of K.Adinarayana Murty (supra) which considered a similar controversy.
According to the Hon'ble Supreme Court, the 'individual' and 'HUF' are recognised as separate units of assessment under the Act and if a notice for making assessment under the Act is wrongly issued to the assessee in the status of an 'individual' and not in the correct status of 'HUF', the said notice is illegal and all proceedings taken under that notice are bereft of jurisdiction and are ultra vires. To the similar effect is the judgment of the Hon'ble Allahabad High Court in the case of Gokul Chand v. ITO . We may also refer to the judgment of Hon'ble Mysore High Court in the case of Lakshmibai v.ITO in this regard. The Hon'ble Supreme Court in the case of CIT v. Kurban Hussain Ibrahimji Mithiborwala went to the extent of saying that if the notice for reassessment does not specify the correct assessment year, the same is to be treated as invalid. Such being the position of law, it would be safe to deduce that where there is an illegality in the notice issued for reopening of assessment under Section 17 of the Act, the same would render the subsequent proceedings as void ab initio. This is for the reason that issuance of a notice under Section 17(1) to assume jurisdiction is a condition precedent to the validity of the assessment framed thereafter. In the above background now we may come back to the facts of the present case.
7. Admittedly, in this case the assessment has been framed on the HUF.The notice under Section 17(1) has, therefore to be served on the assessee proposed to be reassessed. When the assessee is an HUF the notice has to be issued to the HUF. In the instant case, though the notice is addressed to an adult member of the family, yet it is not addressed to the Hindu Undivided Family (HUF). Therefore, the notice is clearly illegal and without jurisdiction. In fact, the notice is de hors the reasons recorded by the AO for the proposed reassessment.
Therefore, it would not be out of place to infer that the subsequent assessment framed by the AO under Section 16(3) dt. 20th March, 2003 is not based on issuance of valid notice under Section 17(1) and therefore, the same stands vitiated. In the face of such invalidity of the notice seeking to assume jurisdiction for making assessment, the subsequent assessment is required to be quashed. We hold so. In the result, this ground of the Revenue for the asst. yr, 1993-94 stands dismissed.
Similar grounds taken by the Revenue for the asst. yrs. 1994-95 and 1995-96 also are decided accordingly. The Revenue fails on this ground in all the three assessment years.
8. Since the assessments have been quashed as lacking in jurisdiction, the remaining ground preferred by the Revenue against the decision of the CIT(A) deleting the additions are rendered academic in nature.
Hence, the same are not adjudicated at the present.