Puran Chand Laxmi Chand Vs. Income-tax Officer - Court Judgment

Excerpt:
1. the grounds of appeal of the assessee in this appeal are argumentative and the objections taken are not immediately apparent.however, it is seen that the following objections have been taken in effect: (a) the assessment made by the ito on the assessee for this year (1975-76) on 24-9-1981 is a nullity. (b) the commissioner (appeals) erred in not quashing the assessment on that ground. (c) the commissioner (appeals) further erred in setting aside the assessment, directing the ito to make it afresh after hearing the assessee.2. we have heard shri p.n. chopra, the learned counsel for the assessee as well as shri j.s. rao, departmental representative. we were also taken through the orders of the authorities below and the material on record. we would first of all notice the relevant.....

Judgment:
1. The grounds of appeal of the assessee in this appeal are argumentative and the objections taken are not immediately apparent.

However, it is seen that the following objections have been taken in effect: (a) The assessment made by the ITO on the assessee for this year (1975-76) on 24-9-1981 is a nullity.

(b) The Commissioner (Appeals) erred in not quashing the assessment on that ground.

(c) The Commissioner (Appeals) further erred in setting aside the assessment, directing the ITO to make it afresh after hearing the assessee.

2. We have heard Shri P.N. Chopra, the learned counsel for the assessee as well as Shri J.S. Rao, departmental representative. We were also taken through the orders of the authorities below and the material on record. We would first of all notice the relevant facts.

3. Puran Chand Laxmi Chand was the sole proprietary concern of one Puran Chand who died on 24-3-1974. Puran Chand died intestate, leaving behind five legal heirs, namely, Sarbati Devi, his wife, and Laxmi Chand, Vijay Agarwal, Sanjay Agarwal and Ajay Agarwal, his sons.

Assessment was originally completed under Section 144 of the Income-tax Act, 1961 ('the Act') for this assessment year by the ITO District III(29) on 23-9-1978, the assessment being made in the name of Puran Chand Laxmi Chand. Puran Chand having died on 24-3-1974 the return of income for this year had in fact been filed by Laxmi Chand, one of the son of Puran Chand, on 16-6-1975. It would appear that this assessment was cancelled on an application being filed by the asscssee under Section 146 of the Act.

4. Thereafter there was a fresh assessment proceeding. A draft assessment order was prepared by the ITO for reference to the IAC under Section 144B. This draft assessment order also showed the name of the assessee as Puran Chand Laxmi Chand, the status being shown as 'individual'. These assessment proceedings were also based on the return filed on 16-6-1975 by Laxmi Chand, one of the legal heirs.

5. The ITO called for objections to the draft assessment order. There was a reply by letter dated 11-4-1981 (a copy of this is at page 6 of the assessee's paper book). This reply was given by Laxmi Chand who styled himself as 'one of the legal heirs of the late Shri Puran Chand'. It was pointed out in this letter that no assessment could be made on a dead person ; that the original assessment under Section 144 as well as the draft assessment order under Section 143(3)/144B were illegal as they were both in the name of a dead person.

6. After receipt of the instructions from the IAC the ITO completed the assessment under Section 143(3)/144B on 24-9-1981. In this, the name of the assessee was shown as 'Shri Laxmi Chand legal heir of late Shri Puran Chand, Proprietor Puran Chand Laxmi Chand, Gadodia Market, Delhi'. The total income was determined at Rs. 2,31,038. There was no discussion in the assessment order as regards the other legal heirs, even though in the letter from Laxmi Chand dated 11-4-1981 to the ITO, names of all the legal heirs had been given. The assessee appealed against the assessment.

7. The objections taken, inter alia, were : The assessment made on Laxmi Chand was a nullity being void ab initio as there was no complete representation of the estate of the late Shri Puran Chand. Apart from Laxmi Chand, there were four other legal heirs and yet assessment was made only on Laxmi Chand. This was done in spite of the ITO's knowledge of the other four legal heirs. The ITO gave no opportunity or notice to the other legal heirs. The assessment was, therefore, to be annulled in toto.

8. The Commissioner (Appeals) did not accept the assessee's claim that assessment was void ab initio. After hearing the assessee he ordered as Under: 11. As the assessment is being set aside other grounds of appeal are not being discussed here. The appellant will, however, be free to make the submissions before the ITO in the course of fresh assessment proceedings on those grounds also and the ITO will duly take them into consideration while making fresh assessment.

In so disposing of the appeal, the Commissioner (Appeals) recorded the following: (i) Return was filed for this year on 16-6-1975 by Laxmi Chand who was the only major son of the late Shri Puran Chand on that date.

(ii) No doubt the claim for the assessee was that the original assessment made in the name of Puran Chand Laxmi Chand was a nullity as it was made on a dead person and that the fresh assessment made after the order under Section 146 was also a nullity. But this contention of the assessee had no force. This was because the original assessment made under Section 144 was not on a dead person.

It was made in the trade name of Puran Chand Laxmi Chand. Business was being carried on in that name. Secondly, even assuming that the original assessment had been made on a dead person the assessee could have agitated this point by way of an appeal. It was not done.

Such an objection could not, therefore, be raised in the proceedings arising out of the fresh assessment. Thirdly, the infirmity, if any, crept in at the stage of framing the assessment, the return having been filed by the legal heirs. By reopening the assessment and framing the fresh assessment on the legal heirs the infirmity got cured. Hence it cannot be said that the present assessment was bad in law because the original assessment was made on a dead person.

9. The Commissioner (Appeals) then considered the assessee's objection that the fresh assessment was bad in law on the ground that all the legal heirs had not been brought on record and had not been made parties to the proceedings. The factual position raised before the Commissioner (Appeals) was that following the death of Puran Chand, his widow Sarbati Devi became the only legal guardian of the three minor sons ; and that besides under the Hindu Succession Act, 1956, the widow also got a share in the estate of the deceased and that this point, however, was not dealt with by the IAC. The ITO was, therefore, called upon by the Commissioner (Appeals) to comment on this point. The ITO gave her comments by her letter dated 27-12-1982. In this it was stated that the assessee did not object to the proceedings on this ground before the ITO. It was only at the draft assessment order stage that such an objection was raised. A further submission from the ITO was that Laxmi Chand took over 'the assets of the concern' after the death of his father and that a partnership under the same name and style was formed, the three minor sons being admitted to the benefits of the partnership ; that, thus, Laxmi Chand could be said to represent the entire estate of the deceased. (This letter of the ITO is noticed again later. See paragraph 27.) 10. The Commissioner (Appeals) considered the above letter of the ITO.He found that for the assessment year 1974-75 the matter had gone up to the Tribunal. Even at that stage the above issue was not raised by the assessee. For that year also Laxmi Chand had filed the return of income on behalf of his late father. Even for the assessment year 1975-76 (the year in appeal here), a 'very cryptic mention' was made by him after receipt of the draft assessment order and which reads as under : The order has not been made in conformity with the requirements of the Income-tax Act, 1961, through legal heirs of the deceased, i.e., late Shri Puran Chand and as such the order is liable to be vacated, struck and annulled as a legal nullity.

The Commissioner (Appeals), however, noted that the finding of the ITO that the estate was fully managed by Laxmi Chand, was not backed by sufficient material. He observed : 'that apart from the business that was run as a proprietary concern, the deceased has immovable properties. Who is managing the property and who is enjoying the income therefrom is not forthcoming from the records. Besides the estate had apparently been partitioned when a partnership firm has come into existence. In what manner the partition has taken place and whether Shri Laxmi Chand has received the entire capital was also not clear.

Besides under similar circumstances it was held by the Calcutta High Court in Sajjan Kumar Saraf v. CIT [1978] 114 ITR 155, that the assessment deserved to be set aside.' In' that case also [the Commissioner (Appeals) noted] the question of other legal heirs being not made parties to the assessment proceedings, was not raised before the ITO. It was raised for the first time before the AAC. Hence the Commissioner (Appeals) held that the assessment had to be set aside, the infirmity having crept in after the filing of the return. The Commissioner (Appeals) was of the view that a fresh inquiry by the ITO was necessary as regards the other legal heirs to be brought on record as parties to the assessment proceedings, unless of course the inquiry showed that Laxmi Chand had been managing the entire estate. The assessment was, therefore, set aside but not annulled. The assessee is in further appeal.

11. After giving due consideration to the submissions raised before us and the material on record, we find that the order of the Commissioner (Appeals) does call for interference. Various authorities were cited before us by the parties. Attention was invited to the provisions of Section 159 of the Act in particular. Reliance was also placed on the following decisions by the learned counsel for the assessee : Dr. S.D.Suri v. WTO [1982] 1 ITD 686 (Delhi) and ITO v. Narain Dass [1979] 52 Tax. (6)-113 (Delhi-Trib.). For the department the following decisions in particular were relied upon : Ganashyamdas Jatia v. ITO [1973] 87 ITR 683 (Cal.) and G.D. Jatia v. CIT [1980] 122 ITR 1023 (Cal.).

12. So far as Dr. S.D. Suri's case (supra) is concerned, the facts are distinguishable. There the assessment was required to be made on the executor of the will of the deceased in terms of Section 19A of the Wealth-tax Act, 1957 but the assessment was actually made on the legal heir of the deceased. In fact the estate duty assessment had actually been made on the executor. Contesting the wealth-tax assessment made on the legal heir, the assessee contended before the AAC that the assessment made on the legal heir should be annulled. The AAC, however, merely set aside the assessment. But the Tribunal held that there could not have been any assessment on the legal heir at all as the deceased had left a will wherein an executor had been appointed for the administration of the estate of the deceased. In the light of Section 19A, the assessment made on the legal heir was held to be void ab initio and was annulled. This case does not help the assessee. In the case before us the assessment was made in the business name of the deceased but the return was filed by Laxmi Chand, one of the legal heirs.

13. The second case is Narain Dass (supra). In this case one Panna Lal who died on 9-1-1971 had not filed any returns of income for the assessment years concerned. The ITO issued notices under Section 148 of the Act for these assessment years, after the death of Panna Lal to one of the sons of Panna Lal, viz., Narayan Das. Narayan Das, accordingly, filed returns of income for the three years. Assessments were then completed by the ITO for the first two years under Section 143(3) and for the third year 1969-70, under Section 144. Narayan Das contended that all the assessments were bad in law as notices under Section 148 were not served on all the legal heirs. The Tribunal observed that the ITO had to make a diligent inquiry as to who was the legal heir of the estate of the deceased and who was actually in de facto possession. The legal representatives then had to be brought on record and proceedings continued in the name of all the legal representatives. It noted that in the case before it the ITO did not make any inquiry as to who were the legal heirs of Panna Lal. The facts on record showed that the ITO knew that there were more than one legal heirs, but he did not make any inquiry. On the contrary he made the assessments by impleading only one of the legal representatives. In such circumstances it was the duty of the Tribunal to annul the assessment. The Tribunal, accordingly, annulled the assessments.

14. The above decisions of the Tribunal were in fact based on the following two decisions : (1) Jai Prakash Singh v. CIT [1978] 111 ITR 507 (Gauhati) and (2) Sajjan Kumar Saraf's case (supra). This decision of the Tribunal strongly supports the stand taken for the assessee. The relevant facts available from the record before us are as under : (a) After the death of Puran Chand on 24-3-1974, one of his legal heirs, viz., Laxmi Chand filed a return of income on 16-6-1975.

(b) The letter dated 11-4-1981 (submitted to the ITO in the second assessment proceedings), clearly described Laxmi Chand as one of the legal heirs of the late Shri Puran Chand.

(c) In spite of the above specific intimation, assessment was completed under Section 143(3)/144B on 24-9-1981 and in this assessment the name of the assessee was shown as 'Shri Laxmi Chand legal heir of late Puran Chand ...' (d) There was no discussion in the said assessment order as regards the other legal heirs being impleaded even though the names of all the other legal heirs had been furnished to the ITO in the letter of 11-4-1981 itself.

15. Now the above facts operate strongly against the revenue-Firstly, the assessment ought to have been made impleading all the legal representatives. In Jai Prakash Singh's case (supra), the Gauhati High Court considered a similar issue. One B.N. Singh died in April, 1967.

The relevant assessment years were 1965-66 to 1967-68. Return for 1965-66 was filed in March 1970 disclosing a net income of Rs. 1,90,178. Assessment was made on a total income of Rs. 4,09,770. Return for 1966-67 was filed in November 1970 disclosing income of Rs. 92,646.

Assessment was closed on a total income of Rs. 1,18,386. For 1967-68, the returned income (October 1971) was a loss of Rs. 3,702. Assessment was closed on a total income of Rs. 73,490.

16. From the assessment orders for all the above three assessment years it appeared, ten persons were described as legal representatives of the late B.N. Singh. Status taken in the assessment was 'individual'. The assessments were contested in appeal. The contention was that B.N.Singh was succeeded by ten legal representatives on his death, viz., three widows, three sons and four daughters. The fact of the death of B.N. Singh and the names of his successors and legal representatives were initimated to the ITO after the death of B.N. Singh. But all the legal representatives were not brought on record and they were not served with the statutory notices before the completion of the assessments. Notices were served only on Jai Prakash Singh, one of the legal representatives. Hence (it was contended) the assessments were illegal, invalid and without jurisdiction. The AAC did not accept this contention. He held that the ITO had merely committed an irregularity in the completion of the assessment by serving the notices on only one of the ten legal representatives. The AAC, therefore, set aside the assessment orders for the three years and directed the ITO to serve notices on all the legal representatives before completing the assessments. In further appeal the cont ention of the assessee was that the assessments should have been annulled instead of being set aside.

It was submitted that the AAC committed an illegality in setting aside the assessments and in not annulling them. The Tribunal also was of the view that the ITO's failure to issue notices under Section 143(2) to nine of the ten legal representatives was at best an irregularity and hence the AAC was justified in setting aside the assessments and in not cancelling them. Thereafter the issue came up for consideration before the Gauhati High Court.

17. In the Court's view violation of principles of natural justice, more particularly statutory principles of natural justice takes, away the jurisdiction of the authorities concerned to continue with the proceedings and pass orders and necessarily invalidates the proceedings and the orders passed therein. If the estate of a deceased 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 to represent the entire estate. If these were not done the assessment proceedings and assessment orders passed therein, would cease to be valid proceedings and valid orders in the eye of the law. In such a case, it is the legal duty of the AAC and the Tribunal to annul the assessments. 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 the assessment as laid down in Section 153 of the Act, by passing an order setting aside the assessment and directing completion of the assessments by issuing notices on the remaining legal representative. This decision of the Gauhati High Court strongly supports the objection raised by the assessee's learned counsel. As we have already noted, the ITO was informed of the existence of other legal representatives in the course of the assessment proceedings which are now being contested. In spite of this information, neither the ITO nor the IAC, to whom a reference under Section 144B was made, appears to have been conscious of the legal obligation to implead all the legal representatives. In such circumstances. as the Gauhati High Court put it in the case of Jai Prakash Singh {supra), it would be the legal duty of the Tribunal to annul the assessments.

18. The Commissioner (Appeals) has referred to the case of Sajjan Kumar Saraf as supporting the setting aside of the assessment rather than annulling it. In that case the facts were : one B.L. Saraf died on 9-7-1960. A notice under Section 22(2) of the Indian Income-tax Act, 1922 ('the 1922 Act') requiring him to file the return of income for the assessment year 1961-62 was issued in the name of B.L. Saraf, after his death, i.e., on 7-7-1961. In June 1965, Sajjan Kumar Saraf, as the legal representative of the deceased filed the return of income for 1961-62. Notices under Section 143(2) and Section 142(1) of the 1961 Act were issued to Sajjan Kumar Saraf as the legal representative of B.L. Saraf.

19. Before the Tribunal Sajjan Kumar Saraf contended that the notice under Section 22(2) issued to a dead person was bad in law and the return filed by Sajjan Kumar Saraf in 1965, was, therefore, non est ; and hence the entire assessment proceedings had to be quashed. The very foundation of the jurisdiction of the ITO stood vitiated because of the invalid notice under Section 22(2). The Tribunal ultimately set aside the assessment. It directed the ITO to make a fresh assessment in accordance with law and after impleading all the legal representatives of the deceased. The matter then went up to the Calcutta High Court.

The Court held that a notice issued within time under Section 22 to a dead person was a bad and invalid notice ; no return could be filed pursuant to a notice which was nonexistent in law. But where a return is filed within the time specified by a legal representative the ITO is not free to ignore the return. Where a return is filed by a legal representative in response to an invalid notice issued to the deceased, but the representative does not state that there are other legal representatives of the deceased, the return would not be invalid.

However, the assessment should be made only after bringing all the legal representatives on record.

20. We do not see how the above decision supports the Commissioner (Appeals) decision, on the facts of this case which are so patent from the record. No doubt the Court said that the return filed by Sajjan Kumar Saraf could be treated as a valid return and acted upon, but the Court made it clear at p. 158 that the book note of the important fact that Sajjan Kumar Saraf did not state originally that there were other legal representatives of the deceased and he filed the return as 'the legal representative'. The Court went on to note that its decision in this case was in consonance with the views expressed by the Gujarat High Court in the case of Chooharmal Wadhuram v. CIT [1971] 80 ITR 360.

Thus, it is apparent that the basic factual difference between Sajjan Kumar Saraf and the instant case is that in the instant case specific intimation was given to the ITO before the completion of the assessment in appeal here about the names of the other four legal representatives of late Puran Chand. This difference takes the instant case out of the ratio of Sajjan Kumar Saraf. In this context it would be useful to refer to the decision in Chooharmal Wadhuram's case (supra) also.

21. In the above case one Chooharmal Wadhuram died on 28-8-1952. The assessment years involved were 1946-47 and 1947-48. Chooharmal was doing business in partnership with one Muljibhai in the name of Daulat Ram Chooharmal at Karachi. This partnership was dissolved in November 1948. Chooharmal and Muljibhai came to India after partition. There was an account in the name of 'Daulat Ram Chooharmal Vahiwatkarta Shah Muljibhai Dahyabhai, Karachi' in the books of one Narandas Parshottamdas of Petlad. In this account there were credits in the previous years relevant for the assessment years 1946-47 and 1947-48.

The income-tax authorities started proceedings against Muljibhai with reference to these credits. Subsequently the Tribunal held that Muljibhai was responsible for only half the amounts credited and that the other half was to be accounted for by Chooharmal. In the meantime the ITO, Surat, started proceedings under Section 34(1)(a) of the 1922 Act against the heirs of Chooharmal as regards the amounts credited in the account of Daulat Ram Chooharmal for the assessment years 1946-47 and 1947-48. The legal heirs were described as an 'association of persons' by the ITO in his proposal to the Commissioner for approval of the action under Section 34(1)(a). Notice for the assessment year 1946-47 was served on 29-3-1955 and that for 1947-48 on 29-3-1956. The notices were issued in the name of 'Chooharmal Wadhuram, by his legal representatives Shri Daulat Ram'. The notices were served on Daulat Ram. It was Daulat Ram who attended in the course of the proceedings.

Assessments initially completed under Section 23(4) of the 1922 Act were set aside by the AAC in February 1958. The AAC directed the ITO to make fresh assessments after giving the assessee an opportunity of being heard. These fresh assessments were again contested. The question that survived for being answered by the Gujarat High Court was-whether the proceedings under Section 34 (1)(a) on the two assessment years were validly initiated by serving the notices under Section 34(1)(a) on Daulat Ram who was only one of the legal heirs of the deceased and whether the ITO initiating the proceedings believed after diligent and bona fide, inquiries that Daulat Ram was the sole legal representative of Chooharmal 22. The Tribunal in fact had called specifically from the department for evidence on the above aspect. After examining the evidence it found that the ITO could not have believed Daulat Ram to be the sole representative of Chooharmal before initiating the proceedings against the legal heirs of late Chooharmal ; and that the ITO obviously knew that there were other legal representatives apart from Daulat Ram because in the very proposal put up for approval of action under Section 34(1)(a) to the Commissioner, the ITO described the assessee as 'Chooharmal Wadhuram, legal representatives--Daulat Ram'. On the ITO's diligent and bonafide inquiry that was required, the Tribunal found that there was no inquiry, presumably because, the ITO felt that it was enough to proceed only against one of the legal representatives ; and hence there was no evidence of any inquiry having been undertaken. In fact before the Tribunal it was contended for the department that the conduct of Daulat Ram in the course of the inquiries that preceded the actual initiation of the proceedings under Section 34(1)(a) eliminated the necessity for such an inquiry by the ITO. It was also submitted for the department that Daulat Ram at no stage pointed out that he was not the only representative of the deceased and that the proceedings should also be initiated against other representatives. The Tribunal, however, was of the view that the errors of omission and commission, if any, committed by Daulat Ram in the course of the inquiry which preceded the initiation of the proceedings were not germane to the issue in dispute.

The subject matter of the inquiry was whether the ITO believed Daulat Ram to be the sole representative of the deceased and whether he made diligent and bona fide inquiry in the matter. There was no evidence also to show that the ITO could believe or did believe that Daulat Ram was the sole representative of the deceased. In fact the evidence on record pointed to the contrary.

23. The Gujarat High Court considered the issue. In its view, where a person dies leaving more than one legal representative, the ITO has to serve notices under Section 22(2)/34 (as the case may be) on all the legal representatives. If the notice is served on only one legal representative there would be no complete representation of the estate and the proceedings will be wholly invalid. The Court further noted that in cases where there are several legal representatives, one of them may represent the whole interest of the deceased and in such a case there being complete representation of the interest of the deceased before the ITO, the assessment made would bind the estate of the deceased. Such cases may arise, for example, where one legal representative is managing the entire estate of the deceased. He, therefore, completely represents the interest of the deceased. The Court also confirmed the Tribunal's view that where the ITO bona fide and diligently believes one or more persons to be the only legal representatives of the deceased and initiates proceedings by serving notices on them and subsequently it is found that besides those served, there were also other legal representatives of the deceased, there is no reason why in such cases the general rule evolved in the field of civil law should not be applied and the proceedings may be held to be valid. The Court also held that the service of the notice on Daulat Ram alone was not sufficient to bind the estate of Chooharmal Wadhuram as Daulat Ram did not completely represent the estate of the deceased and the assessment of the income of the deceased was not in compliance with the requirement of Section 24B(2) of the 1922 Act and that the reassessment orders under Section 34(1) were not valid even against Daulat Ram, 24. The decisions cited for the revenue remain to be considered now.

The first is Ganashyamdas Jatia's case (supra). This was a decision of the Calcutta High Court. The Court held here that where a person dies after notice is served on him under Section 34(1 A) but before furnishing the return, it is not necessary that a fresh notice under that provision should be issued on his legal representatives ; that Sub-section (2) of Section 24B (corresponding to Sections 2(29) and 159 of the 1961 Act), mentions Section 34(1 A) but no specific mention of the provision was made in Subsection (3) of Section 24B ; that, however, Section 24B(3) provides for a situation where a person dies without furnishing a return which he is required to furnish under the provisions of Section 22 ; that Section 34(1A) provides that a notice might be served containing all or any of the requirements which may be included in Section 22 ; and that hence where a notice has been served on a person under Section 34(1 A) further proceedings can be taken against the legal representatives of such person under Section 24B(3) without issue of a fresh notice. We do not find this case to be of any assistance to the revenue. The controversy now before us, was not there before the Calcutta High Court.

25. The second decision cited for the revenue also involves G.D. Jatia.

This is, however, in G.D. Jatia's case (supra). One K.L. Jatia, died on 19-1-1958. In his assessment for the year 1945-46 (relevant previous year being 30-10-1943 to 17-10-1944) total income was determined atRs. 37,269. Subsequently on receipt of information that the income of the assessee exceeding Rs. 1 lakh had escaped assessment for this year, the ITO issued a notice under Section 34(1 A) in March 1956. After K.L.

Jatia's death (in January 1958) the ITO assessed the income for this year.and determined the total income at Rs. 22,18,546. The legal representatives of K.L. Jatia appealed against the assessment order and contended that the reassessment proceedings could not have been initiated without serving fresh notices on the legal representatives and the service of notice under Section 22(4) was invalid. The Court held that there was no specific provision in the Act whereby another notice under Section 34(1A) could be served on the assessee's legal representatives. The proceedings could be validly continued and reassessment could lawfully be made on the legal representatives. Since in spite of the notice under Section 34(1A) the assessee (K.L. Jatia) did not file any return, the ITO could under Section 24B(3), after his death, make the reassessment calling upon the legal representatives to furnish accounts, documents or other evidence which he could have required from the deceased assessee under Sections 22 and 23. The notice under Section 34(1A) was to be equated with a notice under Section 22(2) and the preconditions laid down in Section 24B(3) could be said to exist and hence the reassessment and the notices under Section 22(4) of the 1922 Act on the legal representatives were valid.

Here again we find, the specific controversy before us, was not before the Calcutta High Court. To repeat, the controversy before us is whether in the context of Sections 2(29)/159 of the 1961 Act, all the legal representatives known to the ITO were or had to be impleaded in the assessment proceedings in dispute before us. Hence this decision in G.D. Jatia's case (supra) is also not relevant.

26. On a consideration of the position in law we find that the assessment will have to be annulled on the ground that all the legal representatives known to the ITO were not impleaded.

In fact the only way in which the impleading of only one of the legal heirs, viz., Laxmi Chand could be justified in law and the assessment upheld on that score is for the revenue to show that Laxmi Chand was managing the entire estate of the deceased and, therefore, completely represented the interest of the deceased. So far as the Commissioner (Appeals) order is concerned all that he says is that Laxmi Chand was his only major son. This was in fact controverted for the assessee before us. Shri Chopra, the learned counsel for the assessee, pointed out that when the return was filed on 16-6-1975 there were two major sons, viz., Laxmi Chand and Vijay. In the assessment order itself the ITO records that late Puran Chand carried on business in kirana goods and that he also earned income from commission as well as from property. Apart from this there is apparently no mention or finding made by the ITO to that effect that Laxmi Chand was managing the estate of the deceased and, therefore, completely represented the interest of the deceased. The learned counsel for the assessee in fact referred to the objections taken by the assessee to the draft assessment order of the ITO for this year in the proceedings under Section 144B. This (as already noted) is at page 6 of the assessee's paper book. This is dated 11-4-1981 [see paragraph 5]. This brought to the notice of the ITO and the IAC that apart from Laxmi Chand other legal heirs were Sarbati Devi widow of the deceased as well as Vijay, Sanjay and Ajay, three other sons of the deceased. Specific attention of the IAC was drawn to the claim at the draft assessment was not in conformity with requirements of the Act. The Commissioner (Appeals) also noticed this and described it as a very cryptic mention [see paragraph 10]. This letter of 11-4-1981 no doubt submit (towards the end) that Laxmi Chand prays for a personal hearing and opportunity before the IAC so that the could make a complete and proper representation in the matter of his objections and submissions to the draft assessment order. Firstly, this could not be taken to mean that Laxmi Chand conceded that he represented the interest of the deceased completely. If the factual position was otherwise, the conduct of Laxmi Chand in this regard would be irrelevant. His errors of commission and omission would not improve matters for the revenue. This was the view of the Tribunal in Chooharmal Wadhuram and the conclusion of the Tribunal there was upheld by the Gujarat High Court.

27. It was noted earlier that the Commissioner (Appeals) recorded that the ITO's finding that Laxmi Chand managed the estate fully 'was not backed by sufficient material'. In fact the Commissioner (Appeals) recorded the above finding after noticing the report of the ITO dated 27-12-1982 filed before him. This report had made the following points (page 8 of the paper book) : (i) The firm Puran Chand Laxmi Chand was the sole proprietary concern of late Puran Chand. After his death the assets of the concern were taken over by Laxmi Chand and three minor sons. A partnership firm under the same name and style was formed. It could, therefore, be said that Laxmi Chand was managing the entire estate of the deceased.

(ii) The record also showed that a power of attorney was filed on behalf of Laxmi Chand in the course of the assessment proceedings.

(iii) It was, thus, evident that Laxmi Chand, the eldest son of the deceased, had taken over the assets of his father's concern and that he more than adequately represented the estate of the deceased.

Hence, the assessment made on him as legal representative was in compliance with law.

The Commissioner (Appeals) was, presumably not inclined to accept the ITO's conclusion above. In his view that conclusion was not backed by sufficient material [see paragraphs 9 and 10]. Even otherwise in item (i) above the ITO reports that the assets of late Puran Chand were taken over by all the sons. In item (iii) above the ITO reports a contrary fact, viz., the assets were taken over by the eldest son.

28. In the course of the hearing before us the learned counsel for the assessee submitted that the factual position was as follows : (a) Puran Chand died intestate leaving behind his widow, Laxmi Chand, a major son, and three minor sons. His estate devolved on the above five persons in accordance with Section 8 of the Hindu Succession Act.

(b) The above five persons took over their respective shares as tenants-in-common.

(c) A partnership was constituted in terms of a deed drawn up on 28-3-1974 with effect from 24-3-1974, between Laxmi Chand and Hukam-chand, a stranger, in the name of Puran Chand Laxmi Chand. To this partnership were admitted the minor sons of late Puran Chand.

Hukam Chand retired from the partnership on 4-6-1974, when Vijay, one of the three minors attained majority. Thereupon Laxmi Chand and Vijay became the partners of the firm and the remaining two sons (minors) stood admitted to the benefits of the partnership.

(d) An application for registration was also filed in Form No. 11-A on 24-12-1974 for the assessment year 1975-76.

(e) There was no material on record to show that the ITO bona fide believed that 'there was only one legal representative of the deceased'.

29. We find that the Commissioner (Appeals) came to the conclusion that the ITO's finding of Laxmi Chand representing the estate completely was not backed by sufficient material. That being so the Commissioner (Appeals) was not correct in merely setting aside the assessment order.

He should have annulled the assessment on the ground that the ITO failed to show that Laxmi Chand was managing the estate and could, therefore, be set aside to represent the estate completely. This is because in absence of evidence (brought on record by the ITO before the completion of the impugned assessment) to establish that Laxmi Chand represented the entire estate, the assessment made in his so name as legal representative is a nullity in law. It is the legal duty of the Tribunal, as observed by the Gauhati High Court in Jai Prakash Singh's case (supra) to annul such an assessment. As the Court explained there, the appellate authorities cannot nullify the provisions of the limitation for assessment as laid down in Section 153 by passing an order setting aside the assessment and directing completion of the assessment by issuing notices on the remaining legal representatives.

We would, therefore, annul the assessment.