Commissioner of Income-tax Vs. Brijraj Singh - Court Judgment

V.K. Singhal, J.

1. The assessment made for the years 1971-72 to 1974-75 has been challenged by the Revenue in this case by raising the following question of law :

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessments made in the status of an individual on the returns having been filed in the status of a Hindu undivided family without giving notices under Section 139(2) of the Income-tax Act, 1961, are vitiated ?'

2. Shri Sumer Singh, the ex-ruler of Kishangarh, expired on February 16, 1971. The original return in respect of the assessment year 1971-72 was filed on June 30, 1971, by Shri Brijraj Singh, minor in guardianship of Rajmata Gita Kumari, as legal heir of the late Shri Sumer Singh. The said return was filed in the status of an individual. Subsequently, a revised return was filed with the claim that the status of the assessee was that of a Hindu undivided family originally and after the demise of the late Shri Sumer Singh, that status should be allowed to continue. The Income-tax Officer came to the conclusion that the assessee was assessed all through as an individual and no probate was taken till June 30, 1971, the accounting year for which the assessment was made and, therefore, he came to the conclusion that the income accrued or arisen belonged to the assessee in his individual capacity. The Income-tax Officer held that the law of primogeniture is applicable and it was an impartible estate by custom aswell as by law in the context of corpus and income. The Income-tax Officer while assessing in the year 1972-73 also found that right from 1950-51 assessment years, i.e., from the inception of income-tax law in Rajasthan and 1957-58, i.e., the inception of the Wealth-tax Act, the assessee, namely, the late His Highness, had been assessed as an individual. Shri Brijraj Singh, after the death of his father, being the eldest son, as per rule of primogeniture, stepped into the shoes of the late His Highness, Shri Sumer Singh. He was recognised as Ruler of the former Kishangarh State by the President of India and the Rajtilak ceremony-was performed for Shri Brijraj Singh on February 29, 1971. The estate from which the income has arisen is an impartible estate according to the rule of primogeniture. It was found that since the eldest son acquires the right and it has not been shown that he has renounced or surrendered his rights, the estate held was that of individual on February 16, 1971. Prithviraj Singh was minor and other members not being coparceners were not entitled to claim partition and as such there could be no Hindu undivided family in existence in accordance with K.R. Ramachandra Rao's case : [1963]48ITR959(Mad) . It was held that the impartible estate has to be considered as an individual property and, therefore, in accordance with Section 27(ii), the income which has arisen will have to be assessed in the status of an individual. The assessments for the assessment years 1972-73, 1973-74 and 1974-75, were completed in the status of an individual. The matter was challenged before the Appellate Assistant Commissioner of Income-tax, Ajmer Range, Ajmer, and it was found that the returns for the assessment year 1971-72 were filed on June 30, 1971, in the status of an individual for the period ending on March 31, 1971, under the signatures of Smt. Gita Kumari, widow of the late Shri Sumer Singh, and mother and guardian of Brijraj Singh. The subsequent return which is said to have been filed on July 10, 1971, in the status of Hindu undivided family was not found on record and, accordingly, a duplicate return was filed on February 27, 1974, and the assessment was completed on February 27, 1974, by the Income-tax Officer, Ajmer Range, Ajmer. It was submitted before the Appellate Assistant Commissioner that it was under a mistake of law that the return of income as well as of wealth was filed by the late Shri Sumer Singh in the status of an individual, though he was adopted in the family and all the properties, movable or immovable of Kishangarh, ultimately devolved on him at the time of adoption. The late Shri Sumer Singh was survived by his wife, two sons and two unmarried daughters and, therefore, it should be considered that the property being ancestral, it should be considered as Hindu undivided family property and the assessment should be framedin the status of Hindu undivided family. The Appellate Assistant Commissioner has given a finding that opportunity too was given to the assessee by the Income-tax Officer for deciding the status and even written arguments were submitted before the Income-tax Officer. The Appellate Assistant Commissioner came to the conclusion that Section 27(ii) of the Income-tax Act has provided that the holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate. Accordingly, it was held that for the purpose of income-tax, the status has to be taken as that of an individual. The appeal for the assessment year 1971-72 was accordingly dismissed.

3. In respect of the appeals for the assessment years 1972-73 to 1974-75, an additional ground of appeal was taken that since the returns were filed in the status of Hindu undivided family and remained pending, the present proceedings are barred by limitation. The Appellate Assistant Commissioner has held that in accordance with the provisions of Section 246(c) of the Act, an appeal is provided against an order where the assessee disputes the status and, therefore, even if the status is changed in the assessment proceedings, an appeal would lie and, in other words, the Income-tax Officer has jurisdiction to change the status and the only thing required to be seen is that the assessee should be given an opportunity and since the opportunity was given as mentioned above, no illegality was committed. The appeals were rejected for the subsequent years also.

4. When the matter was challenged before the Income-tax Appellate Tribunal, reliance was placed on the decision of this court in the case of CWT v. Ridhkaran wherein it was held that where the return has been filed in one status then the assessment cannot be completed without serving a notice under Section 14(2) in another status. In that case a notice, was issued in the name of Shri Ridhkaran Munnalal and Prithviraj for filing their wealth-tax return. The notice which was issued has not specified their status and the returns were filed by those persons in the capacity of the karta of the Hindu undivided family, The Wealth-tax Officer assessed in the status of individual. The High Court has held that it is Sections 16(1) and 16(3) which contemplate a return having been filed by the assessee and there can be no assessment under these sub-sections, if the assessee has not filed the return. If the assessee has not filed the return, then the assessment can be under Sub-section (5) of Section 16 and since the returns were filed in the status of the karta of the Hindu undivided family and no returns were filed in the status of individual, the assessment could not have been completed under Section16(3) of the Act. The status of individual and Hindu undivided family were considered as separate units and, therefore, it was held that without issuing fresh notices under Section 14(2) to file the returns, the Wealth-tax Officer exceeded his jurisdiction under Section 16 of the Act in framing the assessment in the status of individual on the returns which were filed in the status of Hindu undivided family.

5. On the basis of the above judgment, it was submitted that since no fresh notice was issued under Section 139(2) in the status of individual, the assessments which were framed were vitiated. The Tribunal, however, has observed that it is not disputed that opportunity of being heard was given before altering the status of the assessee from that of a Hindu undivided family to that of an individual.

6. Section 139(2), during the relevant period, was as under :

'In the case of any person who, in the Income-tax Officer's opinion, is assessable under this Act, whether on his own total income or on the total income of any other person during the previous year, the Income-tax Officer may, before the end of the relevant assessment year, serve a notice upon him requiring him to furnish within thirty days from the date of service of the notice, a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed.'

7. Sub-section (1) of Section 139 casts a duty on every person whose total income exceeds the limit prescribed under this Act to file the returns.

8. This court in Munilal Shivnarain Kothari v. CIT was seized of the matter where the return was filed in the status of a firm but the assessment was made in a different status as an association of persons. It was observed that the position that emerges after a comparative study of the provisions of the Income-tax Act, 1961, and the Indian Income-tax Act, 1922, and also of the Wealth-tax Act is that in the Income-tax Act, 1961, the Income-tax Officer can assess a person in a status other than the one in which the assessee had filed his or its returns and if the assessee is aggrieved by the assessment, in that status he can file an appeal against the order challenging his or its status. That being so, it is not necessary for the assessing authority to issue any notice under Section 139(2) or Section 142 or even Section 143 of the Act of 1961 to the assessee. A reference was also made to the provisions of Section 143(1) of the Act where the assessment could be completed on the basis of the return filed undersection 139 without calling the assessee. In the Explanation clause of Sub-section (3) of Section 143, it has been provided in Clause (1)(f) that, for the purpose of this section, an assessment under Sub-section (1) shall be deemed to be incorrect, inadequate or incomplete in a material respect, if the status in which the assessee has been assessed under Sub-section (1) is different from the status in which the assessee is properly assessable under this Act. This safeguard in the Explanation has been given because the order passed under Sub-section (1) of Section 143 was not appealable. Section 246(c) provides that the assessee may file an appeal in respect of status under which he has been assessed. On the basis of this provision, it was observed that this clearly goes to show that the Income-tax Officer has jurisdiction to assess a person in the status other than the one in which he has filed the return and if the assessee is dissatisfied by the assessment made under Section 143(1), he can object to it under Sub-section (2) of that section or he may file an appeal as provided under Section 246(c). The earlier decision of the Rajasthan High Court in the case of CWT v. Ridhkaran referred to above, was held not pertaining to assessment under the Income-tax Act and, therefore, not at all applicable.

9. In A. A. C. of I. T. v. B. Appaiah Naidu (Late) : [1972]84ITR259(SC) it was held by the apex court that where a notice has been issued to an individual, the Department cannot be permitted to change its stand later and plead that the assessment is to be made as 'karta' of Hindu undivided family.

10. The Andhra Pradesh High Court in the case of CIT v. D. Seshagiri Rao : [1990]182ITR24(AP) has held that where all the aggrieved persons are before the Income-tax Officer, then, for changing the status of the assessee, notice under Section 139(2) is not necessary. It was observed that there is no provision in the Income-tax Act or Rules providing that where the Income-tax Officer proposes to make an assessment in a status different from the one in which the return is filed a notice or a fresh notice, as the case may be, under Section 139(2) of the Act should be issued. Such a requirement cannot be also inferred from the principles of natural justice.

11. This court has subsequently in the case of CIT v. Suresh Chandra Gupta 0065/1987 has held, relying on the decision of CWT v. Ridhkaran that when the return is filed in a different status then a notice under Section 139(2) is necessary.

12. Normally, we would have referred this matter to a larger Bench to resolve the controversy since the judgment given in the case of CIT v.Suresh Chandra Gupta [1988] 173 ITR 407 (Raj) was contrary to the view taken by this court in the case of Munilal Shivnarain Kothari v. CIT . In the case of Munilal Shivnarain Kothari the decision in CWT v. Ridhkaran was specifically held not applicable to the Income-tax Act, 1961, whereas in the case of CIT v. Suresh Chandra Gupta 0065/1987 the decision of CWT v. Ridhkaran was held applicable. In the case of CIT v. Suresh Chandra Gupta 0065/1987 the decision given by another Division Bench of this court in Munilal Shivnarain Kothari's case was not brought to the notice of the court. In the present case, since the individual who has filed the returns in the status of Hindu undivided family, was present before the Income-tax Officer and due opportunity was given to him for the change of status and on that point the Income-tax Tribunal has given a finding that 'it is not disputed that opportunity of being heard was given before converting the status of the assessee from Hindu undivided family to that of individual'. The requirement of the decision in CWTv. Ridhharan and CIT v. Suresh Chandra Gupta 0065/1987 and Munilal Shivnarain Kothari are completely fulfilled. Since the returns were filed for the assessment year 1971-72 initially in the status of individual and it was only in the subsequent years that the returns were filed in the status of Hindu undivided family, the assessee, as the legal heir of the deceased Maharaja Sumer Singh, was given due opportunity of being heard. The legal heir, Shri Brijraj Singh, on whose behalf the returns were submitted, had been given the opportunity in respect of returns already submitted and, therefore, the principles of natural justice as well as the requirement of Section 139(2) can be said to have been complied with. Shri Brijraj Singh had submitted the objections before the Income-tax Officer and detailed submissions were made and, therefore, it cannot be said that any prejudice was caused. The finding which has been recorded by the Tribunal is one of fact that it is not disputed that opportunity of being heard was given before altering the status of the assessee from that of a Hindu undivided family to that of an individual.

13. In the two cases of CWT v. Ridhkaran and CIT v. Suresh Chandra Gupta 0065/1987 no opportunity appears to have been given and, therefore, we are of the view that the Income-tax Appellate Tribunal was not justified in holding that the assessments made in the status of individual on the returns having been filed in the status of Hindu undivided family are vitiated. We are of the opinionthat it has wrongly been mentioned that no notice was given under Section 139(2), because we are of the opinion that the opportunity which was given to the assessee for change of status amounts to a notice.

14. Accordingly, the reference is answered in favour of the Revenue and against the assessee.