1983 PLP 184 (PTD)

ABRAR HUSSAIN NAQVI (MEMBER).‑These are three appeals filed by an assessee relating to the assessment years 1975‑76 and 1977‑

78. Two appeals relating to the assessment years 1975‑76 and 1977‑78 relate to the penalty imposed under section 91(1) of the Income‑tax Ordinance while the third appeal relating to the assessment year 1977‑78 is against the re‑assessment made under section 34 of the Repealed Income‑tax Act, 1922.

2. We take up the appeal relating to the assessment year 1977‑78 against the re‑assessment proper first. Brief facts of the case are that the assessee was a dealer in betel leaves. Original assessment was completed by the I. T. O. on 17‑4‑1978 under section 23(4) as the assessee ,had not filed the return. The I. T. O. estimated the sales at Rs. 2,70,003 and by applying G. P. rate of 15 % and allowing expenses at Rs. 500 net income was estimated from business at Rs. 32,

000. Income from property was estimated at Rs. 3,

000. Thus, total income was worked out at Rs. 35,

000. Subsequently the assessee's case was re‑opened under section 34 of the Repealed Income‑tax Act on the ground that the assessee had imported betel leaves of the value at Rs. 6,26,

118. On the basis of this information the case of the assessee was re‑opened under section 34 of the Repealed Income‑tax Act and the net income was assessed at Rs. 61,500.

3. It may be stated that the assessee had died as back as on 25‑5‑1977. It is, therefore, obvious that even original assessment was completed against a dead person. Then the case was re‑opened under section 34 a notice was issued to Messrs Haji Ghulam Zamin & Sons, Lahore. The first notice appears to have been served on one M. Ali on 28‑11‑1978 and second notice on one Adalat Hussain on 6‑3‑1979. The second notice was also acknowledged by Jalal‑ud‑Din alleged A. R. of the assessee and return .was also filed which was signed by Qamar Din son of the assessee. In the return it was stated that it was being filed by legal representative of Ghulam Zamin who had died on 29‑5‑1977. On 10‑3‑1979, the statement of aforesaid Qamar‑ud‑Din was recorded by the I. T. O. in which inter alia it was stated that he was the eldest son and one of the legal heirs of late Ghulam Zamin alongwith others. He also undertook to pay the arrears of tax liability of late Ghulam Zamin or current demands created by the Income‑tax Department. The case was adjourned to 11‑3‑1979 and on that date Qamaruddin was required to file his identity card and particulars of the death of the deceased. On 11‑3‑1979, as is evident from the order sheet entry, a list of legal hairs of Late Ghulam Zamin was filed. It also appears from the order sheet entry dated 14‑3‑19/79 that the assessing Officer required from the A. R. of the assessee inter alia, to file an undertaking of the legal heirs of the deceased to pay the Income‑tax demand to be created by the Income‑tax Department. The case was adjourned to 18‑3‑1979 but it does not appear that any such undertaking was fled. It is in this background that this appeal has been filed challenging the validity of the reassessment order on the ground that all the legal heirs had not been issued requisite notices under section 34 of the Repealed Income‑tax Act.

4. It was contended by the learned counsel for the assessee that under section 24‑B(2) read with section 34 of the Repealed Income‑tax, Act a notice had to be issued to all the legal heirs of the assesses which was a sine qua non for starting the proceedings against the assessee. It was contended that by operation of subsection (2) of section 24‑B all the legal heirs of the deceased become the assessee on whom assessment was to be completed. The aforesaid subsection (2) is reproduced below:‑ "Where a person dies before the expiry of the time limit prescribed under subsection (14) of section 22 or before be is served with a notice under subsection (2) of section 22 or section 34, as the case may be, his executor, administrator of other legal representative shall, on the serving of the notice under subsection (2) of section 22 or under section 34, as the case ma, be comply therewith, and the Income‑tax Officer may proceed to assess the total income of the deceased person as if such executor, administrator or other legal representative were the assesses." From perusal of the above subsection it is clear that after he death of an assessee, the tax liability devolves upon his legal representatives and it is they who are liable to pay tax on the income of the deceased‑assesses. Section 34 requires that in the given circumstances an I. T. O. can assess or re‑assess the income of an assesses but he has to serve a notice on the person liable to pay tax on such income. The words re‑produced below from section 34 are conspicuous."....the Income‑tax Officer may serve on the person liable to pay tax on such income, . . . . . a notice containing The notice has to be served on a person liable to pay tax. The word assessee has not been mentioned here. After the death of an assessee, the liability to pay tax is on his legal representatives. Admittedly, in the present case there are more legal representatives than one, a list of which bad been placed before the Income‑tax Officer, but in spite of it no notice under section 34 has admittedly been issued to all the legal representatives of the deceased. Since no proceedings under section 34 could legally be started without first serving a notice under that section on all the persons liable to pay tax, the proceedings under section 34 for re‑assessment and consequently the order passed by the I. T. O. is void. The learned D. R. attempted to argue that one of the legal representatives had undertaken to pay the liability of tax demand and, therefore, no such notice under section 34 was necessary to be issued to other legal representatives. It was also contended that in section 24‑B(2) quoted above the word `legal represen tative' has been used which indicates that any one of the legal representatives could be treated as assesses in place of the deceased‑person. Both these contentions have no force. It is settled law that consent of a party cannot confer jurisdiction if the authority concerned otherwise had none. Since the law requires all the persons liable to nay tax bad to be served with the notice, therefore, notwithstanding the undertaking of one of such persons it would not absolve, the I. T. O. from issuing the notice under section

34. It tray be noted that the I. T. O. himself appears to be dissatisfied with the undertaking of one of the sons of the deceased and it was for this reason that he required the A. R. to produce undertakings from other legal represen tatives' as well. In similar circumstances, Kerala High Court (India), in the case of Suseala Sadartandan v. Additional Income‑tax Officer, Kozhikode, and another a similar view was taken. In that case one Sri S. P. Sadanandan had died leaving a will in which more than one executors were appointed. In that case after the death of the deceased the case was reopened under section 34 and a notice was issued to late S. P. Sadanandan by legal heirs, E. D. Sadanandan and other Koahikode". The return was filed on behalf of the legal heirs of the deceased but signed by only one of the some of the deceased on the basis of which re‑assessment was made and the assessment was maintained up to the level of the Income‑tax Appellate Tribunal. The matter was taken to the High Court by a writ petition tiled by the widow of the deceased and the proceedings were challenged on the ground that the notice had not served on all the executors and legal representatives of the deceased. In that case as well as the Department Inter alia took up the stand that notice issued to one of the executors was sufficient in law as the estate of the deceased had been properly represented. The question posed by the High Court was "whether in this case the proceedings taken for re‑assessing, L, issuing notice only to one of the heirs, namely. E. D. Sadanandan, in any way invalidated because of the non‑issue of the notice to the other legal heirs including all the executors of his estate". The High Court quoted with approval the following paragraph of another decision of the Madras High Court in the case of E. Alfred v. First Additional Income‑tax Officer Sales (i) it cannot be doubted that the liability imposed by section 24‑B(2) on the legal representatives of a deceased attached itself to all the legal representatives of the deceased on whom notices are served. It should also be clear that all such legal representatives are liable to he served with notice under section 24‑B(2)". "It was observed by the High Court that the proceedings taken by the Income‑tax Department for purposes of re‑assessment by issue of notice only to one of the legal representatives under section 34 cannot be sustained". The High Court in the aforesaid case reached the following conclusion which runs as under:‑ "Therefore, it will follow that the proceedings taken in this case by the Department by issuing notice only to one of the executors in question under section 34 is invalid and it further follows, on the basis of the decision of the Supreme Court in Nurayana Chetty v. Income‑tax Officer, Nellore (1959) 35.I T R 388, that the further orders of assess ment based upon such an invalid notice will result in the assessment themselves being considered illegal or void."

5. In regard to tire objection as to whether the word used III sec tion 24‑B(2) legal Representative' has a singular or plural expression. The High Court, in the aforesaid case, reproduced the following paragraph from the decision of B. Alfred v. First Additional Income‑tax Officer, Sales;‑ "In other words, the expression `legal representative' means and include4 one person as well as several persons according as they represent the whole interest of the deceased person. Their Lordships of the Privy Council in Kharajmal v. Daim 1904 I L R 32 Cal 296: P. C. . . . Ordinarily, therefore, it is necessary to implead all the legal representatives of a deceased person, on the record and a few of them do not represent the whole interest of the deceased and if all are not made parties to the suit or appeal, it results in an abatement of those proceedings . . . . . . . ." in reply to the argument that in the terms of section 2a‑B(2) the Legislature did not intend to include all the legal representatives, the High Court observed", "We do not see any reason to put such a restricted interpretation on the provisions contained in section 24‑B(2)".

6. For the foregoing reasons we have no option but to hold that notice having not been issued by the I. T. O. to all the legal representatives of the deceased under section 34 of the Repealed Income‑tax Act while he had the knowledge that there were other legal representatives, the proceedings taken by him under section 34 of the Repealed Income‑tax Act, are void conse quently the order passed by dim is also void and illegal. We, therefore, annul the assessment order.

7. Penalty Appeals.‑Admittedly the penalties have been imposed after the death of the deceased. As for the assessment year 1977‑78 the assessment itself having been annulled, the penalty is also to be cancelled. As for the penalty in the assessment year 1975‑76, admittedly it was imposed after the death of the deceased and without providing an opportunity of being beard to all the legal representatives of the deceased. This penalty is thefore, also cancelled.

8. For the foregoing reasons all the appeals of the assessee are accepted. Appeal accepted.