H. N. SETH, J.-Controversy in this reference under section 256 (1) of the Income-tax Act, 1961, concerns the assessm ent of Lala Madan Lal Agarwal (Hindu Undivided Family), for the assessment year 1946-47.
2. After obtaining approval of the Board for initiating proceedings to assess the escaped income of the assessee for the year 1946-47, Income-tax Officer, Aligarh issued following notice which was dated 29th September, 1962 to Sri Madan Lal Agarwal :--- "Whereas I have reason to believe that your income---------..Chargeable to tax for the assessm ent year in respect of which your are assessable (sic) 1946-47 has escaped assessment within the meaning of section 147 of the Income-tax Act, 1961 ; I, therefore, propose to assess/re-assess the income---------------depreciation allowance for the said assessm ent year and I hereby require you to deliver to one within 30 days from the date of service of this notice, a return in the prescribed form of your income------------..In respect of which you are assessable for the said assessment year.
(2) This notice is being issued after obtaining the necessary satisfaction of the Commissioner of Income-tax, U. P. Lucknow/the Central Board of Revenue.
(Sd.)
J. S. Agarwal.
Income-tax Officer, B-Ward Aligarh."
On receipt of the notice Sri Madan Lal Agarwal, on 12-11-1962, filed a return of his individual income pertaining to assessm ent year 1946-47 'under protest. The Income-tax Officer thereupon informed Sri Madan Lal Agarwal that the notice dated 29th September, 1962 related to his Hindu Undivided Family and that he should, instead of the return of his individual income, file the return of the income of his Hindu Undivided Family. At a later stage the proceedings were, under the orders of Commissioner of Income-tax, transferred to Income-tax Officer Special Survey Circle, Agra who on 30th March, 1962 framed an assessment order determining tae taxable income of the Hindu Undivided Family for the assessm ent year 1945-47 as Rs. 3,87,763. However, as before framing the assessm ent the Income-tax Officer, Special Survey Circle Agra did not give any notice or fresh opportunity to the assessee, the Appellate Assistant Commissioner, by his order dated 30th July, 1974 allowed the appeal filed by the assessee, set aside the assessment made by the Income tax Officer and remanded the case to him for making fresh assessment in accordance with law.
3. As before the Appellate Assistant Commissioner the assesses had also questioned the validity of the proceedings initiated under section 147/148 of the Income-tax Act and bad claimed that those proceedings deserved to be quashed, and its plea in that regard had not been accepted, the assesses took the matter up in appeal before the Income-tax Appellate Tribunal, Allahabad and raised following five issues before it.
(1) That the proceedings initiated against the assessee stood vitiated as no notice under section 148 of the Income-tax Act, 1961 was ever served upon it.
(2) That there was no Hindu Undivided Family styled as Lala Madan Lal Agarwal in existence in the relevant assessm ent year,
(3) That the Revenue having earlier proceeded to assess Sri Madan Lal Agarwal as an individual was precluded from assessing him in the status of Hindu Undivided Family.
(4) That the requisite belief of the Income-tax Officer enabling him to initiate proceedings under section 147 of the Income-tax Act was no belief in law, and
(5) That the Income-tax Officer at Aligarh and Agra had no jurisdiction in the matter.
4. The Income-tax Appellate Tribunal repelled all the pleas raised on behalf of the assessee and upheld the order of the Appellate Assistant Commissioner remanding the case to the Income-tax Officer for framing fresh assessm ent in accordance with law.
5. The assesses then moved the Income-tax Appellate Tribunal to under section 256 (1) of the Income-tax Act, and requested it to state the case and refer following questions of law for the opinion of this Court :--
(1) Whether, on the facts and in the circumstances of the case, the assessment and the proceedings purporting to be under section 147 (a) are legally valid and maintainable ?
(2) Whether, the Tribunal was correct in law in holding that the irregularity in the relevant notice issued under section 148, did not vitiate and invalidate the said notice and the relevant re- assessm ent proceedings ?
(3) Whether, on the facts and in the circumstances of the case and having regard to the Tribunal's own finding that the action under section 148 was based on some information obtained by .The Income-tax Officer from the Directorate of Inspection, the Tribunal was correct in law in confirming the legality of the relevant re-assessment proceedings initiated under section 147 (a) and not under section 147 (b) ?
(4) Whether, on the facts and in the circumstances of the case, the assessment and the proceedings purporting to be under section 147 (a) are without jurisdiction ?
(5) Whether, the Tribunal's decision regarding the validity of the proceedings under section 147 (a) in the present case is vitiated by irrelevant and inadmissible material and failure to consider the relevant material ?
(6) Whether, there is material for the Tribunal's conclusion that (a) the alleged "H. U. F. Existed in the relevant assessm ent year and had a joint nucleus" and (b) there existed an honest belief and material for the belief that the alleged income assessable in tire hands of the H. U. F. Had escaped assessm ent in the present case ?
(7) Whether, on the facts and in the circumstances of the case, the present assessment and the relevant proceedings are illegal and void on ground of double assessment of the same income and/or the option to assess the same income in the hands of individual having been already exercised by the Department ?
(8) Whether, the Tribunal has acted contrary to law and principles of natural justice in proceeding to decide the case on the basis of an alleged report by the I. T. O. Special circle. Amritsar, even though the assesses was neither confronted with it nor given any opportunity to have its say against the same ?
(9) Whether, on the facts and in the circumstances of the case and having regard to the Tribunal's own directions that the basis and material relied upon by the Department for initiating the present re-assessm ent proceeding against the alleged H. U. F. Should first be disclosed to the assessee, the Tribunal has acted contrary to law and principles of natural justice in adversely deciding the question of the validity of the relevant proceedings and not restoring that question to the lower authorities ?
6. The tribunal thought that the questions framed by the assesses were questions of law which arose out of its appellate order but then it opined that the purpose would be served by referring only one question, namely :-- Whether on the facts and in the circumstances of the case the proceedings initiated under section 147 (1) against the Hindu Undivided Family styled as Lala Madan Lal Agarwal was in accordance with law ?
It accordingly drew up a statement of the case and referred the aforementioned comprehensive question for opinion of the Court.
7. Learned counsel appearing for the assesses questioned the validity of the proceedings under section 147 (a) of the Income-tax Act, 1961 against it Inter alia on the ground that the notice under section 148 of the Income-tax Act, 1961 issued to the assesses is invalid.
8. It is now well-settled, and we do not consider it necessary to advert to numerous authorities in this regard cited at the Bar, that issuing-of at valid notice to the assesses under section 148 of the Income-tax Act within the period specified under section 149 of the Act is a condition precedent to the validity of any assessm ent to be made against such assesses under section 147 of the Act.
Accordingly, where no such notice has been issued or if the notice issued is not valid or the same has not been served on the assesses in accordance with law, it will not be possible to sustain that the eventual assessm ent made under section 147 on the basis of such notice. We may also take it that where the notice issued to an assessee is vague, it would not be possible to rely upon it to sustain an assessm ent made under section 147 of the Income-tax Act. In this regard two questions that arise for our consideration are (1) whether notice dated 29th September, 1962 issued under section 148 suffers front the vice of vagueness and (2) whether the said notice can after subsequently removing the vagueness be relied upon for sustaining an assessment under section 147 of the Income-tax Act.
9. Revenue's case is that the notice dated 29th September, 1982 was intended to be issued to Sri Madan Lal Agarwal in the status of Hindu Undivided Family. A perusal of the notice which has already been quoted above does not give any indication that it was addressed to Madan Lal Agarwal in his capacity as representing Hindu Undivided Family which purposes of the Income-tax Act is an entity different from Madan Lal Agarwal individual. On the face of it the notice purports to inform Madan Lal Agarwal that the Income-tax Officer had reasons to believe that his income should for the assessm ent year 1946-47, had escaped assessment and that he should file a return of his income for that year for which he was assessable. Prima facie the said notice could be interpreted by Sri Madan Lal Agarwal as having been issued to him as an individual. As it is Revenue's own case that the notice was intended to be issued to Madan Lal Agarwal in the status of Hindu Undivided Family, the said notice either was not ad to the assessee which was a Hindu 1Jadivi4ed Family, an entity different Madan Lal Agarwal individual, or, in any case, it suffered from the vice of vagueness and unless the subsequent action of tile Income-tax Officer in informing the assessee that he was required to file the return in his status as Hindu Undivided Family, could, under the law, have the effect of rendering the notice valid, it will not be possible to sustain the assessm ent made against the Hindu Undivided Family on its basis.
10. Submission of learned counsel for the assessee is that a notice contemplated by section 148 of the Income-tax Act is a jurisdictional notice for initiating proceedings for making assessment under section 147 of the Act and that any defect in that notice cannot be cured by anything don: by the I.-T. Authorities subsequently. In the instant case the notice was invalid and it continued to be so despite the fact that certain information was subsequently given to the assessee.
11. Learned counsel appearing for the Revenue, however, contended that even if it be that a notice under section 148 for initiating proceedings under section 147 of the Income-tax Act is a jurisdictional notice, but then the section nowhere says that notice under section 148 has to be in any particular form or that all the requirements which are includible in a notice under sub--section (2), of section 139 of the Act are to be communicated to the assessee at one and the same time.
According to him there should be no objection to the removal of vagueness in the notice subsequently.
12. In the case of Rama Devi Agarwalla v. Commissioner of Income-tax, West Bengal-III((1979) 117 I T R 256 : 1976 Tax L R 101), a Division Bench of the Calcutta High Court found that the notice issued by the Income-tax Officer in that case was vague in as much as the capacity or the status in which it had been issued was not clear from it. The contention of the learned counsel for the Revenue was that if the notice is read in the background of earlier correspondence and various proceedings which had gone on between the Revenue and the concerned persons, there would be no vagueness in the notice and the notice would be perfectly intelligible. Learned counsel also contended that in construing a statutory notice extraneous evidence may also be looked into to fill up any lacuna or cure the defect, if any, in such a notice and for that purpose he placed reliance on the case of Balchand v. I. T. O., Sagar ((1969) 72 I T R 197 : AIR 1969 SC 496). Learned Judges pointed out that what the Supreme Court had observed in Balchand's case was that the facts of that case revealed that even though there was some negligence in drafting the preamble of the notice it did not affect its validity because the notice itself clearly informed the assessee that he had to file a return of income assessable for the year ending 31st March, 1:946. Learned Judges further opined that the said Supreme Court's decision could not be treated as an authority for the proposition that if statutory n3tice under section 34 of the Indian Income-tax Act, 1922 and/or under section. 148 of the Income-tax Act, 1961 is ambiguous or defective or is otherwise invalid, the same can be cured by taking into account other documents, whereby such defect can be rectified and/or omissions can be filled in. Eventually the learned Judges repelled the plea of the Revenue and held the vague notice to be invalid and did not permit the vagueness therein to be removed with reference to other documents on the record.
13. Again in the case of Bhagwan Devi Saraogi v. Income-tax Officer `E' Warm Calcutta ((1979) 118 I T R 906 : 1976 Tax L R 513), a .Single Judge of the Calcutta. High Court following the dictum laid down in Rama Devi Agarwalla's case observed that if the notice itself is otherwise bad in law, the invalidity or illegality thereof cannot be cured by any act of the assessee to whom the said notice is issued.
14. The matter in our opinion stands concluded by a decision of the Supreme Court in the case of Commissioner of Income-tax Gujarat II v. Kurban Hussain Ibrahimji Mithiborawala ((1971)82 ITR 821 :1972 Tax LR 1013). In that case a notice was issued to the assessee under section 34 of the Indian Income-tax .Act, 1922 calling upon him to file his return for the assessment year 1948-49. Along with it a notice under section 22 (1) was also issued wherein the assessment year had been indicated as 1949-50. The assessee submitted a return for the year 1949-50 under protest and eventually the Income-tax Officer completed the reassessment of the assessee for the year 1949-50. The assessee claimed that the notice under section 34 was invalid as it did not relate to the year 1949-
50. The appellate Assistant Commissioner accepted the plea of the assessee and allowed the appeal on the ground that section 34 notice was invalid. In appeal by the Commissioner of Income-tax, the Tribunal reversed the decision of the Appellate Assistant Commissioner. It held that the irregularity in the notice did not in any manner prejudice the assessee. The matter then came up before the High Court which reversed the decision of the Income-tax Appellate Tribunal and held that the proceedings in the case stood vitiated. Notwith--standing the fact that the assessee had been afforded an opportunity and he had in fact filed the return for the year 1949-50 for which the Income-tax Department intended to proceed under section 34 of the Indian Income- tax Act, 1922, the Supreme Court observed that it was well settled that the Income-tax Officer's jurisdiction to reopen an assessm ent under section 34 depends upon the issuance of valid notice.
If the notice issued by him is invalid for any reason, the entire proceedings taken by him would become void for appellant of jurisdiction. By means of the notice under section 34 of the Income- tax Act, 1922 issued by the Income-tax Officer in that case he purported to reopen the assessment of the assessee for the assessm ent year 1948-49, but be had in fact re-opened it for the year 1949-
50. In the result the learned Judges opined that the High Court was right in holding that the notice in question was invalid and as such the Income-tax Officer had no jurisdiction to revise the assessm ent of the assessee for the year 1949-50. In this case their Lordships of the Supreme Court clearly did not permit the defect in the notice issued under section 34 of the Income-tax Act, 1922 to be cured by something that was contained in collectoral document, namely, the notice under section 22 of the 1922 Act as also by taking into account the fact that the assessee had in fact not been prejudiced as he bad filed the return of his income for the year for which lie was actually sought to be assessed. In this view of the matter, it will not be possible, as claimed by the Revenue, to hold that the defect in the notice dated 29-9-1962 stood rectified merely because subsequently the Income-tax Officer required the assessee to file the return in his capacity of Hindu Undivided Family instead of that of an individual.
The entire proceedings, therefore, initiated on the basis of such a notice stood vitiated.
13. Learned counsel for the Revenue placed reliance on three decisions of this Court in the cases of Gopaldas Parshottamdas v. Commissioner of Income-tax C. P. & V. P. ((1941) 9I T R 130 : AIR 1940 All 537), In re : Radhey Lai Balmukand ((1942) 10 I T R 131), and Muhammad Haneef v. Commissioner of Income-tax ((1955) 27 I T R 447). So far the cases of Gopaldaa Parshotamdas v. Commissioner of Income-tax C. P. & U. P. And In re : Radhey Lal Balmukund are concerned, they pertain to the notice for original assessm ent issued by the income-tax authorities under section 22 of the Indian Income-tax Act, 1922. In these cases it has been held that merely because while issuing a notice under section 22 calling upon an assesses to file a return under section 22 of the Income-tax Act, 1922 the Income-tax Officer does not indicate the capacity in which the assessee is to file the return, the notice and the proceedings following thereupon do not stand vitiated. It was pointed out in these cases that when the Income-tax Officer calls upon a person to file a return under section 22 or the Income-tax Act, 1922 he may not be in a position to know the capacity in which he may be receiving the income. In the circumstances it is for the assessee to himself inform the Income-tax Officer as to what income and in which capacity he had received the same. In our opinion these reasons will not apply to a case where the escaped income of an assessee is sought to be brought to tax. So far as the case of Muhammad Haneef v. Commissioner of Income-tax is concerned in that case the notice issued under section 34 of the Income-tax Act, 1922 did not specify the status in which it bad been issued to the notice. However, this Court construed the notice as clearly indicating the capacity in which it had keen issued to the notice, and held that in these circumstances, it could not be said that the notice was vitiated merely because it did not specify the status in which it had teen issued to the notice. This decision,, in our opinion, is clearly distinguishable inasmuch as in the instant case even if the notice is read as a whole it does not indicate that it has been issued to Madan Lal Agarwal in the status of Hindu Undivided Family.
Muhammad Haneef's case certainly is not an authority for the proposition that any vagueness in the notice can be got cured with reference to any sub--sequent communication made by the Income-tax Officer.
16. We are, therefore, of opinion that the notice under section 34 (147), issued to Sri Madan Lal Agarwal on 29th September, 1962 was vague and such invalid. The vagueness of the said notice did not stand cured because the Income-tax Officer at a later stage informed the notice that he was file his return in the status of Hindu Undivided Family. The proceeding following such a vague and invalid notice also stand vitiated. In this view o the matter, it is not necessary for us to go into various other grounds raised b learned counsel for the assessee for questioning the validity of the proceeding under section 147 (a) of the Income-tax Act, 1961.
17. In the result, we answer the question referred to us in the negative and in favour of the assessee.
The assessee shall be entitled to costs, which are assessed at Rs. 250.
M. Z.M.