COMMISSIONER OF INCOME-TAX Vs. K L VENUGOPAL

JUDGEMENT

(1.) The two questions referred by the Tribunal for the opinion of this court are:

(2.) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that the assessments made under Section 144 in the status of an 'individual' for non-compliance with notice under Section 148, were not valid in law, and, therefore, by dismissing the Department's appeal and allowing the assessee's cross-objections ?" 2. The assessee had been assessed in the status of an "individual" up to the assessment year 1970-71. For the first time in 1971-72, the assessee claimed the status of a "Hindu undivided family". The Income-tax Officer negatived the claim on the ground that the assessee had obtained property and business from his grandfather by virtue of his will and so the status continued to be that of individual. The position was the same for the assessment years 1972-73 and 1973-74. For the years 1974-75 to 1976-77 again the assessee filed the returns in the status of a "Hindu undivided family". The Income-tax Officer, instead of rejecting the claim and making assessments in the status of an individual as in the past, issued notices under Section 148 calling upon the assessee to submit returns in the status of an "individual". For those notices, there was no response. Thereupon, the Income-tax Officer took action under Section 147(a) read with Section 144 and made the assessment orders for the years 1974-75 to 1976-77. The assessee appealed to the Appellate Assistant Commissioner who agreed with the Income-tax Officer in making the assessments but directed him to accept the returned figures. The Revenue appealed to the Appellate Tribunal. The assessee filed cross-objections challenging the validity of the assessment orders.

(3.) The question before the Tribunal was whether the Income-tax Officer was justified in ignoring the return of income filed by the assessee in the status of a Hindu undivided family and issuing notice to the assessee under Section 148. The Tribunal observed as follows : " In this case, there is only one assessee assessed on P. A. No. 44002 PQ 7103. The notice is being issued to the individual. It is under that P. A. No., the assessee continued to file the return in the status of a Hindu undivided family. It cannot be said that these returns are not in compliance with Section 139. The point of difference between the Income-tax Officer and the assessee is that while the assessee declares his status as Hindu undivided family, the Income-tax Officer determines it as individual. The Act gives him powers to determine the correct status. Therefore, we have to agree with the assessee that a valid return has been filed and reassessment was illegal. The decision of the Bombay High Court in [1958] 34 ITR 449 (Lalbhai Ghatabhai) would apply to the present case. The position might have been different if there had been two assessments on the same person in two different status. In this connection, we have to refer to the decision relied on by the learned Departmental representative in the case of CIT v. Adinarayana Murthy AIR1967 SC 1545 , [1967 ]65 ITR607 (SC ), [1967 ]3 SCR388 , In this case, notice was issued in the status of an individual but the assessee filed the return in the status of a Hindu undivided family. Later, as the correct status was determined to be that of Hindu undivided family, the Income-tax Officer issued another notice to the Hindu undivided family ignoring the first return. The assessment was completed on the basis of the return filed in compliance with the second notice. The Supreme Court upheld the assessment on the ground that the first notice being illegal, the return filed in response to that notice, viz., the first return, has no legal sanction and, therefore, the Income-tax Officer was right in ignoring it. In the present case, no such illegality could be made out in respect of the return filed by the assessee. The earlier proceedings have all along been in the status of an individual, but the assessee, to keep his claim regarding the status alive, continues to file the returns in the status of a Hindu undivided family. The Income-tax Officer as in the past should have determined the correct status as individual and proceeded to complete the assessment. To presume that there is no compliance with the provisions of Section 139, unless and until the assessee files a return in the status as determined by the Income-tax Officer, is not correct. Accordingly, we allow the cross-objections of the assessee and set aside the orders of the Appellate Assistant Commissioner." The first question referred to us relates to the validity of the notice issued under Section 148 by the Income-tax Officer calling upon the assessee to submit a return in the status of an "individual" when the assessee had filed the return in the status of a "Hindu undivided family". It is not in dispute that the assessee was all along being assessed in the status of an individual. That was his recognised status. If he was aggrieved by that status recognised, he could have preferred an appeal against the previous assessments. But he did not do it. He silently accepted that position. When there was no return filed by the assessee in the status of an individual, the Income-tax Officer was justified in issuing a notice under Section 148 calling upon him to file the return.