COMMISSIONER OF INCOME TAX Vs. KRISHNANKUTTY MENON P

JUDGEMENT

(1.) AT the instance of the Revenue, the Income-tax Appellate Tribunal has referred the following question of law for the decision of this court:

(2.) THESE five references are connected. All of them relate to the assessment year 1971-72. The respondents (assessees) are the legal heirs of one A.P. Menon who died in 1957. A.P. Menon died, leaving behind two brothers (Kannankutty Menon and Echukutty Menon) and two sisters (Ambika R. Menon, Devaki Thampuran). Another sister, Ammalukutty Amma had predeceased A.P. Menon. A property belonging to A.P. Menon was acquired by the Government of Kerala under the Land Acquisition Act. A compensation of Rs. 3,39,473 was awarded thereon, The capital gains arising out of the said acquisition was assessed in the hands of the aforesaid five legal heirs for the assessment year 1971-72. Kannankutty Menon, one of the brothers, died, leaving behind his son, Krishnankutty Menon and Kamalam K. Menon (daughter). Devaki Thampuran was represented by Achuthankutty Menon. The original assessments against Devaki Thampuran (represented by Achuthankutty Menon), Echukutty Menon and Ambika R. Menon were completed on September 8, 1972. The assessment against Krishnankutty Menon and Kamalam K. Menon (legal heirs of Kannankutty Menon, one of the brothers) was made on March 29, 1974. The assessments of Krishnankutty Menon and Kamalam K. Menon were confirmed in the appeals. The assessments made against Achuthankutty Menon, Echukutty Menon and Ambika R. Menon were cancelled in the appeals. Echukutty Menon filed a return on September 25, 1971, with a covering letter. Kannankutty Menon's heirs, Krishnankutty Menon and Kamalam K. Menon, filed returns on January 10, 1971. Achuthankutty Menon (for Devaki Thampuran) and Ambika R. Menon filed returns on October 6, 1971. The assessments on these returns were completed on September 8, 1972. The original assessments in the case of Krishnankutty Menon and Kamalam K. Menon were completed on March 29, 1974. It appears that subsequent thereto, there was some discussion between the advocate of one of the legal heirs and the Income-tax Officer on February 24. 1975. A communication was also sent to the Income-tax Officer. The above discussion and the letter disclosed, that as against the one-fifth share claimed for each one of the legal heirs, Kannankutty Menon, Echukutty Menon, Ambika R. Menon, Devaki Thampuran and Ammalukutty Amma, since Ammalukutty Amma predeceased A.P. Menon, the surviving heirs would get one-fourth share each in the estate. On coming to know of this, the Income-tax Officer initiated proceedings under Section 147(b) of the Income-tax Act. He issued notices on March 31, 1975 to Devaki Thampuran (represented by Achuthankutty Menon), Echukutty Menon and Ambika R. Menon. The notices were served on them on April 11, 1975. The said three persons filed returns. It should be noticed that the Income-tax Officer did not issue any notice to Krishnankutty Menon and Kamalam K. Menon, the legal heirs of Kannankutty Menon, in whom one-fourth of the estate of A.P. Menon vested. In pursuance of the returns filed by Devaki Thampuran, Ambika R. Menon and Echukutty Menon, no further action was taken. Nearly three years thereafter, on noticing that the legal heirs are entitled to more shares, the Income-tax Officer issued notices to all the five persons (the legal heirs of A.P. Menon) under Section 147(a) of the Income-tax Act. He stated that the legal heirs (Krishnankutty Menon and Kamalam K. Menon) are together entitled to one-fourth share, Echukutty Menon entitled to one-fourth share, so also Ambika R. Menon and Devaki Thampuran are each entitled to one-fourth share, and since the original assessments were on the basis that the heirs are entitled to one-fifth share in the estate, the assessments require revision. Fresh returns were filed on March 9, 1979. The reassessments were effected on March 24, 1979. One of the grounds taken up before the Appellate Assistant Commissioner, as also before the Appellate Tribunal, was that the reassessments are illegal and unsustainable. The Appellate Tribunal accepted the said plea. Thereafter, on motion by the Revenue, the Income-tax Appellate Tribunal has referred the question of law, formulated hereinabove, for the decision of this court.

(3.) HAVING heard the rival contentions, we are of the view that the Appellate Tribunal was justified in holding that the reassessments are illegal and unsustainable. It is common ground that the Income-tax Officer issued notices under Section 147(b) of the Income-tax Act to Ambika R. Menon, Devaki Thampuran and Echukutty Menon on March 31, 1975. The notices were served on April 11, 1975. Under Section 153(2)(b)(ii) of the Income-tax Act, the assessments based on this notice should have been completed on or before April 11, 1976. It was not so done. What is more, the assessments were kept pending. No final orders were passed. Apart from the fact that the assessments, having been made after April 11, 1976, are barred, a further notice was sent to all the legal heirs under Section 147(a) of the Income-tax Act, on December 21, 1978. On the day when such a notice was sent under Section 147(a) of the Act, reassessment proceedings initiated under Section 147(b) were pending. The second notice issued under Section 147(a), dated December 21, 1978, is incompetent and unauthorised. The Income-tax Officer is not authorised to initiate successive reassessment proceedings when assessment proceedings are already pending. We are fortified in this view by the decision in Commercial Art Press v. CIT [1978] 115 ITR 876 (All). On this short ground, the assessments are barred and unsustainable.