COMMISSIONER OF INCOME-TAX Vs. HAR PARSHAD

JUDGEMENT

(1.) ON an application under Section 256 (1) of the Income-tax Act, 1961 (hereinafter called "the Act"), by the Commissioner of Income-tax, Haryana and Chandigarh, Rohtak, the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh, has referred the following two questions of law to this court for its opinion ;

(2.) FACTS giving rise to the present reference, briefly stated, are as under : Four out of the various partners of the firm, Noop Ram Man Singh, which was carrying on business at Bazar Sirkiwalan, Delhi, namely, Nanak Chand, Tulsi Ram, Har Parshad (all sons of Noop Ram) and Pehlad Dutt, S/o. Ramji Lal, all residents of village Gangaichajat, Tehsil Rewari District, Gurgaon, purchased two pieces of land at Rewari on May 18, 1951, measuring 3,700 square yards. During the financial year ending March 31, 1960, relevant to the assessment year 1960-61, that land was sold by the aforesaid persons after dividing it into 12 plots. With a view to tax the income from the sale of land, the Income-tax Officer started proceedings under Section 147 (a) of the Act and issued a notice under Section 148 of the Act to the aforesaid four persons jointly at their village address treating their status as "association of persons" on February 10, 1969, by registered post. The said notice was received back in the office of the Income-tax Officer on February 21, 1969, indicating refusal. Treating the same as presumptive proof of service and thus satisfaction of condition precedent under the law, in the absence of any return filed by the assessee, the Income-tax Officer made a best judgment assessment under Section 144 of the Act on January 31, 1970. The assessment was made in the status of an "association of persons" and the notice of demand in pursuance thereof was served on August 28, 1970, on Shri Har Parshad alone as member of the association of persons. Shri Har Parshad moved an application under Section 146 of the Act on September 2, 1970, claiming that the assessee did not receive any notice for which reason the assessment made under Section 144 should be cancelled and a fresh assessment be made according to law. The contention of Shri Har Parshad found favour with the Income-tax Officer and he, vide his order dated October 6, 1970, cancelled the assessment under Section 144 holding that notice under Section 139 (2)/148 was not served on the assessee. Shri Har Parshad alone out of the four aforesaid persons or his son, Ishwar Chander, joined the subsequent proceedings for fresh assessment and assessment against the assessee as association of persons was finally made by the Income-tax Officer, Rewari, vide his order dated December 30, 1974 (annexure "a" ). In the appeal preferred against that order, both the arguments giving rise to the present questions of law were repelled and the findings of the Income-tax Officer were confirmed by the Appellate Assistant Commissioner of Income-tax, Rohtak Range, Rohtak, vide his order dated November 1, 1976 (annexure "b" ). Feeling aggrieved, the assessee preferred an appeal before the Income-tax Appellate Tribunal, Chandigarh Bench, which was allowed holding that no notice under Section 148 of the Act was served on the assessee and that no association of persons was formed by the aforesaid four persons in the impugned transactions of purchase and sale of land, vide its order dated March 14, 1978 (annexure "c" ). Thereafter, the Department made a reference application under Section 256 (1) of the Act resulting in the present reference.

(3.) IT is clear from the facts placed on the record that only one notice under Section 148 of the Act was issued arid that was issued in the joint names of all the four persons, at their village address, on February 10, 1969. It was received back with an endorsement of refusal. That could be treated as presumptive proof of service for discharge of condition precedent for proceedings under Section 147 (a) of the Act. It has been shown on the record that out of four persons to whom notice was addressed, two, namely, Nanak Chand and Pehlad Dutt, had already expired when that notice was issued and the third, i. e. , Tulsi Ram, allegedly was in Delhi during February, 1969. The factum of stay of Tulsi Ram during February, 1969, in Delhi remains uncontroverted on the record. It is also not disputed that the names of the legal heirs of the two deceased were never mentioned in the notice. Thus, for obvious reasons, no presumption with regard to service of notice against Sarvshri Nanak Chand, Pehlad Dutt and Tulsi Ram can be raised by any stretch of imagination. Again, the Income-tax Officer, in his order dated October 6, 1970, of cancellation of assessment under Section 146 of the Act, has categorically found that the notice was not served upon the assessee and thus the presumption, if any, possible against any of the four persons in question, stood rebutted and it is not possible to conclude that the notice in question was served before February 21, 1969. However, filing of return by Shri Har Parshad which could be filed in response to a notice under Section 148 which subsisted till it was served and his subsequent association in the proceedings for assessment amounts to acceptance of notice by him before the Income-tax Officer and the notice can well be treated to have been served upon him. The Tribunal was, therefore, not right in law in holding that the assessment made under Section 143 (3) of the Act on December 30, 1974, which was made on the return filed by Shri Har Parshad and in which proceedings he voluntarily associated himself was not a valid assessment so far as the individual of Shri Har Parshad is concerned. But the same cannot be treated to be binding on the rest of the three persons, Sarvshri Tulsi Ram, Pehlad Dutt and Nanak Chand, on whom no notice under Section 148 of the Act was served. Question No. (i) accordingly is answered in the negative, i. e. , in favour of the Department to the extent it relates to Shri Har Parshad alone.