19 November 1970
Supreme Court


Case number: Appeal (civil) 2332 of 1966






DATE OF JUDGMENT: 19/11/1970


CITATION:  1971 AIR  147            1971 SCR  (2) 807  1970 SCC  (3) 371

ACT: Income-tax Act, 1922, ss. 34(3) 2nd Proviso and 24B-Assessee dying, before completion of assessment-Assessment  completed by  I.T.O.  on  assessees  legal  representatives  including disinherited   son--A.A.C.  setting  aside  assessment   and directing I.T.O. to make fresh assessment on executors under assessee’s will-Case whether covered by s. 34(3) 2nd proviso for  purpose  of  extending  limitation-Procedure  for   re- assessment-Applicability of s. 24B.

HEADNOTE: R filed his income-tax and excess profits tax returns before the  Income  Officer/Excess  Profits  Tax  Officer  for  the assessment  years 1942-43 and 1943-44 and the  corresponding chargeable  accounting periods.   He  complied  with   the statutory notices issued to him by the said Revenue  Officer but  died  before  the assessments could be  made.   He  was survived by A, his second wife, his children by her, and  by S, his son by a predeceased wife.  In his will A and another person B were named’-as executors and S was disinherited.  S performed  the observation at the funeral of R and  on  this information the Revenue Officer gave notice to S asking  him to  show cause why assessment should not be made on  him  as the legal representative of R. It was objected by S that he was  not  legal representative, but he failed to  produce  a copy  of the will.  The Revenue Officer thereupon  completed the  assessments on the estate of R by his legal  heirs  and representatives  among  whom  he  included  S,  A  and  her. children.    On   appeal  by  S  the   Appellate   Assistant Commissioner,  before whom a copy of the will was  produced, set  aside the assessments and directed the Revenue  Officer to make fresh assessment on the executors in accordance with s.  24B  of  the  Income-tax Act,  1922.   Pursuant  to  the direction   the  Revenue  Officer  issued  notice   to   the executors.   R’s widow A accepted the notice  and  requested the  Revenue  Officer to issue the copies of the  record  to enable her to make representation.  The Revenue Officer held that  it  was not necessary to go  through  the  formalities



again.   He completed the assessments on 29th  October  1952 more than four years after the end of the assessments, years 1942-43  &  1943-44  respectively.   In  appeal  by  A   the Appellate  Assistant Commissioner held that the  assessments were  validly  made  on a valid direction  by  the  previous Appellate Assistant Commissioner.  He however set aside  the assessments  and  directed the Revenue Officer  to  complete them  after  giving  the executrix a  fresh  opportunity  to object to the assessment.  The Tribunal upheld the order  of the Appellate Assistant Commissioner.  In reference the High Court  held that the first assessment having been made on  S who  was not a legal representative, the direction given  by the  Appellate Assistant Commissioner was outside the  scope of s. 34(3) of the Act.  The High Court also gave a  finding that  s. 24B was applicable to the proceedings but  that  in the  present  case the section had not  been  complied  with inasmuch as the procedure for making assessment had not been followed de novo  In appeals before this Court filed by  the Revenue  as  well  as  by A  the  questions  that  fell  for consideration were : (i) whether s. 34(3) 2nd proviso  saved the assessments in the 808 present case from the bar of limitation and (ii) whether  s. 24B applied to the case. HELD,:    (i)  The  second proviso to s. 34(3)  of  the  Act applied   to   the  present  appeals  because,   first   the proceedings against R commenced on filing of  returns before the  Income  tax  authorities.    Secondly,  the  assessment proceedings continued after the death of R against the legal representatives S and A; thirdly, the assessment proceedings on being set aside and not cancelled pursuant to the  appeal filed by S on the ground that notice was not given to A were continued and fourthly, the setting aside of the  assessment was  only  on the ground that notice was not  given  to  and therefore  the  finding  and  direction  was  vital  to  the assessment  proceedings.   The High Court was  in  error  in holding that the assessments were barred by limitation. [815 C-D] Income-tax  Officer,  Sitapur v.  Murlidhar  Bhagwandas,  52 I.T.R. 335 and S. C. Prashad & Anr. v.Vasantsen Dwarkadas  & Ors. 49 I.T.R. 1, distinguished. (ii) The  High Court correctly held that s. 24B of the,  Act applied  to present case.  The third sub-section of  s.  24B deals with !a case of a person dying after having  furnished a  return.   Further  in the  present  case  the  Income-tax Officer  had reason to believe the return to  be  incorrect, and  he called upon R to furnish evidence.  The Act  further confers power on the Revenue Officer to make the  assessment and  determine the tax payable by the deceased on the  basis of the assessment and for that purpose to issue  appropriate notice which would have had to be served upon the’  deceased had  he  survived  and in that behalf to  require  from  the executor,  administrator or other legal  representatives  of the  deceased  person any accounts or documents  or  further evidence  which he might under the provisions of ss. 22  and 23 require from the demand person. [815 G-H] [Counsel  for the Revenue did not impeach the conclusion  of the  High Court that in relation to A the provisions  of  s. 24B of the Act were to be followed de novo.]

JUDGMENT: CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 2332 to 2335 and 2336 to 2339 of 1966.



Appeals from the judgment and order dated August 16, 1966 of the Madras High Court in Tax Case No. 171 of 1962 (Reference No. 96 of 1961). A.   K.  Sen and T. A. Ramachandran, for the  appellant  (in C.As.  Nos.  2332 to 2335 of 1966) and  the  respondent  (in C.As. Nos. 2336 to 2339 of 1966). S.   Mitra, G. C. Sharma, B. D. Sharma for R.  N.  Sachthey, for the respondent (in C.As. Nos. 2332 to 2335 of 1966)  and the appellant (in C.As. Nos. 2336 to 2339 of 1966). The Judgment of the Court was delivered by Ray,  J. These appeals are by certificate against the  judg- ment dated 16 August, 1965 of the High Court of Madras on                             809 a reference under section 66(1) of the Indian Income-tax Act 1921 (hereinafter referred to as the Act). Seven  questions were referred to the High Court.   The  re- ference  involved  first  the  construction  of  the  second proviso  to sub-section (3) of, section 34 of the Act,  and, secondly, the applicability of section 24B(3) of the Act  to the assessments made on the, executor to the estate of  late Rangalal Jajodia. In  order  to appreciate the scope of the reference,  it  is necessary  to  refer  to the facts which gave  rise  to  the questions.  Rangalal Jajodia (hereinafter referred to as the deceased) filed income-tax returns for the year 1942-43  and 1943-44  as well as his excess profits tax returns  for  the corresponding   chargeable  accounting  periods  ending   31 December,  1941 and 31 December, 1942 before the  Income-tax Officer, Excess, Profits Tax Officer, Madras, Special  South Circle.  On receipt of the returns,, the officer issued  the requisite  statutory notices to the assessee for  production of  accounts  and  also other evidence  in  support  of  the returns  under  sections 22 (4) and 23 (2) of  the  Act  and under  the  corresponding provisions of section  30  of  the Excess  Profits  Tax Act, 1940.  Rangalal  Jajodia  complied with the aforesaid notice.  But before the assessment to the income-tax  and  excess profits tax could be  made  Rangalal Jajodia died on 11 January; 1946. Rangalal Jajodia was survived by Shankarlal Jajodia son by a predeceased  wife, Aruna Devi, the second wife and  children by the second wife.  Rangalal Jajodia had made a will on  16 April,  1945 whereby Aruna Devi and one Ram  Kumar  Bhuwalka were  executor  and  executrix  respectively.   Shankar  Lal Jajodia was disinherited under the will.  Shankarlal Jajodia however  performed the funeral obsequies for  the  deceased. The  Revenue on the basis of that information issued  notice to  Shankarlal  Jajodia  asking him to show  cause  why  the assessment of the deceased should not be made on him as  the legal  representative.  Shankarlal Jajodia objected  to  the course stating that he was not the legal representative  and that  his step mother Aruna Devi and- Ram Kumar Bhuwalka  as the  executrix  and executor respectively  were  the  proper persons  on whom proceedings were to be taken.  The  Revenue called  for  a  copy  of the  will  which  however  was  not produced.  The assessment was completed on 28 February, 1947 on  the materials describing the assessee as "the estate  of late   Shri  Rangalal  Jajodia  by  legal  heirs   and   re- presentatives,  Shri  Shankarlal Jajodia,  son  of  Rangalal Jajodia,  Shrimati Aruna Devi, wife of Rangalal Jajodia  and her children". The assessment orders were served on Shankarlal Jajodia  who appealed to the Appellate Assistant Commissioner contend- 810 ing  that  he  was not the  legal  representative.   At  the hearing  of  the  appeals on  30,,  April.  1952  Shankarlal



Jajodia  produced  a  copy  of  the  will.   The   Appellate Assistant Commissioner set aside the assessment and directed the  Revenue  Officer  to make a  fresh  assessment  on  the executors  in  accordance  with  section  24B  of  the  Act. Pursuant  to  the  direction  of  the  Appellate   Assistant Commissioner the Revenue Officer informed the executrix  and Ram  Kumar  Bhuwalka of his proposal to make  assessment  on them as the legal representatives of Rangalal Jajodia.   Ram Kumar  Bhuwalka  who  had  refused to  act  as  an  executor intimated  the fact to the Revenue Officer.  Aruna Devi  the executrix  accepted  the notice but  requested  the  Revenue Officer to furnish her with copies of the returns, notes  of examination and correspondence between the deceased and  the Revenue to enable her to make representations.  The  Revenue Officer however took the view that under section 24B of  the Act it was not necessary to go through all the  formalities once again and that the assessments were required to be done only for the purpose of inviting objections, if any, to  the locus  standi of Aruna Devi as the legal  representative  of the  deceased.   On,  the  said  view  the  Revenue  Officer completed the income-tax and excess profits tax assessments on  the estate’ of late Rangalal Jajodia by  executors  Mrs. Aruna  Devi  and another.  The assessments were made  on  29 October.-  1952  more  than  four years  after  the  end  of assessment years 1942-43 and 1943-44 respectively. The  executrix Aruna Devi appealed against  the  assessments contending before the Appellate Assistant Commissioner  that the  assessments  were  barred by limitation  and  that  the previous  Appellate  Assistant Commissioner’s  direction  to make assessments on her was invalid.  It was also  contended that  reasonable opportunities were not given to Aruna  Devi before  the assessments were made.  The Appellate  Assistant Commissioner  on  16 April, 1955 held that  the  assessments were  validly  Made  on a valid direction  by  the  previous Appellate Assistant Commissioner.  He however set aside  the assessments directing the Revenue Officer, to complete  them after giving the executrix a fresh opportunity to object  to the  assessment.   Aruna  Devi  appealed  to  the  Appellate Tribunal.   The Tribunal rejected the appeals on the  ground that  the  assessments had been set aside by  the  Appellate Assistant Commissioner with the direction to give sufficient opportunities to her.  On a reference taken by Aruna Devi to the High Court, the High Court held that the Tribunal  ought to have properly disposed of the appeals on all 811 the  contentions raised therein.  Pursuant to the  order  of the High Court the Tribunal heard the appeals on merits on 9 June,  1961  and  held that the  reassessment  made  by  the Revenue  Officer on Aruna Devi, the executrix was valid  and that  the assessments were saved from the bar of  limitation by  the  second proviso to section 34(3) of  the  Act.   The Tribunal  also held that the assessments were  validly  made under section 24B(3) of the Act. The  High Court on reference under Section 66(1) of the  Act held  that  the second proviso to section 34(3)  applied  to save reassessment from the bar of limitation but that in the present  appeals, the first assessments which were  made  on Shankarlal  Jajodia were set aside on appeal  because  these were  not  made on, the real legal  representatives  of  the deceased and therefore no direction or finding could be made by the Revenue Authority in any such appeal as would  remove the bar of limitation on the reassessment later made on  the executor  who  was to be regarded as an  entirely  different assessee.   The High Court also held that the  direction  or finding  given by the Appellate Assistant  Commissioner  for



making  the assessment on the executors was unnecessary  for the disposal of the appeals filed by Shankarlar Jajodia  and therefore  the direction and the findings were  outside  the scope of the second proviso to section 34(3) of them Act. As to section 24B sub-clause (3) of the Act, the High  Court held  that  the section applied to the  assessments  in  the present appeals but the High Court negatived the  contention of  the Revenue that the assessments made on  the  executrix were   mater  in  proper  compliance  with   the   procedure prescribed under section 24B (3) of the Act.  The High Court held  that it was a condition precedent to the  validity  of assessment. to be made on the.legal representatives that the procedure  prescribed  for  making  the  assessment  on  the deceased  assessee  was  to  be  repeated  as  regards   the assessment  on the legal representative irrespective of  the fact  that such procedure was followed during the life  time of the deceased. The  relevant provisions of section 34(3) of the Act  neces- sary  for the purpose of the present appeals are the  second proviso to the said sub-section.  The said second proviso is as follows               "Provided  further that nothing contained  in’               this  section limiting the time  within  which               any action may               812               be,  taken  or any order,  assessment  or  re-               assessment  May be made, shall Apply to a  re-               assessment  made  under section 27  or  to  an               assessment   or  reassessment  made,  on   the               assessee or any person in consequence or of to               give  effect  to  any  finding  or   direction               contained   in  an  order  under-section   31,               section 33, section 33A, section 33B,  section               66 or section 66A".  Counsel  for  the  Revenue in C.A. No.  2336-2339  of  1966 contended that the second proviso saved the assessment  from the  bar of limitation by reason of an order  of  assessment having  been made in consequence of a finding  or  direction given  by the Appellate Assistant Commissioner and  secondly that  Aruna Devi was a person intimately connected with  the assessment and that in fact the assessment was made on  her, but the assessment was set aside because no notice was given to  her.  Counsel for the appellant Aruna Devi in  C.A.  No. 2332-2335  of 1966 on the other contended first  that  Aruna Devi  was not an assessee and therefore the benefit  of  the second proviso to section 34(3) of the Act would not  avail. Secondly  it  was said that Aruna Devi  was  not  intimately connected  with  the  assessment and was  not  an  assessee, because there was no proceeding in law under the Act against Aruna Devi and therefore she was not an Assessee. An assessee is defined in section 2 (2) of the Act  meaning, a  person  by whom income-tax or any other sum of  money  is payable under this Act, and includes every person in respect of whom any proceeding under the Act has been taken for  the assessment of his income or of the loss sustained by him  or of  the amount of refund due to him.  It was said on  behalf of  the  appellant Aruna Devi that the estate cannot  be  an assessee  and in order to make the legal  representative  an assessee,  a proceeding must be taken against  the  executor under  the  Act.   It  was  also  said  that  in  the  final assessment  Aruna Devi was assessed as an executrix  but  no proceeding for assessment was taken against Aruna Devi as an executrix.   Emphasis  was  placed  on  the  fact  that  the proceeding. was against the estate which was unknown to  law and even if the proceeding against the estate could be  held



to  be  a valid proceeding Aruna Devi was  never  given  any notice and therefore no proceeding was taken against her. The  assessment order shows the name of the assessee as  the estate  of  late Shri Rangalal Jajodia by  legal  heirs  and representatives   Shri  Shankarlal  Jajodia,  son  of   Shri Rangalal  jajodia, Smt.  Arun Devi wife of Rangalal  Jajodia and  her children.  Rangalal Jajodia had filed the  return., He   died  before  the assessment  was   completed.    The assessment was made on Aruna                             813 Devi  as legal representative.  She was described  as  legal representative but not as an executrix.  The liability under the  Act in case. of death of a person is of  the  esceutor, administrator  or representative to be liable to pay out  of the estate of the deceased person to the extent to which the estate is capable, of meeting the charge the tax assessed as payable  by  such person or any tax Which would  have  been paid- by him under the Act if he had not died.  The  Revenue in  the  assessment  proceedings  described  the  estate  of Rangalal  Jajodia  by the legal heirs  and  representatives. It.  cannot  be  denied that an executor is  also a  legal representative. What happened in the present assessment proceedings was that the  proceedings  were  commenced during  the  life-time  of Rangalal Jajodia by reason of the returns being filed by and notices  under sections 22 (3) and 23 (2) of the Act  having been  served on Rangalal jajodia during his life-time.   The assessment order contains, intrinsic evidence to that effect as  also  of  repeated  intimation  having  been  given   to Shankarlal Jajodia after the death of Rangalal Jajodia.   No reply  having  been received from  Shankarlal  Jojodia,  the assessment  was  completed  under section  24B  of  the  Act through the legal heirs and representatives including  Aruna Devi.   The  Appellate Assistant Commissioner on  an  appeal preferred  by  Shankarlal Jajodia set aside  the  assessment because  no  notice  was  given to  Aruna  Devi  though  the assessment   proceeding   was  against  her   as   a   legal representative.  The lack of a notice does not amount to the Revenue  Authority having had no jurisdiction to assess  but that  the assessment was defective by reason of  notice  not having been given to her.  An assessment proceeding does not cease to,, be a proceeding under the Act merely by reason of want  of  notice.   It will be a  proceeding  liable  to  be challenged and corrected.  Similarly, if there is a  mistake as  to  name or there is a misdescription of the  name,  the proceeding will be liable to be challenged and’ corrected by giving   notice  to  the  assessee  subject  to  such   just exceptions as an assessee can take under law.  The direction given  lay the Appellate Assistant Commissioner was to  make fresh  assessment  on  Aruna Devi  in  accordance  with  the provisions of the Act. Counsel for Aruna Devi relied on the decision of this  Court in Income-tax Officer, Sitapur vs.  Murlidhar Bhagwandas, 52 I.T.R.  3 3 5 in support of the proposition that no  finding was necessary in the present case because Aruna Devi was not an assessee and was a different person.  We find that  Aruna Devi was an. assessee in the income-tax proceedings, but the proceedings  were, not in compliance with the Act by  reason of the failure of giving the requisite notice of  assessment and  the  requisite notice of demand.  In  Murlidhar’s  case (supra) the assessee appealed against an assess- 814 ment  order  and the Appellate Assistant  Commissioner  held that the income was received in the previous accounting year and  directed  that the amount should be  deleted  from  the



assessment year 1949-50 and included in the assessment year 1948-49.  Pursuant to that direction the Income-tax  Officer imitated  reassessment proceedings in respect of  the  year- 1948-49  and  served  a notice on  5  December,  1957.   The question  was whether the second proviso applied  and  saved the  notice in respect of the year 194849. It was held  that the  jurisdiction  of the Appellate  Assistant  Commissioner under  section 31 of the 1922 Act was strictly  confined  to the assessment order of the particular year under appeal and the assessment or reassessment made in consequence of or  to give  effect  to any finding or direction  contained  in  an order  under section 31, section 33A., section 33B,  section 66 or section 66A must necessarily relate to the  assessment of  the  year  under appeal.  The  expression finding  and direction in the second proviso to section 34(3) was held to be  a finding necessary for giving relief in respect of  the assessment   in  question  and  that  direction  which   the appellate or the revisional authority was empowered to  give tinder the sections mentioned in that proviso.  The  finding in  Murlidhar’s case (spura) that the income belonged to the year 4948-49 was not a finding necessary for the disposal of an appeal in respect of the year of assessment in question. Counsel  for Aruna Devi contended that the  expression any person’ occurring in the second proviso to section 34(3)  of the act could not be referable to a stranger and that  Aruna Devi  was  a  stranger.  In  support  of  that proposition reliance’ was placed on the decision of this Court in S.  C. Prashar  & Anr. v. Vasentsen Dwarkadas & Ors. 49  I.T.R.  1. The facts of that case are entirely different and are of no assistance for the reason that in the, present appeals Aruna Devi was impleaded as a party to the assessment  proceedings as  a legal representative of Rangalal Jajodia.   The  words any person were construed in Murlidhar’s case (supra) to be, confined   to  a  person  intimately  connected   with   the assessment year under appeal.  It was said in that case that "modification  or setting aside assessment made on  a  firm, joint Hindu family, association of persons, for a particular year may affect the assessment for the said year on a patner or  partners;  of the firm, member or members of  the  Hindu undivided family or the individual, as the case may, be.  In such  cases though the latter are not a nominee  parties  to the appeal, their assessments depend upon the assessments on the former, The said instances are only illustrative.  It is not  necessary,  to pursue the matter  further.   We  would, therefore,  hold  that  the expression  any  person  in  the setting  in  which it appears must be confined to  a  person intimately connected in the aforesaid sense with the assess- 815 ments of the year under appeal." In the present appeals  the ending was that the assessment was made on Aruna Devi but no notice  was  given  to her.,  The  necessary  direction  was therefore  given that notice should be given to her.   Aruna Devi  was  heard and the assessment was made.  She  was  not merely  intimately connected with the assessment.  She  was in  fact  an  assessee.  Therefore, the  Second  proviso  to section 34(3) applied. We are therefore of opinion that the second proviso to  sec- tion 34(3) of the Act applies to the present appeals because first the proceedings against Rangalal Jajodia commenced  on filling  of  returns  before  the  income-tax   authorities; secondly,  the  assessment proceedings continued  after  the death of Rangalal Jajodia against the legal  representatives Shankarlal  Jajodia and Aruna Devi; thirdly, the  assessment proceedings on being set aside and not cancelled pursuant to the  appeal filed by Shankarlal’Jajodia on the  ground  that



notice  was  not given to Aruna Devi  were  continued,  and, fourthly,  the setting aside of the assessment was  only  on the  ground  that  notice was not given to  Aruna  Devi  and therefore  the  finding  and  direction  was  vital  to  the assessment  proceedings.   The High Court was  in  error  in holding  that  the  assessment proceedings  were  barred  by limitation. The  other question is as, to the applicability  of  section 24B  of the Act.  Counsel on behalf of Aruna  Devi  repeated the contentions advanced in the High Court that section  24B does not cover the entire field of procedure to be  followed in  assessing the income of the deceased person.   The  High Court  held  that section 24B of the Act applied  but  Aruna Devi  should have been given opportunities to object to  the assessment by repeating the entire procedure of section  24B of the Act as during the life time of the deceased.  Counsel for the Revenue. did not impeach the conclusion of the  High Court  that  in  relation to Aruna Devi  the  provisions  of section 24B of the Act were to be followed de novo.  We  are of  opinion that the High Court correctly held that  section 24B  of  the  Act applies to the present  case.   The  third subsection  of  section 24B deals with a case  of  a  person dying  after  having furnished a return.  Further, in  the present  case the Income-tax Officer had reason  to  believe the return to be incorrect or incomplete, and he called upon Rangalal to furnish evidence.  The Act further confers power on the Revenue officer to make the assessment and  determine the  tax  payable  by  the deceased  oh  the  basis  of  the assessment and for that purpose to issue appropriate  notice which would have had to be served upon the, deceased had  he survived  and in that behalf to require from  the  executor, administrator or other legal representative of the  deceased person  any accounts, documents or other evidence  which  he might  under  the provisions of sections 22 and  23  require from the deceased 816 person.  These provision adequately answer the contention of the appellant Aruna Devi. For these, reasons we hold that the High Court was in  error in holding that the second proviso to section 34 (3) of  the Act did not save the assessments and therefore we set  aside the judgment of the High Court and allow the appeals of theRevenue in C.A. Nos. 2336-2339 of 1966. As for appeals C.A. Nos. 2332-2335 of 1966 we the conclusion of  the High Court and dismiss the appeals party  will  bear and pay its own costs in all these appeals., G.C.          C.A. Nos. 2336-2339 of 1966 allowed. C.A. Nos. 2332-23.35 of 1966 dismissed. 817