B.P.Jeevan Reddy, C.J. - (1.) The Income-tax Appellate Tribunal, Delhi Bench, has stated the following two questions under Section 256(1) of the Income-tax Act, 1961 : "(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that there was valid service of notices under Section 147(a) of the Income-tax Act, 1961, for the assessment year 1949-50 and under Section 34(1)(a) of the Indian Income-tax Act, 1922, for the assessment years 1952-53 to 1955-56 on the assessee-Hindu undivided family ? (2) If the answer to the first question is in the negative and in favour of the assessee, whether the assessment made in pursuance of the said notices for the five assessment years 1949-50, 1952-53 to 1955-56 are valid in law?"
(2.) The assessee is a Hindu undivided family represented by its karta, Kailash Chand Jain. During the years 1949 to 1955, it carried on banking business under the name and style of Mansa Ram and Sons, with its head office at Dehradun and branches at Mussoorie, Saharanpur, Rishikesh and Hardwar. In this reference, we are concerned with the validity of the reassessment orders made under Section 147 for the years 1949-50, 1952-53, 1953-54, 1954-55 and 1955-56. The ground upon which the reassessment orders are said to be bad is that the notices under Section 34(1) of the Indian Income-tax Act, 1922, and under Section 147 of the Income-tax Act, 1961, were not served upon the assessee. Inasmuch as such service is a condition precedent to a valid assessment, it is urged that reassessments made are totally illegal and void. For a proper appreciation of the question, it is necessary to state a few more facts as they appear from the statement of the case and the Tribunal's order. In the year 1955, there was a huge rush at the assessee's bank. The assessee could not meet all the demands of its customers. Insolvency petitions were filed by the creditors wherein the District Judge, Saharanpur, appointed the official receivers at Saharanpur and Dehradun to be interim official receivers of the entire properties of the assessee-Hindu undivided family and to administer them to the best advantage of the creditors with full powers of administration (vide order dated July 26, 1955, in Insolvency^Case No. 1 of 1955). In pursuance of this order, the interim official receivers took charge and continued as such till July 5, 1968. There was another Insolvency Petition No. 8 of 1971, in which the assessee-Hindu undivided family was adjudged insolvent by the District Judge, Dehradun, by his order dated April 22, 1976. During these proceedings, the Official Receiver, Dehradun, was again appointed as interim receiver of the properties of the assessee and, in this capacity, he again functioned as interim official receiver of the properties of the assessee from 1971 till April 23, 1976 and, thereafter, as the official receiver.
(3.) With respect to the assessment years 1952-53, 1953-54, 1954-55 and 1955-56, notices under Section 34(1) of the 1922 Act were issued on January 7, 1960. The notices were issued to the assessee-Hindu undivided family represented by its karta. These notices were served on the interim official receiver, Dehradun, on January 8, 1960. With respect to the assessment year 1949-50, notices under Section 147/148 of the 1961 Act were issued on February 28, 1966, and were served upon the clerk of the interim official receiver on March 3, 1966. In response to the notices served upon him, the receiver filed returns for the four assessment years 1952-53 to 1955-56 on November 7, 1960, November 10, 1960 and November 19, 1960. Inasmuch as the interim receiver had no concern with the said assessment years, the returns filed by him were not taken into account. Thereupon, returns were filed by the karta of the assessee-Hindu undivided family on May 22, 1971. It is on the basis of these returns that the reassessment orders were passed. So far as assessment year 1949-50 is concerned, a return was filed by the karta of the assessee-Hindu undivided family on February 10, 1967, on the basis of which an order of reassessment was made. During the course of reassessment proceedings, the asses-see raised a contention through its letters dated September 15, 1972 and October 12, 1972, that the notices under Section 34/148, not having been served upon the assessee-Hindu undivided family, no reassessment can be made on the basis of such notices. The Income-tax Officer rejected the said objection and passed orders of reassessment. The appeals filed by the assessee were rejected by the Appellate Assistant Commissioner, whereupon the matter was carried to the Appellate Tribunal in further appeal. It would be appropriate to notice the findings of the Tribunal : (i) "It is an undisputed fact that insolvency petitions were filed against the assessee-family by its creditors and that in the said insolvency proceedings, the learned District Judge, Saharanpur appointed, by his order dated July 26, 1955 in Insolvency Case No. 1 of 1955, the official receivers at Saharanpur and Dehradun to be the interim official receivers of the entire properties of the debtors in the two districts of Saharanpur and Dehradun, respectively, to take possession of the said properties and to administer them to the best advantage of the creditors, with full powers of administration, including that of filing suits on behalf of the debtors for the realisation of their assets. (ii) The interim receivers were in charge of the properties till July 5, 1968. Subsequently, in Insolvency Petition No. 8 of 1971, the Official Receiver, Dehradun, was again appointed as the interim receiver of the properties of the assessee and he continued as such till April 23, 1976, whereafter he continued as the official receiver under the orders of the court. (iii) Notices under Section 34/147, 148 were served upon the interim receiver, Dehradun. The dates on which these notices were served fell within the first spell of the interim receivers, which commenced on July 26, 1955, and continued up to July 5, 1968. During this period of 13 years, the interim receivers were in possession and administration of the properties of the assessee-Hindu undivided family. (iv) The notices were, undoubtedly, addressed to the assessee-Hindu undivided family, Mansa Ram & Sons. It is not, and also cannot be, the case of the assessee that these five notices were not passed on to him by the interim official receiver and that he was not aware or had no knowledge of these notices at all. On the contrary, the assessee's conduct in 1950-51 assessment shows that the assessee was fully aware of the legal position, as he had made an endorsement on the office copy of the notices under Section 147(a), dated March 27, 1967 to the effect that 'the Official Receiver functioning under the District Magistrate is handling the affairs of Mansa Ram & Sons' ". (v) The karta of the assessee-Hindu undivided family filed returns in pursuance of the said notices, but did not raise any objection whatever about the service of notices. These returns were filed on May 22, 1971, with respect to the assessment years 1952-53 to 1955-56 and on February 10, 1967, with respect to the assessment year 1949-50. It is only by its letters dated September 15, 1972, and October 12, 1972, that the assessee chose to raise this objection. In the circumstances, the assessee cannot complain that there was no service of the notices under Section 34/147, 148 upon him, nor can the reassessment orders be invalidated on the ground of non-service of the said notices.";