S.K. Mal Lodha, J. - (1.) AT the instance of the Commissioner of Income-tax, Jodhpur, the following question has been referred by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur ("the Tribunal" herein), for the opinion of this court : "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was in law justified in holding that the Appellate Assistant Commissioner of Income-tax was right in annulling the assessment for the assessment year 1965-66 made by the Income-tax Officer ?"
(2.) THIS question is said to arise out of the order of the Tribunal dated May 31, 1978, passed in I.T.A. No. 1277(JP)/1977-78, in respect of the assessment years 1965-66 and 1967-68. The assessments for the assessment years 1965-66 and 1967-68 were completed under Section 143(3} of the Income-tax Act, 1961 (No. XLIII of 1961) for short ("the Act"). It was discovered by the Income-tax Officer ("the ITO") that the assessee, Mohanlal (deceased), failed to disclose the material facts truly and correctly and as such income has escaped assessment. The case of the assessee was that a plot was purchased for Rs. 9,900 on March 27, 1965. A house was constructed on the plot and the construction was completed by March, 1966. The major portion of the construction was completed in the assessment year 1966-67 and a sum of Rs. 27,387 was spent. A sum of Rs. 650 only was spent by Mohanlal Gupta (assessee) in the assessment year 1967-68. The cost of construction, as per the version of the assessee, was Rs. 31,200. The Income-tax Officer estimated the cost of construction at Rs. 38,000. This cost of construction estimated by the Income-tax Officer was wrong according to the assessee. After issuance of a notice under Section 148 of the Act for the aforesaid assessment years, Mohanlal filed a return declaring income below the taxable limit, on March 13, 1974. After the filing of the return, he died on December 7, 1974. After his death, a notice under Section 142(1) of the Act was issued in the name of Mohanlal Gupta (deceased-assessee). In other words, the notice was issued against a dead person. This notice was received by his son, Gyan Prakash Gupta (legal heir of Mohanlal Gupta). After receipt of the notice, Gyan Prakash Gupta wrote a letter dated December 11,1975, to the Income-tax Officer stating that Mohanlal Gupta had expired on December 7, 1974, and that he is survived by his widow, Smt. Bhagwati Devi Gupta, two sons and one married daughter. The names of the legal representatives were mentioned. It was also stated that Mohanlal Gupta had executed a will according to which his house in the industrial area was bequeathed to Gyan Prakash Gupta's wife, Smt. Dayawati Gupta by name. It was also mentioned that Mohanlal Gupta was served with a notice under Section 148 for the assessment years 1965-66 and 1967-68. The Income-tax Officer completed the assessments on February 27, 1976, for both the years. The legal heir of the deceased-assessee, Gyan Prakash, went up in appeal. The Appellate Assistant Commissioner, by his order dated December 30, 1977, reached the conclusion that the assessment orders were void ab initio. He, consequently, annulled both the assessments. The reasons given by the Appellate Assistant Commissioner in support of his conclusion are : (1) that no assessments could be completed in the name of Gyan Prakash Gupta ; (2) that in the will executed by Mohanlal, the house in the industrial area was the property of Smt. Dayawati and, therefore, if any assessment was to be made, it should have been made in the name of Smt. Dayawati. (3) that the Income-tax Officer was informed about the names and addresses of the legal representatives of the deceased, Mohanlal, but he did not issue notice to any other legal representative. On merits, the Appellate Assistant Commissioner found that a substantial part of the house was constructed in the assessment year 1966-67 and as such the addition in question could not be made in the assessment years 1965-66 and 1967-68. A further appeal was taken. It was submitted on behalf of the Commissioner of Income-tax that the Appellate Assistant Commissioner erred in annulling the assessments and, at the most, he could only set aside them on the ground of the failure on the part of the Income-tax Officer to issue notices to the legal representatives after the death of Mohanlal which was merely an irregularity and the same could be rectified by setting aside the assessments. The Tribunal dismissed the appeal and agreed with the Appellate Assistant Commissioner that the assessments were rightly annulled. In this view of the matter, the Tribunal did not go into the other points raised before it. An application was filed by the Commissioner of Income-tax under Section 256(1) of the Act. Hence, the aforesaid question has been referred. We have heard Mr. B.R. Arora, for the Revenue, and Mr. Rajesh Balia, learned counsel for Gyan Prakash (non-petitioner). The only point involved in this reference is whether the Appellate Assistant Commissioner was right in annulling the assessment for the assessment year 1965-66. There is no dispute that after service of the notice under Section 148 of the Act, Mohanlal Gupta had filed the return on March 13, 1974, declaring income below the taxable limit. It was after the filing of the return that he died on December 7, 1974. The notice under Section 142(1) of the Act was issued to Mohanlal Gupta though he had already died before the issuance of it. That notice was received by his son, Gyan Prakash Gupta, and on receipt of that notice, he apprised the Income-tax Officer by his letter dated December 11, 1975, about the legal representatives of Mohanlal Gupta and that the will was executed by Mohanlal Gupta before his death in favour of Smt. Dayawati Gupta who is his wife. Despite the letter dated December 11, 1975, containing the aforesaid facts, no notice was issued to all the legal representatives of Mohanlal Gupta or Smt. Dayawati in whose favour the will is said to have been executed by the deceased, Mohanlal Gupta. The Income-tax Officer completed the assessment on February 20, 1976, on Gyan Prakash Gupta.
(3.) NOW, we may notice the relevant provisions of the Act. Section 142 of the Act deals with enquiry before assessment. A notice under Section 142(1) was issued in the name of the deceased, Mohanlal Gupta. Section 143 of the Act lays down the procedure for completing the assessment. It provides that a notice, before making an assessment under Section 143 of the Act, should be served on the assessee mentioning the date on which he is required to attend the Income-tax Officer's office or to produce or to cause to be there produced any evidence on which the asses-see wants to rely in support of his return. Section 153 lays down the time-limit for completing the assessment and reassessment. We have made mention of these provisions, as learned counsel for the assessee has referred to them during the course of arguments, to impress upon us that the period for completing the reassessment having been expired, the Appellate Assistant Commissioner was justified in annulling the assessments. The other important section, to which reference may be made is Section 159, which is with respect to the legal representatives. It deals with the liability of the legal representatives. Sub-section (3) of Section 159 is as under : "(3) The legal representative of the deceased shall, for the purposes of this Act, be deemed to be an assessee." According to Sub-section (6) of Section 159, the liability of a legal representative under this section shall, subject to the provisions of Sub-section (4) and Sub-section (5), be limited to the extent to which the estate is capable of meeting the liability. Under Section 251, in an appeal against the assessment, the Appellate Assistant Commissioner has, inter alia, power to annul the assessment or set aside the assessment and refer the case back to the Income-tax Officer for making a fresh assessment in accordance with the directions of the Appellate Assistant Commissioner. ;