THE COMMISSIONER OF INCOME TAX V. M P JAYARAJ (DEAD)

ITA/901/2007

AI Insights

This case involves a complex legal dispute concerning the tax liabilities of the deceased M.P. Jayaraj, where the Income Tax Department sought to assess the estate's tax obligations. Following the death of M.P. Jayaraj, his assets, including cash and jewelry, were seized by the police and handed over to the tax department. The department issued notices under Section 148 of the Income Tax Act, which led to a series of appeals and legal proceedings. The ITAT initially set aside the matter for fresh adjudication, directing the inclusion of all legal heirs and awaiting the resolution of civil disputes over heirship. The High Court's decision reinforced the ITAT's approach, highlighting the necessity of resolving legal heirship before any tax assessments could be conclusively made.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 741783 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 08-04-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: SOMASHEKAR KASHIMATH
• Assessee Lawyers: K V ARAVIND
• Keywords: Assessment; Civil dispute; Income Tax; Legal heirs; Tribunal
• Section: 148; 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 08TH DAY OF APRIL 2014 PRESENT THE HON'BLE MR.JUSTICE DILIP B.BHOSALE AND THE HON'BLE MR.JUSTICE B.MANOHAR ITA NO.901/2007 BETWEEN: 1. The Commissioner of Income-tax, C.R Building, Queens Road, Bangalore. 2. The Deputy Commissioner of Income-Tax (Asst), Special Range – 3, C.R Building, Queens Road, Bangalore. ….Appellants (By Sri.K.V.Aravind, Advocate) AND: M.P.Jayaraj (Dead) Represented by Smt.Elizabeth, No.7, Arikempanahalli, Bangalore. …Respondent (By Sri.Somashekar Kashimath, Advocate) 2 This ITA is filed under Section 260-A of I.T.Act, 1961 arising out of Order dated 16-07-2007 passed in M.P.No.67/Bang/2007 (arising out of ITA.Nos.614 to 616/Bang/1997) for the Assessment Year 1987-1988, praying that this Hon’ble Court may be pleased to i. formulate the substantial questions of law stated therein. ii. Allow the appeal and set aside the Order passed by the ITAT, Bangalore in MP.No.67/Bang/2007 (arising out of ITA.Nos.614 to 616/Bang/1997) dated 16- 07-2007 and confirm the order of the Appellate Commissioner confirming the order passed by the Deputy Commissioner of Income Tax (Asst)., Special Range -3, Bangalore, in the interest of justice and equity. This appeal coming on for Hearing this day, Dilip B.Bhosale J., delivered the following: P.C. Heard the learned counsel for the appellants. 2. None appears for the respondent though served. 3. This income tax appeal is directed against the order dated 16th July 2007 whereby the Income Tax Appellate Tribunal (for short ‘the Tribunal’) dismissed the M.P.No.67/Bang/2007. By that petition, the 3 appellant sought disposal of ITA Nos.614-616/1997 on merits in view of the directions issued by this Court vide order dated 28th September 2006 in ITA No.260/2001. The relevant observations made in the order dated 16-07-2007 read thus: The rival contentions in regard to the above petition have been very carefully considered. The finding of the Tribunal in this case was that the High Court in its order had given a clear ruling to the effect that the proceedings have not been invalidated, but requires to be re-examined. This was on the basis that the person concerned is one of the legal heirs and there are few more legal heirs in the property that devolves on any person, who could be more than one. Principles of natural justice demand that each of those legal heirs receiving the property or claiming to have a share in the property would have necessarily to be heard. The civil dispute with regard to who are the legal heirs are still to be resolved and since all the legal heirs have to be brought on record and heard as heard. The purpose is that each of those persons would have to realize that the property that is received by them is subject to tax demands of the Department that may be raised consequent to the assessment on the deceased. The Tribunal having 4 remanded the issue to the file of the Assessing Officer to bring on record all the legal heirs and await the conclusion of the civil dispute was only the probable course available. There being no mistake apparent on the records, the petition is dismissed.” 4. It appears that the Revenue had filed ITA No.260/2001 under Section 260A of the Income Tax Act, 1956 against the order dated 20th April, 2001 passed in ITA No.613/Bang/1997 for the assessment year 1989-90 and so also for setting aside the order passed by the Tribunal in ITA No.613/Bang/1997 dated 20-04-2001. The Revenue had also prayed for confirming the assessment order passed by the Deputy Commissioner of Income Tax, Special Range, Bangalore. The appeal was disposed of by this Court vide order dated 28th September 2006. The relevant observations in the said order read thus: 3. One Sri.M.P.Jairaj is dead. The Police searched the house of Sri.M.P. Jairaj. They noticed cash and jewellery in addition to documents in the matter 5 of assets. The same were handed over to the Department. Originally, Sri.M.P.Jairaj had not filed a return of income. On the death of M.P.Jairaj, the Department issued a notice under Section 148 of the Income Tax Act (for short, ‘the Act’). Proceedings were initiated. His wife filed a return of income. Thereafter, several notices have been issued. Some of them have returned unserved. In the circumstances, an adverse order was passed by the Assessing Officer. The same was challenged by way of an appeal. The Appellate Authority has passed an order. Aggrieved by the order of the Appellate Authority, the legal representatives of the assessee filed an appeal before the Tribunal. The Tribunal has allowed the appeal on the sole ground that all the legal representatives of the deceased assessee were not brought on record. The Tribunal did not go into the merits of the matter. This order is challenged in this appeal by the revenue. 4. Heard Sri.M.V.Seshachala, learned Counsel for the revenue and Sri.S.Parthasarathi, learned Counsel for the legal representatives of the deceased assessee. 5. In the course of arguments, it is brought to our notice the latest Judgment of the Supreme Court reported in 219 ITR 737. The Supreme 6 Court would say in the said Judgment that non-service of notice to the legal representatives of the assessee would not invalidate the assessment order passed by the Income Tax Officer. The Supreme Court ruled that it was at best an irregularity for which the Appellate Assistant Commissioner was justified in setting aside the assessments and it was not a case fit for cancellation of the assessments. The said Judgment is equally applicable to the facts of the case. 6. In the circumstances, we accept the appeal. The order of the Tribunal is set aside. All questions of law are answered in favour of the revenue. The Tribunal is to decide the matter on merits. Parties are to appear before the Tribunal, without waiting for any notice on 02.11.2006. The Tribunal is to consider the material facts and thereafter proceed to apply correct law laid down in the case on hand, without in any way being influenced by its earlier order or by this order. The Tribunal is to complete the proceedings within five months thereafter. 5. Thereafter the Revenue filed another ITA No.601/2007 in this Court against one Smt.Puttathayamma arising from the orders dated 7 16-02-2007 and 16-07-2007 passed in ITA No.613/Bang/2007 and M.P.No.64/Bang/2007. In that appeal, this Court after perusing the order dated 28-09-2006 (of this court) passed in ITA No.260/2001, disposed of the same by making following observations: “We are of the opinion that unless there is proper adjudication by the civil court with regard to the legal representatives of late late M.P.Jairaj, nothing can be done further in the matter. Thus the Tribunal was justified in directing the Assessing Officer to await the outcome of adjudication with regard to L.Rs of late M.P.Jairaj by the civil court. We find that there is no substance in this appeal. 6. After the order of this court, the Tribunal disposed of the appeal bearing ITA Nos.614-616/1997 vide order dated 31-01-2007. The concluding paragraph of the order dated 31-01-2007 read thus: 4. Rival contentions heard. On a careful consideration of facts and circumstances of the case, we are of the considered opinion that the issue in question should be set aside to the file of Assessing Officer for fresh 8 adjudication. The Hon’ble High Court has accepted the appeal of revenue and directed the Tribunal to decide the matter on merits. Neither the Assessing Officer nor the CIT (A) has given a speaking order on the issue of the sources of funds for acquisition of the property at 7, Arekempana Halli in 1988 by Smt.Elizabeth. It is well settled that the burden of proof lies on the party which alleges benami. The Assessing Officer has to discharge this burden. 5. We have also observed that the Hon’ble High Court has not specifically decided the issue as to whether Smt.Elizabeth can be considered a legal heir of Mr.M.P.Jayaraj. The revenue has claimed in Question No.2 framed before the Hon’ble High Court that it hadstatements and documents in its possession which exclusively prove that Smt.Elizabeth is a legal heir of Mr.M.P.Jayaraj. The Assessing Officer is directed to furnish to the assessee all such statements and documents seized, which show her to be the legal representative and dispose off the matter in accordance with the law after receiving explanations from the assessee. Needless to say proper opportunity has to be provided before disposing the issue defendant nova. Thus all these appeals of the assessee are allowed for statistical purposes. 9 7. Having considered the background facts, against which the aforementioned orders have been passed by this Court and the Tribunal, we are not inclined to interfere with the same unless the issue of heirship is finally concluded. 8. In our opinion, the Tribunal vide its order dated 16th July 2007 has rightly refused to interfere with its order dated 31-01-2007. In the circumstances, we dispose of this appeal. All contentions of the parties are kept open. It is needless to mention that the Assessing Officer shall comply with the directions issued by the Tribunal vide its orders dated 31-01-2007 in ITA Nos.614- 616/1997 and 16-07-2007 in Misc. Petition No.67/2007 expeditiously, but in any case after the adjudication by the Civil Court with regard to the legal representatives 10 of Late M.P.Jairaj as observed by this Court in the order dated 1st February 2008. The appeal is accordingly disposed of. No costs. Sd/- JUDGE Sd/- JUDGE mpk/-* "