NAMRATA KAPALE ,CHINDWARA vs. PR.CIT-1, JABALPUR, JABALPUR

O R D E R

Per Sanjay Arora, AM:

(AY 2017-18) Namrata Kapale v. Pr. CIT The first such is the revision being invalid as the notice u/s. 263 dated 30/12/2021 was issued in the name of a deceased person; Shri Rama Rao Kapale (RK) having expired on 14/02/2021 (PB pgs.42). No fresh notice u/s. 263 was issued on the appellant, the legal representative (LR) and daughter of RK, i.e., on her informing the ld. Pr. CIT of her father‟s death vide letter dated 12/01/2022, i.e., in response to the notice dated 30/12/2021, so that the ensuing proceedings were thus null and void. The only manner whereby the appellant could be proceeded against was by taking her on record, i.e., in terms of sec. 159(2)(b), even as explained in CIT v. Hemanathan (M.) [2016] 384 ITR 177 (Mad) – which also considers the decision by the Hon'ble jurisdictional High Court in Kaushalyabai v. CIT [1998] 238 ITR 1008 (MP), and which was not. Reliance is placed on Pr. CIT v. Maruti Suzuki India Ltd. [2019] 416 ITR 613 (SC); and Sheela Devi v. Pr. CIT (in dated 03/03/2022/WS-1, pgs. 4-14). In the former, notice u/s. 143(2) was issued on the amalgamating company despite communication of the fact of its amalgamation to the assessing authority, while in the latter, notice u/s. 263 was issued, as in the instant case, on a person no longer alive. This sums up the assessee‟s case qua the validity of sec. 263 proceedings before us.

4.1 In our considered view, the assessee‟s challenge, for the reasons that follow, is not valid in law. In Kaushalyabai (supra), the issue of notice u/s. 148(1) in the name of the assessee‟s deceased husband, Vishan Das, was considered by the Hon'ble Court as of no moment in view of she – who responded to the said notice by filing returns in her capacity as the LR and joined the proceedings, having participated in the proceedings, so that there was no case of any prejudice. The question of whether the notice on a dead person is a nullity or is a procedural irregularity was, in its view, rendered academic under the circumstances. The correspondence with the facts in the instant case is striking. Non-acceptance of the said decision in Hemanathan (M.)(supra) by the Hon'ble Madras High Court would not make it any less binding on us. In CIT vs. Premium Capital Markets &

(AY 2017-18) Namrata Kapale v. Pr. CIT Investment Ltd. [2005] 275 ITR 260 (MP), the participation by the assessee in the assessment proceedings, stretching to over a year, and without raising any issue qua the service of notice u/s. 143(2), was construed by the Hon'ble Court as a valid service and, in any case, as disentitling the assessee to raise the issue of service of the said notice – a mixed question of fact and law, for the first time before the Tribunal. The same, it may be noted, is precisely what s.292BB, inserted on the statute w.e.f. 01/04/2008, deems. We are conscious that this may not hold in case of a jurisdictional notice, as u/s. 143(2), as explained in Maruti Suzuki India Ltd. (supra) by the Apex Court, for which reference was made to para 33 of it‟s judgment which, read out during hearing, reads as under: “33. In the present case, despite the fact that the Assessing Officer was informed of the amalgamating-company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a co-ordinate Bench of two learned judges which dismissed the appeal of the Revenue in Spice Enfotainment on November 2, 2017. The decision in Spice Enfotainment has been followed in the case of the respondent while dismissing the Special Leave Petition for Assessment Year 2011-2012. In doing so, this Court has relied on the decision in Spice Enfotainment.” (emphasis, ours) Though this decision stands since turned, i.e., on the aspect of ceasure to exist of amalgamating company (Pr. CIT vs. Mahagun Realtors (P.) Ltd. [2022] 443 ITR 194 (SC)), the same would continue to hold qua a valid assumption of jurisdiction. The issue thus boils down to a valid assumption of jurisdiction and grant of proper opportunity. Our reference to „service of notice‟ hereinbefore is only toward the latter, which aspect is not in dispute in the instant case. 4.2 On the aspect of jurisdiction, reference during hearing was made to CIT vs. Amitabh Bachchan [2016] 384 ITR 200 (SC). It stands clarified therein, as had been earlier by the Apex Court in Gita Devi Aggarwal v. CIT [1970] 76 ITR 496 (SC) and CIT vs. Electro House [1971] 82 ITR 824 (SC), also referred to by it, that 3 | P a g e

(AY 2017-18) Namrata Kapale v. Pr. CIT it was not necessary for the revisionary authority to issue a notice before assuming jurisdiction u/s. 263, which does not require fulfilment of any condition precedent. The purport of a notice u/s. 263, and all that he is required to do, is to give an opportunity of being heard to the assessee, and make (or cause to make) such enquiry as he deems necessary. To the same effect is the decision in CIT v. Prem Syndicate [1983] 141 ITR 290 (MP). That is, the notice u/s. 263 is not a jurisdictional notice, for the ratio of the decision in Maruti Suzuki India Ltd. (supra) to apply. No rebuttal was made by Sh. Bardia, the ld. counsel for the assessee, despite being allowed time to respond. Rather, to the extent the decision in Sheela Devi (supra) holds the non-communication of the fact of the death of the assessee to the assessing authority, or the assessee‟s conduct, as irrelevant, the same is also inconsistent with the decision in Mahagun Realtors (P.) Ltd. (supra). The reliance on the decisions in Hemanathan (M.) (supra) and Sheela Devi (supra), thus, fails.

4.3 There is accordingly no issue either as to jurisdiction or opportunity, with, rather, the Hon'ble jurisdictional High Court in the decisions cited granting precedence to observing the principles of natural justice over adherence to strict procedure. What, then, one may ask, is the objection about? As explained in CIT v. Sumantbhai C. Munshaw (Decd) [1981] 128 ITR 142 (Guj), rendered with reference to a host of judicial precedents, including by the Apex Court, where there is no lack of jurisdiction, the proceedings cannot be questioned where the LR is impleaded or otherwise joins the proceedings, and is allowed opportunity of being heard before passing the order under reference; the defects in procedure – except where fundamental, affecting the jurisdiction, being saved by sec. 292B. Reference therein is also made to Estate of Late Rangalal Jajodia v. CIT [1971] 79 ITR 505 (SC), which has a bearing on the effect of a defect in the assessment arising out of want of notice to the LR and mis-description or mistake of name in the assessment order. Section 159, it explains, does not bear upon the jurisdiction

(AY 2017-18) Namrata Kapale v. Pr. CIT of the taxing authority, but deals with matters incidental to it. The decision in Sumantbhai C. Munshaw (Decd.), a treatise on the subject, is, thus, consistent with the binding decisions in Kaushalyabai (supra) and Premium Capital Markets & Investment Ltd. (supra) i.e., in principle. In Swaran Kanta v. CIT [1989] 176 ITR 291 (P&H), the mention of the name of the deceased in the heading of the order, in proceedings, validly initiated, and concluded on the LR, whose is deemed by law (s.159) to be an assessee, was held as valid notwithstanding that the title of the order was not happily worded, which though would not make it invalid for that reason and, besides, is saved by s. 292B.

4.4 The foregoing explains our decision in non-acceptance of the assessee‟s case. We may, before parting, also advert to the decision in Guduthur Brothers v. ITO [1960] 40 ITR 298 (SC), wherein the Apex Court per it‟s larger Bench decision explained that where a notice remained undisposed, it did not cease to be operative, and the AO had the jurisdiction to continue the proceedings from the stage where the illegality had occurred.

4.5 The assessee‟s next legal challenge before us was that as the notice u/s. 143(2) was for limited scrutiny, i.e., qua cash deposited during demonetisation period (PB pg.7), it was not proper on the part of the revisionary authority to, in exercise of the revisionary power, question the absence of verification in assessment qua agricultural income, disclosed by the assessee at Rs. 7,00,900. The objection is, to our mind, not maintainable, both on facts and in law. This is as agricultural income is surely one of the sources of cash deposited by the assessee, to verify which the return was selected for scrutiny. Two, that the assessee does not own any agricultural land is an admitted fact. It is only where the land is either owned or taken on rent (as per revenue record), that the income from agricultural activity could be said to be agricultural. The AO ought to have, therefore, exceeded his ambit to verify the veracity of the claims as to agricultural income, exempt u/s. 10, i.e., besides being in explanation of the source of the cash deposit. 5 | P a g e

(AY 2017-18) Namrata Kapale v. Pr. CIT He having not done so, by seeking the approval of his range head, as enjoined upon him by the Board Circular, binding on him, the said authority was competent to, in exercise of his revisionary jurisdiction, require the AO to examine the same, setting aside the assessment for the purpose. Reliance, for the purpose, by the ld. Pr. CIT on the decisions in CIT v. Deepak Kumar Garg [2008] 299 ITR 435 (MP); CIT vs. Himachal Pradesh Financial Corpn. [2010] 186 Taxman 105 (HP); and Consolidated Photo and Finvest vs. Asst. CIT [2006] 281 ITR 394 (Del), is also apposite, represent as it does the well-settled law of lack of inquiry as warranting revision. The matter, on pleas being taken against such a course being adopted, expanding the scope of the proceedings, was examined at length by the Tribunal in Vinod Rajput & Anr. v. Pr. CIT (in & 22/Jab/2022, dated 31/08/2022), also represented by Sh. Bardia, upholding the exercise of revisionary power under the circumstances, to which reference, with profit, may be made; it being a common ground before us that the same pleadings, as well as the ensuing decision thereon, be adopted in the instant case as well. This, we may though clarify, shall cover only the legal aspect qua competence of the ld. Pr. CIT, and not on the facts.

4.6 On facts, we approve of the observations by the Pr. CIT at paras 8 through 8.4 of his order, being in respect of the infirmities observed by him qua the assessee‟s explanation in respect of her claim for agricultural income of Rs. 7.01 lacs. The AO, who abysmally failed to do so in the original proceedings, shall question the assessee in the matter keeping the same in mind, though not limited thereto, and neither being bound thereby, inasmuch as it is an open set aside (para 9). That is, he shall decide per a speaking order, issuing definite findings of fact upon due enquiry/verification, observing the principles of natural justice.

(AY 2017-18) Namrata Kapale v. Pr. CIT 6. In the result, the assessee‟s appeal is dismissed. Order pronounced in open Court on September 23, 2022 Sd/- Sd/- (Manomohan Das) (Sanjay Arora) Judicial Member Accountant Member Dated: 23/09/2022 vr/- Copy to:

1. 1. The Appellant: Namrata Kapale, L/R of Ram Rao Kapale, Ward No.12, Purani Basti Loniya, Karbal, Chhindwara 2. The Respondent: Principal CIT-1, Jabalpur.