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

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:

….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)

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.

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

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.”

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.

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.

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.

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.

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

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.

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JUDGE

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JUDGE

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