JUDGMENT Prakash Krishna, J.
1. The Tribunal has referred the following two questions of law as per direction of this Court, under Section 256(2) of the IT Act for the opinion of this Court for the asst. yrs. 1965-66 to 1972-73 :
"(1) Whether, on the facts and circumstances of the case, the Tribunal could be said to be correct in deciding that the notice under Section 148 of the IT Act issued to the assessee-HUF was not meant for it, but for the Karta as an individual ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal is right in annulling the assessment made by issue of notice under Section 148 on the ground that no valid notice under Section 148 was issued to the assessee-HUF ?"
2. The assessee is an HUF and it derived income for the aforesaid assessment years from property and dealings in silver utensils and yarn. After completion of the assessment for the asst. yrs. 1965-66 to 1972-73, the business premises of the assessee was searched. The ITO on the basis of the documents and the articles found during the course of search, was of the view that the income of the assessee has escaped assessment and the business in the name of one Heera Lal Burnwal was the Benami business of the assessee. After obtaining sanction from the CIT, notices under Section 147(a) of the Act were issued. The ITO sought and was granted the approval to the reopening of the assessment in respect of the assessee in the status of HUF. However, the notices issued to the assessee were addressed as follows :
Shri Ram Lala Prasad Pro. Ram Das Deokinandan Prasad, Hindi Bazar, Gorakhpur.
The notices were served on Shri Ram Lala Prasad. He was also the Karta of the assessee-HUF. In compliance to the notices, returns were filed in the status of HUF and the assessments were also completed in that status.
3. The ITO rejected the contention of the assessee that the Department had no material to show that the income of the assessee has escaped assessment. He also rejected the contention that the notices were invalid and illegal as the same have been served in the individual capacity of the assessee. The CIT(A) heard the matter in appeal for the asst. yr. 1965-66 and accepted both the contentions of the assessee that the ITO had no material to come to conclusion that there was escapement of income. He also accepted the contention that the notice under Section 147(a) of the Act was invalid. Consequently, the reassessment order for the asst. yr. 1965-66 was cancelled. The same view was taken by the CIT(A) for the asst. yrs. 1970-71, 1971-72 and 1972-73. However, the appeals for the asst. yrs. 1966-67, 1967-68, 1968-69 and 1969-70 were considered by another CIT(A). For the asst. yrs. 1966-67 and 1967-68, he, by a consolidated order,r took a different view of the matter and came to the conclusion that the proceedings under Section 148 were started with the prior approval of the CIT(A). The proposal for approval was sent in respect of the assessee in the status of HUF and the notice issued to the Karta of the HUF, Shri Ram Lala Prasad, and then the return was filed in the status of HUF, therefore, the notices were valid. For the asst. yrs. 1968-69 and 1969-70, the CIT(A) followed its earlier order and dismissed the appeals.
4. The matter was taken up by the Department before the Tribunal for the asst. yrs. 1965-66, 1970-71, 1971-72 and 1972-73 challenging the findings of the CIT(A) that the notices issued under Section 148 were invalid. The assessee also challenged the order of the CIT(A) for the asst. yrs. 1966-67, 1967-68, 1968-69 and 1969-70 regarding the validity of the notice issued under Section 148 of the Act. The Tribunal came to the conclusion that the notices were issued to Shri Ram Lala Prasad in his individual capacity and were not issued to Shri Ram Lala Prasad as Karta of Ram Das Deokinandan Prasad, HUF. The notices were issued to him as proprietor of Ram Das Deokinandan, who was required to file return for his individual income as a proprietor. It took the view that the notices issued under Section 148 of the Act were invalid and the reassessments were unsustainable as proper notices under Section 148 were not served on the assessee.
5. Heard the counsel for the parties and perused the record. The learned standing counsel for the Revenue submitted that approval was sought and was granted by the CIT in the status of HUF. The assessee filed a return of HUF and as such the initiation of reassessment proceedings were valid and the ITO rightly exercised its jurisdiction to reassess the underassessed income of HUF. The learned standing counsel has placed reliance on the following cases :
1. CIT v. S. Raman Chettiar (1965) 55ITR 630 (SC)
2. CIT v. Banarsi Lal Rajgariha (1964) 51 ITR 659 (Pat)
3. Sajjan Kumar Sanaf v. CIT (1978) 114 ITR 155 (Cal)
4. Mahaveer Prasad Poddar v. ITO (1976) 102 ITR 478 (Cal).
6. The learned counsel for the assessee submitted that the ITO illegally assumed the jurisdiction to reassess the escapement of income. Notice under Section 148 of the Act was not issued to assessee-HUF, but was issued to Shri Ram Lala Prasad in his individual capacity. A person may have different capacities or legal status under the Act. In the present case, no notice to reassess the income of assessee in the status of HUF was issued and as such the entire reassessment proceedings are illegal and without jurisdiction. The reassessment notice under Section 148 of the Act was directed against the assessee in his individual status and as such filing of return of HUF will not validate the reassessment order. Reliance has been placed by him on the following cases :
1. CIT v. K. Adi Narayana Murty (1967) 65 ITR 607 (SC)
2. CIT v. Kurban Husain Ibrahimji Mithiborwala : (1971) 82 ITR 821 (SC)
3. CIT v. Ishwar Singh & Sons (1981) 131 JTR 480 (All)
4. CIT v. Bibhuti Bhushan Malik and Ors., (1987) 165 ITR 107 (Cal).
7. We have given careful consideration to the respective submissions of the counsel for the parties. It is fairly settled that a notice for reassessment of escaped income under Section 148 of the Act is jurisdictional notice. The AO gets jurisdiction to reassess the escaped income only after issuance and service of a valid notice under Section 148 of the Act. In the case of CIT v. S. Raman Chettiar (supra), the question involved therein was a different one. The Court in that case has posed the question involved in the case, in the following manner:
"The short question which arises in this case is whether the return dt. 4th Sept., 1948, can be treated as the valid return under Section 22(3) of the Act ?"
The controversy in that case was under the old IT Act and was with reference to the Section 22(3) of the Act. For the asst. yrs. 1944-45 and 1945-46, the assessee did not file any return of the income. The ITO issued registered notices for both the assessment years under Section 34 of the old Act. The assessee filed return for the asst. yrs. 1944-45 and 1945-46. The ITO dropped the proceedings for the year 1944-45 as infructuous. But for the asst. yr: 1945-46 tax was levied, which was challenged in appeal. The matter travelled upto the Tribunal. The appeal was allowed in part. Thereafter, after obtaining sanction of the CIT(A), the ITO issued a notice purporting to be under Section 34 of the Act in respect of the asst. yr. 1944-45. The Court was considering the validity of this notice. In that connection, it was held by the Supreme Court in the above case that notice is not valid for the asst. yr. 1944-45. The observation made by the Supreme Court in the aforesaid judgment was with reference to the different context of facts. The said ruling has no application to the issue involved in the present reference. The Supreme Court interpreted Section 22(3) of the old IT Act.
8. The next case relied upon by the learned counsel for the Revenue is CIT v. Banarsi Lal Rajgariha (supra). In that case the notice states that the income of the assessee for the year ending 31st March, 1948, had escaped assessment and called upon him to submit a return. This notice was understood by the assessee as relating to the asst. yr. 1948-49. It was held by the Patna High Court that there was no violation of any condition precedent for assumption of jurisdiction under Section 34 (old IT Act). The obvious clerical mistake in the notice in mentioning the year of assessment did not invalidate the notice or the reassessment proceedings taken in the pursuance thereof or the order of reassessment. The point in issue in the said case was as to whether there was a clerical mistake in mentioning a wrong assessment year in the reassessment notice. It was treated to be a clerical mistake by the High Court and was held that the reassessment notice is valid. The Court was of the view that the obvious clerical error or mis-description in the notice could not invalidate notice and consequently, the reassessment proceeding or the order. The High Court proceeded to decide the controversy on the assumption that it was a case of clerical error. But, the Supreme Court in the case of CIF v. Kurban Hussain Ibiahimji Mithiboiwala (supra) has held that the ITO has jurisdiction to reopen an assessment under Section 34 (old Act) (which) depends upon the issuance of a valid notice. If the notice issued by him is invalid for any reason, the entire proceedings taken by him would become void for want of jurisdiction. It was held that reassessment notice was invalid as the ITO sought to reopen the assessment of the assessee for the asst. yr. 1948-49 but, in fact, he reopened the assessment of the year 1949-50.
9. The next case relied upon by the learned standing counsel is Mahaveei Poddar v. TVO (supra). In that case, the argument that in the reassessment notice it was not stated whether it was issued to the individual or Karta of HUF, therefore, the notice is invalid was repelled by the Calcutta High Court. The High Court took the view that this was first year of the assessment and the assessee himself was taking a shifting stand. As a proposition of law, it accepted that reassessment could only be made after proper notice had been given of the reopening of the assessment to the assessee. But on the facts of that case, the High Court did not entertain the writ petition for the reason that the assessee himself was taking contradictory stand. In the facts of that case earlier the assessee filed a return in his individual capacity and thereafter filed a return that it was an HUF. Indisputably, this was the first year of the assessment. On the facts of that case it was held by the Calcutta High Court that service of notice for reassessment without indicating the capacity could not invalidate proceedings as the status can be determined in the assessment proceedings. On a close reading of the judgment, it helps, on the facts to the assessee in the present case rather the Department. The legal proposition which is in favour of the assessee was accepted by the High Court but on account of special facts, indicated above, the writ petition was dismissed.
10. Then the learned counsel for the Revenue placed reliance upon Sajjan Kumar Sarraf (supra). The said case has no bearing to the controversy involved in the present reference. It was not the case of reassessment proceedings. A notice was issued to a dead person and the return was filed within the specified time by a legal representative. It was held that where a return is filed by a legal representative in response to a invalid notice issued to the deceased, return would not be invalid. It was a case of regular assessment notice and was not with respect to the reassessment proceedings. Therefore, it has hardly any application to the facts of the present case.
11. The Supreme Court in the case of CIT v. K. Adi Narayana Murty (supra) has considered a parallel controversy and has observed as follows :
"Under the scheme of income-tax the "individual" and the "HUF" are treated as separate units of assessment and if a notice under Section 34 of the Act is wrongly issued to the assessee in the status of an "individual" and not in the correct status of "HUF", the notice is illegal and all the proceedings taken under that notice are ultra vires and without jurisdiction."
12. A similar controversy arose before a Division Bench of this Court in the case of Gokul Chand v. ITO (1995) 211 LTR 738 (All). It has been held that where a reassessment notice has been issued to a person in his individual capacity, the notice is invalid as it does not mention that it was being issued to the person in his capacity as the Karta of "HUF".
13. In CIT v. Ishwar Singh & Sons (supra), it was held by this Court that a notice under Section 148 was issued to an entity which was, as a matter of fact, nonexistent and was at any rate different from the entity which filed return in response to that notice. The notice was issued to Sardar Arjun Singh, an individual, and the return was filed by Sardar Sampuran Singh, Karta of HUF. The two are distinct entities in law, as also, as matter of fact and thus a valid reassessment could not be made on the assessee-HUF, as no notice had been issued to it under Section 148 of the Act.
14. In the case in hand the Tribunal, on fact, has found that notice was issued to the assessee in his individual capacity and the income sought to be reassessed is that of HUF of which the assessee is a Karta. Therefore, the case of Ishwar Singh (supra) is fully applicable to the present case and the notice to reassess the income of assessee-HUF is invalid. Consequently, the ITO had no jurisdiction to pass the reassessment order against the assessee.
15. Similar controversy came up for consideration before a Division Bench of this Court in the case of Madan Lal Agrawal v. CIT (1383) 32 (1983) 144 UR 745 (All). In this case the notice was issued to a person to file return with respect to his individual income pertaining to the asst, yr. 1946-47. Subsequently, the ITO informed him that the notice dt. 29th Sept., 1962, related to his HUF and he should instead of return of his individual income file the return of the income of his HUF. A question arose whether the proceedings initiated under Section 147(a) against the HUF was in accordance with law. The Court answered it in negative. It took the view that notice issued under Section 34 of the Act to the HUF on 29th Sept., 1962, was vague and as such invalid. The vagueness of the said notice did not stand cured because ITO at a later stage informed the assessee that he was to file his return in the status of HUF.
16. The learned counsel for the Revenue has not advanced any argument that the finding of the Tribunal that notice under Section 148 of the Act was meant for the Karta of the HUF and not in his individual capacity. The only point urged by the learned counsel for the Revenue was that since the assessee has filed a return of HUF and the income sought to be reassessed was of HUF, the proceedings are valid, notwithstanding the fact that the notice was issued to the assessee in his individual capacity. Moreover, the finding of the Tribunal that the notice under Section 148 of the Act did not disclose that it was issued to reassess the escaped income of the HUF, is a finding of fact. In the statement of the case, the Tribunal has mentioned that it is annexing the copies of the notices issued under Section 148 of the Act. But, the copies of those notices have not been annexed along with the statement of the case, sent by the Tribunal. Nor they have been included in the paper book filed by the Department. In this state of affairs, this Court proceeded to adjudicate the referred two questions in the light of the findings of fact recorded by the Tribunal, taking them to be correct. Both the counsel advanced the arguments only on the question as to whether the notice issued to an assessee in his individual capacity can be treated to be a valid notice to reassess the income of HUF of which he is a Karta.
17. In view of the above discussion, we answer both the questions in affirmative i.e., against the Revenue and in favour of the assessee. However, no order as to costs.