M.C Agarwal, J.M:— All these appeals are by inter-related assessees and raise common points. They were, therefore, heard together and for the sake of convenience are disposed of by this common order.

2. We have heard the learned counsel for the appellants and the learned Departmental Representative and have perused the material placed before us. We will deal with the case of Smt. Munia Devi Jain first as similar facts and issues are involved in the Other matters also and after having decided the issues in her case, we will proceed to the other cases mentioning their individual facts briefly, if necessary.

3. The appeals relate to asst. yrs. 1973–74, 1977–78, 1978–79, 1979–80, 1980–81, and 1981–82 in respect of which assessments were originally made on 26th Sept., 1973, 22nd Nov., 1978, 22nd Nov., 1978, 11th Oct., 1979, 12th June, 1980 and 30th Nov., 1981 respectively. The assessee had owned certain lands which were acquired and by an Award dated 25th May, 1981, the U.P Avas Evam Vikas Parishad Tribunal enhanced the compensation awarded earlier by the Collector. On the compensation, interest was also awarded to the assessee and since the interest was in respect of the period relating to various accounting periods relevant to the assessment years in question, the ITO initiated action under s. 147(a)/148 of the IT Act, 1961. Notices under s. 148 for all the years were issued on 2nd Aug., 1982 and were served on 15th Aug., 1982. The assessee filed returns on 20th May, 1982 and re-assessments were made on 1st June, 1984. The assessee objected to action under s. 147/148 but the objection was over-ruled by the ITO.

4. The assessee appealed to the AAC, Agra. It was contended before the learned AAC that there was no failure on the part of the assessee to furnish correct particulars of income and hence initiation of action under s. 147(a) was invalid. It was also contended that the Commissioner while granting sanction for the initiation of action under s. 147/148 had not applied his mind and, therefore, the ITO's action was bad in law. These contentions were negatived by the learned AAC and consequently the appeals were dismissed.

5. The assessee is now in appeal before us. The learned counsel for the assessee contended that in this case, there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for her assessment for the years in question when the assessments were initially framed and, therefore, re-assessment proceedings could not be legally taken under s. 147(a). According to him, action could have been taken under s. 147(b) but the ITO did not choose to take recourse to this provision of law and that according to the law as laid down by Hon'ble the Allahabad High Court in whose jurisdiction these cases are it would not be permissible to this “Tribunal to treat the assessments as having been reopened under s. 147(b). He further pointed out that even action under s. 147(b) would not be possible for some of the assessment years as the time prescribed under s. 149 had expired. It was also contended that the assessments for asst. yr. 1977–78, 1978–79 and 1979–80 have not been completed within the time prescribed under s. 153(2)(b)(ii) of the Act under which an assessment under s. 147 has to be made within one year from the date of service of the notice under s. 148. It was also contended that notice under s. 148 for asst. yrs. 1978–79 and 1979–80 was not signed by the ITO and, therefore, the re-assessments for these years are illegal.

6. The learned Departmental Representative on the other hand contended that in this case, the assessee has earned income by way of interest??? on compensation awarded under the Land Acquisition Act and the same was taxable under the provisions of the Act. He conceded that s. 147(a) did not permit the re-assessments but contended that the legislature did not contemplate that income should be allowed to escape assessment and that the re-assessments in this case could be made at any time under the provisions of s. 153(3)(ii) to give effect to the findings of the Tribunal that awarded enhanced compensation and interest thereon.

7. As is evident from the facts narrated above, assessments for all the years under appeal had initially been completed under s. 143. Reopening of assessments under. sub-cl.(a) of s. 147 is permissible in a case where the assessee did not file a return or the assessee failed to disclose fully and truly all material facts necessary for his assessment. Action for re-assessments under sub-cl.(b) of s. 147 is permissible where there has been no omission or failure as mentioned in cl.(a) on the part of the assessee but the ITO has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year. In the case before us, the material fact that is said to have been suppressed by the assessee is that it had moved the U, P. Avas Evam Vikas Parishad Tribunal for enhancement of compensation. The award by the said Tribunal had been made on 25th May, 1981 while the assessment for asst. yr. 1981–82 was made more than six months after i.e on the 30th Nov., 1981. Therefore, so far as asst. yr. 1981–82 is concerned, the assessee had become entitled to a certain amount of interest which was taxable as its income for that year and patently till the assessment was completed the assessee did not inform the ITO of the coming into existence of income. Therefore, so far as asst. yr. 1981–82 is concerned, there is a clear default on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year and action under s. 147(a) for this year was legally permissible and was, in our view, validly taken.

8. As regards the other assessment years, we have to see whether the pendency of the proceedings for enhancement of compensation was a material fact that the assessee should have disclosed during the assessment proceedings. So far as the amount of interest relevant to the assessment years under consideration is concerned, patently the award had not been made till the assessments were originally made and it was impossible for the assessee to disclose the amount of interest. In Rai Singh Deb Singh Bisht v. Union of India, (1970) 77 ITR 802 (Del), the Hon'ble High Court of Delhi held that facts that come into existence subsequent to original assessment cannot possibly be disclosed and, therefore, a fact which comes into existence subsequent to the making of assessment cannot be a material fact within the purview of s. 34(1)(a) of the 1922 Act [equivalent to s. 147(a) of the 1961 Act.] In T.M Kousali v. 6th ITO, (1985) 155 ITR 739 (Kar) Hon'ble the Karnataka High Court held that proceedings cannot be initiated under s. 147(a) to assess amounts awarded as enhanced compensation after the assessments had already been made. That was a case in which like the case before us the amount of interest arising from the compensation awarded was sought to be taxed in the re-assessments. In Mukhtiar Singh Sandhu v. ITO, (1986) 55 CTR (P&H) 196 : (1986) 160 ITR 521 (P&H) the Hon'ble Punjab & Haryana High Court also dealt with a similar controversy and held that there Was no failure to disclose fully and truly all material facts. In this case also when the assessee filed his returns, his application under s. 18 “of the Land Acquisition Act was pending with the Distt. Judge and the assessee during the assessment proceedings had not mentioned anything with regard to the pendency of the application under s. 18 of the Land Acquisition Act. In Ganesh Chander Khan v. ITO, (1978) 111 ITR 934 (Cal) Hon'ble the Calcutta High Court held that where in respect of house occupied by the government and later requisitioned compensation for house for the previous years was fixed by agreement and the assessee was till the assessments were made not aware of compensation becoming payable, the assessments could not be reopened under s. 147/148. Thus in the case before us, so far as the amount of interest is concerned, the assessee could not have disclosed the same in the proceedings for asst. yrs. 1973–74 and 1977–78 to 1980–81 and consequently she cannot be accused of any failure oh her part. So far as the pendency of the proceedings for enhancement of compensation are concerned in the case of T.M Kousali (supra), the Hon'ble Karnataka High Court has specifically Held that the pendency of the proceedings was not a material fact that was required to be disclosed during the assessment proceedings. The same is the view taken by Hon'ble the Punjab & Haryana High Court in the case of Mukhtiar Singh Sandhu (supra) in which the case of T.M Kousali (supra) has been referred to. The learned Departmental Representative did not cite any authority to the contrary nor did he point out how the mere fac??? of pendency of proceedings could have changed the quantum of income assessed in the original assessments so that it could be said that it was a material fact for the assessment of income for those years. We, therefore, hold that for asst. yrs. 1973–74 and 1977–78 to 1980–81 there was no failure on the part of the assessee to disclose all material facts necessary for her assessment for those years within the meaning of s. 147(a) and consequently we hold that action for re-assessments for these years under s. 147(a) was invalid.

9. The learned counsel for the assessee Shri C.S Agarwal relied upon the law as laid down by the jurisdictional High Court of Allahabad in Raghuvar Dayal Ram Kishan v. CIT, (1967) 63 ITR 572 (All) in which it has been held that where the ITO takes action under s. 34(1)(a) of the 1922 Act, the Tribunal has no jurisdiction to convert or alter the assessment made by the ITO to one under s. 34(1)(b). Sec. 147 of the 1961 Act is analogous to s. 34 of the 1922 Act and, therefore, this authority is binding on us and we cannot uphold the action of the ITO by resorting to s. 147(b). The Revenue has not placed before us a copy of the reasons recorded by the ITO while initiating action under s. 147(a) and, therefore, it is not possible for us to consider even whether it was a case of mentioning of a wrong section though the reasons recorded showed that in effect only action under s. 147(b) was intended. As a matter of fact such does not appear to be the case because for some of the years action under s. 147(b) had become barred by time and the ITO appears to have been keen to rope in all the assessment years.

10. We may also here deal with an argument raised by the learned Departmental Representative that under s. 153(3)(ii), the assessments could be made at any time. Sec. 153 deals with the time limit for completion of assessments and re-assessments. Sec. 153(1) prescribes limitation for assessments under s. 143 and 144 while sub-s.(2) thereof prescribes the limits for assessments or re-assessments under s. 147. Sub-cl.(ii) of sub-s.(3) provides that nothing in sub-ss.(1) and (2) shall apply:

(ii) where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under s. 250, 254, 260, 262, 263 or 264 (or in an order of any court in a proceeding otherwsie than by way of appeal or reference under this Act).”

As is clear sub-s.(3) enacts an exception to the period of limitation prescribed under s. 153(1) & (2). It on its very face would apply only when the assessment, reassessment or recomputation is open and cannot cover cases where the assessments have already been completed and have not been validly reopened under the provisions the Act. As has already been mentioned in the present case, the assessments had all ready been framed by the ITO and he could take proceedings for re-assessment only by having recourse to s. 147. We have already held that the initiation of proceedings for reassessments under s. 147(a) by the ITO was invalid. Sec. 149 provides a period of limitation within which action under s. 147 can be initiated. The learned Departmental Representative contended that the legislature did not contemplate incomes remaining untaxed. This contention in our view is not wholly correct. The legislature was conscious of the difficulty that an assessee would have to face if no time limit is placed for initiation of action for re-assessments under s. 147. Therefore, it had to strike a mean between the difficulty that may arise to the taxpayer as well as the interests of Revenue and that is why s. 149 has been enacted which provides different periods of limitation for cls.(a) and (b) as well as different period where the income escaped is beyond a certain monetary limit.

11. The learned Departmental Representative contended that under the aforesaid sub-cl.(ii) of s. 153(3), an assessment or re-assessment can be made at any time if the assessment is in consequence of or to give effect to any finding in an order of any Court in a proceeding otherwise than by way of appeal or reference under this Act. According to him, the award of the Tribunal was a finding or direction of a Court and, therefore, under this clause, the ITO could make assessments at any time. As already stated, in our view, sub-cl.(ii) of s. 153(3) can be pressed into service only when the assessment is already pending and it cannot be invoked when the assessments have already been made and have not been validly reopened. The learned Departmental Representative, however, relied upon the ratio of the Hon'ble Karnataka High Court in T.M Kousali (supra) in which in almost similar circumstances, the Hon'ble High Court after holding that the assessments could not be reopened under s. 147(a) held that the notice have to be upheld as validly issued under s. 147(b) and s. 153(3)00 of the Act. The Hon'ble High Court held that the words ‘an order of any Court in a proceeding otherwise than by way of appeal or reference under this Act’ are wide enough to cover the orders of any Court and the nature of the order made by the Court have ???o relevance. In the opinion of their Lordships, if there is an order of a Court, whatever be its status, the bar of limitation is automatically lifted. This ruling was considered by the Hon'ble Punjab & Haryana High Court in Mukhtiar Singh Sandhu v. ITO (supra) and was dissented from on this point. The Hon'ble Punjab & Haryana High Court observed that the judgment in T.M Kousali's case (supra) suffers from a patent mistake and that if the interpretation of s. 153(3)(ii) as done in T.M Kousali's case is to be accepted as correct then s. 150 of the Act becomes redundant. The Hon'ble Punjab & Haryana High Court went further to state that on this aspect of the matter, the Karnataka High Court's judgment is contrary to the judgment of their Lordships of the Supreme Court in Rajinder Nath v. CIT, (1979) 12 CTR (SC) 201 : (1979) 120 ITR 14 (SC). In that case, Hon'ble the Supreme Court was concerned with the interpretation of s. 153(3)(ii) itself. In that case in the assessments of a partnership firm, the ITO added a certain amount being the unexplained investment in the construction of a building. On appeal, the AAC had held that the partnership was not the owner of the property which actually belonged to the partners in their individual capacity and consequently any excess over the disclosed cost of construction could not be added in the assessments of the firm. The AAC even observed that the ITO was free to take action to assess the excess in the hands of the co-owners. Thereafter the ITO initiated action under s. 147(a) against the individual partners and the matter ultimately reached the Hon'ble Supreme Court which observed as below:

“The expression “finding” and “direction” are limited in meaning. A finding given in an appeal, revision or reference arising out of an assessment must be a finding necessary for the disposal of the particular case, that is to say, in respect of the particular assessee and in relation to the particular assessment year. To be a necessary finding, it must be directly involved in the disposal of the case. It is possible in certain cases that in order to render a finding in respect of A, a finding in respect of B may be called for. For instance, where the facts show that the income can belong either to A or B and to no one else, a finding that it belongs to B or does not belong to B would be determinative of the issue whether it can be taxed as A's income. A finding respecting B is intimately involved as a step in the process of reaching the ultimate finding respecting A. If, however, the finding as to A's liability can be directly arrived at without necessitating a finding in respect of B, then a finding made in respect of B is an incidental finding only. It is not a finding necessary for the disposal of the case pertaining to A. The same principles seem to apply when the question is whether the income under enquiry is taxable in the assessment year under consideration or any other assessment year. As regards the expression “direction” in s. 153(3)(ii) of the Act, it is now well settled that it must be an express direction necessary for the disposal of the case before the authority or court. It must also be a direction which the authority or court is empowered to give while deciding the case before it. The expressions “finding” and “direction” in s. 153(3)(ii) of the Act must be accordingly confined Sec. 153(3)(ii) is not a provision enlarging the jurisdiction of the authority or court. It is a provision which merely raises the bar of limitation for making an assessment order uner s. 143 or s. 144 or s. 147 : Income Tax Officer, A Ward, Sitapur v. Murlidhar Bhagwan Das, (1964) 52 ITR 335 (SC) and N.K.T Sivalingam Cheater v. CIT, (1967) 66 ITR 586 (SC).”

The Hon'ble Supreme Court held that the decision of the AAC in the case of the firm was neither a finding nor a direction within the meaning of s. 153(3)(ii).

12. In the case before us what the learned Departmental Representative relied upon is the award passed by the Tribunal enhancing the amount of compensation and consequently of interest payable thereon. The Tribunal was not concerned with the determination of income of the assessee in question and, therefore, there cannot be a finding by the Tribunal that the assessee earned an income from interest assessable to income-tax for any of the accounting periods in question. We, therefore, hold that s. 153(3)(ii) was not applicable to the facts of the case and did not enlarge the limitation either for the reopening of the assessments or for their completion.

13. The next contention raised by the learned counsel for the assessee was that assessments for asst. yrs. 1977–78,1978–79 and 1979–80 were barred by time. As noted above, the returns in pursuance of notice under s. 148 were filed on 2nd March, 1982 and the assessments were made on the 1st of June, 1984. According to the learned counsel under s. 153(2)(b)(ii) the assessments should have been made within one year of the filing of the returns. This contention would have been correct if the assessments had been reopened under s. 147(b) but in this case, assessments were reopened under s. 147(a) and we have already held that the initiation of re-assessment proceedings was invalid. Therefore, this question does not surive for decision.

14. Lastly, it was contended that the notices issued by the ITO under s. 148 for asst. yrs. 1978–79 and 1979–80 were invalid because they were not signed by the ITO. Such a point was not specifically taken before the learned AAC and he has not dealt with the same. In the appeals before us, although this point has been specifically raised, how-ever, no material has been placed before us to show that the notices in question were not signed by the ITO. In the paper book only a copy of the notice for asst. yr. 1977–78 has been placed which duly bears the signatures of the ITO. Therefore, it is not established that the notices were not signed by the ITO and this argument will, therefore, fail.

15. In the grounds of appeal, a ground has been raised that the CIT accorded sanction under s. 151(2) mechanically without applying his mind. No argument was addressed to us on this point and nothing has been placed before us to substantiate the contention. We, therefore, reject it. No other point was addressed or pressed before us in the case of Smt. Munia Devi Jain.

16. As a result of the findings recorded above, we allow the assessee's appeals for asst. yrs. 1973–74, 1977–78, 1978–79, 1979–80 and 1980–81 and cancel the re-assessments made for these years. The appeal for asst. yr. 1981–82 is dismissed.

I.T.A No. 2630 & 2631 (Rajendra Chand Jain)

17. These are appeals for asst. yrs. 1980–81 and 1981–82. Original assessments were made on 26th March, 1981 and 19th Dec, 1981. Notices under s. 148/147(a) were issued on 14th June, 1984 and were served on 2nd July, 1984 for both the years. The returns Were filed on 11th July, 1984 and re-assessments were made on 16th July, 1984. The facts are identical to the case of Smt. Munia Devi Jain above and for the reasons already recorded, we allow the appeal for asst. yr. 1980–81 and cancel the re-assessment for this year. The appeal for asst. yr. 1981–82 is dimissed.

Kishan Chand Jain (I.T.A No. 2632 and 2633).

18. In the case of this assessee, original assessments for asst. yrs. 1980–81 and 1981–82 were made on 26th March, 1981 and 30th Nov., 1981 respectively. Notices under s. 148/147(a) for the two years were issued on 14th June, 1984 and were served on 2nd July, 1984. Returns were filed on 11th July, 1984 and re-assessments were made on 16th July, 1984. The relevant facts and circumstances are identical to the case of Smt. Munia Devi Jain and for the reasons recorded above, we allow the appeal for asst. yr. 1980–81 and cancel the re-assessment for this year. The appeal for asst. yr. 1981–82 is dismissed. Narain Das Jain (deceased) through L/R Sh. Inder Chand Jain. (I.T.A No. 2634 to 2637)

19. In these appeals, the assessee is late Sh. Narain Das Jain who is represented by his legal representative Sh. Inder Chand Jain. The proceedings relate to asst. yrs. 1973–74. 1974–75, 1975–76 and 1976–77. Assessments for the first three years were made on 31st March, 1976 and for asst. yr. 1976–77, on 9th Feb., 1979. The assessments were re-opened under s. 147(a) and notices under s. 148 were issued on 15th March, 1982. The assessee was already dead and the notices were served on Sh. Inder Chand Jain on 24th March, 1982. He filed returns for all these years on 19th May, 1982 and assessments were made on 23rd July, 1984. The facts are in all material respects identical to the case of Smt. Munia Devi Jain which has been discussed above and for the reasons recorded above, we hold that the initiation of action under s. 147(a) was invalid and the assessments have, accordingly, to be cancelled.

20. However, the learned counsel for the assessee raised an additional contention that in this case, notice under s. 147(a) was not served on all the legal representatives of the deceased. It appears that this point was not raised before the ITO. It was raised in the grounds of appeal before the learned A AC but she has not discussed the issue probably because at the hearing such contention was not actually pressed. In the paper book filed before us, during the hearing a chart has been placed at page 18 which, inter alia, notes that S/Sh. Inder Chand Jain, Rajendra Chand Jain, Kishan Chand Jain and Rakesh Kumar Jain are the legeal representatives. Apart from this, no material has been placed before us to show whether the deceased died interstate and how the four persons named above were related with the deceased. Reliance was placed on Alfred v. I Addl. ITO, (1957) 32 ITR 401 (Mad) in which it was held that the assessments were bad for want of service of notice on all the legal representatives. That was, however, a case in which the person who was served with a notice contended before the ITO that he was not the only legal representative and did not represent the entire estate. In spite of this, the ITO did not try to find out who were the other legal representatives. In the case before us, the present appellant never raised such a contention before the ITO nor did he apprise the ITO as to who were the other legal representatives, In the aforesaid ruling, the Hon'ble Madras High Court has held that (a) if the ITO bonafide believed and acted on that belief that A was the only legal representative, (b) if A did not bring to the notice of ITO that there were other legal representatives, who should be brought on the record and, (c) if A represented the estate of E in the assessment proceedings and, (d) if there was no fraud or collusion then it could well be said that the entire body of legal representatives including A would be bound by the assessment made by the ITO. In the case before us, all the aforesaid conditions are fulfilled and, therefore, even if there are any other legal representatives, the assessment would be valid in view of the law as laid down; in this ruling itself. This point is, therefore rejected although the assessments have to be cancelled for the other reasons discussed above.

21. In the result, all these four appeals are allowed and the re-assessments made by the ITO are cancelled.

Shri Inder Chand Jain (I.T.A No. 2638 & 2639).

22. These are two appeals by Shri Inder Chand Jain in his personal capacity. They relate to asst. yrs. 1980–81 and 1981–82. The facts are identical to the case of Smt. Munia Devi Jain and, therefore, following the view taken above, we cancel the re-assessment for asst. yr. 1980–81, while we uphold the assessment for asst. yr. 1981–82. In the result, ITA No. 2638 stands allowed, while ITA No. 2639 stands dismissed.

Sh. Rakesh Kumar Jain (I.T.A No. 2640 & 2641).

23. In this case, the appeals relate to asst. yr. 1980–81 and 1981–82. The facts are identical to the case of Smt. Munia Devi Jain and, therefore, following the view taken above, we cancel the re-assessment for asst. yr. 1980–81 and we uphold the assessment for asst. yr. 1981–82. In the result, ITA No. 2640 stands allowed, while ITA No. 2641 stands dismissed.