(a) The Impugned notice suffers from several legal
infirmities. In the first place, the transaction noticed related to sale of
some agricultural land sold to KS Ltd. not by the assessee. This is not the
transaction with which the assessee was connected. So, notice was issued in
respect of some other transaction carried out by some other person. Secondly,
the notice is admittedly issued to the assessee as individual. No notice was
issued to the HUF in which status the assessment was subsequently made. The
assessee has vehemently contended throughout that no notice u/s.148 was served
on the assessee. There is neither any finding, nor is there any material to
refute the claim of the assessee.
(b) Notices were issued without application of mind. It is
a settled law that there must be valid reasons, material and circumstances
leading to the belief that income had escaped assessment. Any good or bad
reason is not sufficient to sustain initiation of proceedings u/s.147/148 as
valid. Therefore, no valid proceedings were initiated u/s.147/148.
(c) The Income-tax Act recognises status of HUF different
from individual status of Karta of the HUF. The two are treated as different
legal entities. Therefore, it is necessary that notice u/s.148 should be sent
in a correct status, because jurisdiction to make assessment is assumed by
issuing valid notice.
(d) It is also settled law that assessment under the
Income-tax Act has to be made in accordance with statutory provisions and not
on agreement or consent of the assessee. Therefore, after having issued notice
u/s.148 to the individual, the ITO had no jurisdiction to assess HUF of the
assessee. He could assume jurisdiction by issuing valid notice u/s.148 after
satisfying conditions laid down u/s.147. This was not done and, therefore,
entire proceedings have to be held to be illegal and without jurisdiction.
(e) The Department cannot be permitted to change the status
from individual to HUF. In the first place, the Assessing Officer had no
jurisdiction to assess HUF, as he did not issue any notice u/s.147/148 in the
case of the HUF. This defect of jurisdiction could not be cured by obtaining
consent from the assessee.
