1997 (4) TMI 32 - HC - Income Tax

Summary

Issues Involved:
1. Requirement to communicate reasons for initiating action under Section 59 of the Estate Duty Act, 1953.
2. Validity of the notice issued under Section 59 of the Act.
3. Allegations of non-application of mind and violation of principles of natural justice.
4. Typographical error in the date of the notice.

Detailed Analysis:

1. Requirement to Communicate Reasons for Initiating Action:
The primary issue in this case is whether the Controller of Estate Duty (CED) is required to communicate the reasons for initiating action under Section 59 of the Estate Duty Act, 1953, to the accountable person. Section 59(a) of the Act states that the Controller can issue a notice for assessment or reassessment if the accountable person fails to disclose fully and truly all material facts necessary for assessment, resulting in property chargeable to estate duty escaping assessment. The expression "has reason to believe" is crucial in this context. The court examined whether this expression necessitates the communication of reasons to the accountable person at the notice stage. It was held that the expression "has reason to believe" requires the recording of reasons by the competent authority but does not mandate the communication of these reasons to the accountable person along with the notice.

2. Validity of the Notice Issued Under Section 59:
The petitioner challenged the legality of the notice issued under Section 59 on the grounds that it did not disclose the basis for the action initiated. The court referred to several precedents, including the Supreme Court's decision in S. Narayanappa vs. ITO and other High Court rulings, which established that the proceedings for assessment or reassessment are administrative until the issuance of the notice and become quasi-judicial only after the notice is served. It was concluded that the accountable person is not entitled to challenge the notice solely on the ground that the reasons were not communicated along with it.

3. Allegations of Non-Application of Mind and Violation of Principles of Natural Justice:
The petitioner argued that the non-disclosure of reasons constituted a violation of the principles of natural justice. However, the court held that the accountable person must first file a reply to the notice and can then request the competent authority to disclose the reasons. If the reasons are not relevant or if no reasons were recorded, the accountable person can challenge the notice on these grounds. In this case, the petitioner did not file a reply but requested the reasons, which the respondent refused to disclose. The court found no illegality in this refusal and determined that the disclosed reason-that the share of the deceased in Bagichi Nand Lal was not included in the estate duty return-was relevant and germane to the proceedings.

4. Typographical Error in the Date of the Notice:
The petitioner alleged that the date on the notice was altered from 8th August 1982 to 8th July 1982 with a mala fide intent. Upon reviewing the original record, the court concluded that this was a correction of a typographical error and not a mala fide alteration. The carbon copy of the notice confirmed that it was indeed issued on 8th July 1982.

Conclusion:
The court dismissed the writ petition, holding that the accountable person is not entitled to challenge the notice under Section 59 solely on the ground that reasons were not communicated along with it. The reasons for initiating action were found to be relevant and germane, and no illegality was committed by the respondent in refusing to disclose them at the initial stage. The typographical error in the date of the notice was deemed a non-issue. The interim order was automatically vacated.