1964 (11) TMI 110 - HC - Income Tax

Issues Involved:
1. Validity of Wealth-tax assessment order dated March 25, 1963.
2. Validity of the notice of demand dated March 25, 1963.
3. Validity of the revisional order passed by the Commissioner of Wealth-tax dated September 13, 1963.
4. Applicability of Wealth-tax Act provisions to the estate of a deceased individual.
5. Jurisdiction of the High Court under Article 226 of the Constitution to quash the assessment and demand notice.

Issue-wise Detailed Analysis:

1. Validity of Wealth-tax assessment order dated March 25, 1963:
The petitioners, as joint executors of the deceased Smt. Sodradevi N. Daga, challenged the wealth-tax assessment order dated March 25, 1963. They contended that the Wealth-tax Act, 1957, does not provide for charging, assessing, and recovering wealth-tax on the wealth left by a deceased person beyond the financial year in which the person died. The court examined the relevant provisions, particularly sections 3, 19, and 21 of the Wealth-tax Act. It was concluded that the charging section 3 and other related sections do not authorize taxing a deceased individual's estate beyond the financial year of death. The assessment order was found to be without legal authority and jurisdiction.

2. Validity of the notice of demand dated March 25, 1963:
The notice of demand issued under section 30 of the Act, addressed to "late Smt. Sohadradevi Daga" through the joint executors, demanded payment of Rs. 7,466.09 as wealth-tax. The court found that this notice was based on the invalid assessment order. Since the assessment itself was unauthorized, the demand notice was also deemed invalid and illegal.

3. Validity of the revisional order passed by the Commissioner of Wealth-tax dated September 13, 1963:
The petitioners sought revision of the assessment order before the Commissioner of Wealth-tax, arguing that there could be no assessment on a deceased individual. The Commissioner upheld the assessment, finding it in order. The court, however, ruled that the Commissioner's order was based on a misinterpretation of the Wealth-tax Act, which does not allow for taxing the estate of a deceased individual beyond the financial year of death. Thus, the revisional order was also invalid.

4. Applicability of Wealth-tax Act provisions to the estate of a deceased individual:
The court analyzed sections 3, 19, and 21 of the Wealth-tax Act. Section 3 charges wealth-tax on the net wealth of individuals, Hindu undivided families, and companies. Section 19 provides for tax payable by the legal representatives of a deceased individual but only for the financial year in which the person died. Section 21 deals with assessment of assets held by trustees, courts of wards, etc., but was not applicable in this case. The court concluded that there is no provision in the Act for charging wealth-tax on the estate of a deceased individual beyond the financial year of death.

5. Jurisdiction of the High Court under Article 226 of the Constitution to quash the assessment and demand notice:
The respondents argued that the revisional order was administrative and not subject to judicial review under Article 226. The court referred to precedents, including the Supreme Court's rulings in Calcutta Discount Co. v. Income-tax Officer and S.C. Prashar v. Vasantsen Dwarkadas, which established that the High Court can issue writs to prevent executive authorities from acting without jurisdiction. The court found that the assessment and demand notice were issued without jurisdiction, thus warranting intervention under Article 226. Consequently, the court quashed the assessment order, demand notice, and the revisional order.

Conclusion:
The court ruled in favor of the petitioners, holding that the Wealth-tax Act does not authorize the assessment of wealth-tax on the estate of a deceased individual beyond the financial year of death. The assessment order, demand notice, and revisional order were declared invalid, and the rule was made absolute with costs awarded to the petitioners.

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