1985 (11) TMI 23 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Controller to impose penalty under section 73(5) of the Estate Duty Act.
2. Discretionary power of the Controller under section 73(4) of the Estate Duty Act.
3. Interpretation of sections 62, 70, 73(4), and 73(5) of the Estate Duty Act.
4. High Court's power under Article 226 of the Constitution to interfere with the Controller's discretion and quasi-judicial power.

Detailed Analysis:

1. Jurisdiction of the Controller to Impose Penalty under Section 73(5) of the Estate Duty Act:
The petitioner challenged the jurisdiction of the Controller to impose a penalty without considering his application to treat him "as not being in default." The Controller assessed the estate duty at Rs. 25,133 and served a notice demanding payment by July 15, 1971. The petitioner appealed and requested extensions, which were partially granted. However, the Controller imposed a penalty of Rs. 10,470 for non-payment of instalments. The court held that the Controller's order to pay by monthly instalments was against the statutory provision of section 70(2), which allows yearly or half-yearly instalments, making the imposition of the penalty invalid and without jurisdiction.

2. Discretionary Power of the Controller under Section 73(4) of the Estate Duty Act:
The petitioner repeatedly requested to be treated "as not being in default" due to financial difficulties and pending appeal. The court noted that the Controller's discretionary power under section 73(4) is a public duty that must be exercised judiciously. The Controller failed to consider the petitioner's applications on merits, which amounted to a non-exercise of discretion. The court emphasized that the power should normally favor the accountable person who has filed an appeal unless there are sound reasons to deny it.

3. Interpretation of Sections 62, 70, 73(4), and 73(5) of the Estate Duty Act:
The court interpreted section 70(2) as conferring a statutory right on accountable persons to pay estate duty in yearly or half-yearly instalments. The Controller's alteration of the mode of payment to monthly instalments was deemed illegal and without jurisdiction. The court also highlighted that the penalty proceedings under section 73(5) were initiated prematurely, as the petitioner could not be a defaulter before the expiry of the allowed period for yearly instalments.

4. High Court's Power under Article 226 of the Constitution:
The court addressed whether the availability of an alternative remedy (appeal) bars the High Court from entertaining a writ petition under Article 226. The court held that an alternative remedy must be equally efficacious and not unduly onerous. In this case, the requirement to deposit the entire estate duty (2.5 times the penalty amount) to appeal was considered onerous. The court cited several precedents where writ petitions were entertained despite alternative remedies due to the nature of the jurisdictional challenge or the oppressive nature of the alternative remedy.

Conclusion:
The court quashed the impugned penalty order and remitted the case to the Controller to reconsider the petitioner's applications under section 73(4) in accordance with law and reason. The court also declared that the petitioner was not a defaulter at the relevant times and that the Controller's actions were illegal and without jurisdiction. The petition was accepted without any order as to costs.