1961 (11) TMI 81 - HC - Income Tax

Summary

Issues Involved:
1. Validity of penalty orders passed against a deceased person.
2. Applicability of penalty provisions under section 46(1) to a legal representative in respect of tax demands against a deceased assessee.

Detailed Analysis:

1. Validity of Penalty Orders Passed Against a Deceased Person:
The petitioner argued that the penalty orders were a nullity as they were passed against a deceased person. However, the court found this argument to be devoid of substance. The penalty orders were passed against the petitioner, who was alive at the time, not against the deceased. Therefore, the orders cannot be said to have been passed against a dead person and are not a nullity on this ground.

2. Applicability of Penalty Provisions Under Section 46(1) to a Legal Representative:
The petitioner contended that, according to section 24B, no penalty order could be passed against a legal representative in respect of a tax demand against a deceased assessee. The petitioner relied on the Madras High Court decision in E. Alfred v. Additional Income-tax Officer, which stated that a legal representative assessed under section 24B is not an "assessee" within the meaning of sections 29, 45, or 46(1) and, therefore, cannot be penalized under section 46(1).

The court, however, disagreed with this view. It noted that the terms "assessment" and "assessee" are not used consistently throughout the Income-tax Act. The definition of "assessee" in section 2(2) at the material time included "a person by whom income-tax is payable." The court cited various authorities, including the Privy Council and the Supreme Court, to support the view that a legal representative is considered an assessee under the Act. The court also referred to the decision of the Calcutta High Court in Sukumar Mukherjee v. Commissioner of Income-tax, which held that a penalty could be imposed on a legal representative under section 28 as it could be on the assessee himself.

The court further observed that section 24B does not limit the liability of the legal representative only to the cases referred to in that section. This was supported by the Bombay High Court decision in Commissioner of Income-tax v. James Anderson, which was approved by the Supreme Court. The court noted that the legal fiction in section 24B should be fully worked out and not limited to what is expressly enacted.

The court also pointed out that the default leading to the penalty was not the deceased's default but the legal representative's default in paying the tax dues. Therefore, it is logical and legal to impose a penalty on the person whose default it is.

The court emphasized that section 46 is a collecting section and should be liberally construed to make the liability effective. The court cited cases such as Drummond v. Collins and Whitney v. Commissioners of Inland Revenue to support this view.

In conclusion, the court held that a penalty can be properly imposed under section 46(1) on a legal representative where the tax due under an assessment made on the deceased or under section 24B is not paid, and the default is committed by the legal representative. Thus, the second point raised by the petitioner was overruled.

Final Judgment:
The writ petition was dismissed with costs. The court found no merit in the arguments presented by the petitioner, and the penalty orders were upheld.