1967 (9) TMI 29 - HC - Income Tax

Hyderabad Agricultural Income-tax Act, 1950 - Certificate Proceedings - Whether the petitioner can be said to be an assessee in default within the meaning of that expression found in the section 34(3) of the Hyderabad Agrl. IT Act, 1950 - Held, no

Issues Involved:
1. Liability of the legal representative for the deceased's tax dues.
2. Definition and applicability of "assessee in default."
3. Requirement of a notice of demand under section 23.
4. Continuation of recovery proceedings against the legal representative.
5. Interpretation of relevant sections of the Hyderabad Agricultural Income-tax Act, 1950.

Issue-wise Detailed Analysis:

1. Liability of the Legal Representative for the Deceased's Tax Dues:
The petitioner, as the legal representative of the deceased assessee (Raja Krishtappa Naik), was held liable to pay the agricultural income-tax assessed on his father under section 22(1) of the Hyderabad Agricultural Income-tax Act, 1950. This section states, "the legal representative shall be liable to pay out of the estate of the deceased person to the extent to which the estate is capable of meeting the charge." The court affirmed that the petitioner's liability is limited to the extent of the estate of the deceased.

2. Definition and Applicability of "Assessee in Default":
The term "assessee in default" was crucial in determining whether recovery proceedings could be continued against the petitioner. Section 34(3) of the Act states, "When an assessee is in default, the Agricultural Income-tax Officer may forward to the Taluqdar a certificate under his signature, specifying the amount of arrears due from the assessee." The court noted that the petitioner could not be considered an "assessee in default" because no notice of demand under section 23 had been served on him after his father's death.

3. Requirement of a Notice of Demand under Section 23:
The court emphasized that a notice of demand under section 23 is essential before a person can be deemed an "assessee in default." Section 23 reads, "When any tax or penalty is due in consequence of any order passed under or in pursuance of this Act, the Agricultural Income-tax Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum so payable." The petitioner argued that no such notice had been given to him, and thus, he could not be considered an "assessee in default."

4. Continuation of Recovery Proceedings Against the Legal Representative:
The court examined whether the recovery proceedings initiated against the deceased could be continued against the petitioner without serving a fresh notice of demand. The judgment highlighted that under section 34(3), recovery could only be made from an "assessee in default." Since the petitioner had not been served with a notice of demand, he could not be deemed an "assessee in default," and thus, recovery proceedings could not be validly continued against him.

5. Interpretation of Relevant Sections of the Hyderabad Agricultural Income-tax Act, 1950:
The court analyzed sections 22, 23, 33, and 34(3) of the Act. It concluded that the legal representative steps into the shoes of the deceased for tax liability purposes but not for default purposes unless a notice of demand is served on him. The court stated, "We have to hold that the 'assessee' mentioned in section 34(3) denotes a person liable to pay either because his income was assessed to tax or because he is liable to pay the tax assessed."

Separate Judgments Delivered:
Judge T. K. Tukol dissented, arguing that the legal representative should be considered an "assessee in default" without the need for a fresh notice of demand, as the liability is absolute and can be enforced against the estate of the deceased.

Full Bench Decision:
The Full Bench, comprising A. R. Somnath Iyer, B. M. Kalagate, and M. Sadanandaswamy, held that the petitioner was not an "assessee in default" within the meaning of section 34(3) of the Act. The court stated, "Our decision on the question of law referred to us, therefore, is that the petitioner was not an assessee in default within the meaning of that expression found in section 34(3) of the Hyderabad Agricultural Income-tax Act, 1950 (Act 13 of 1950)."

Conclusion:
The court allowed the petition and quashed the impugned recovery proceedings against the petitioner, emphasizing the necessity of serving a notice of demand on the legal representative to deem him an "assessee in default."

← Previous Next →