1971 (2) TMI 35 - HC - Income Tax

Estate Duty Act, 1953 Whether the Assistant Controller of Estate Duty had information in his possession in consequence of which he could have reason to believe that any property chargeable to estate duty had escaped assessment Held yes - Whether Smt. Chander Mohni, daughter of the deceased, late Shri Goverdhan Dass, is an accountable person in respect of the property passing on the death of late Shri Goverdhan Dass - Held no - Whether, unequal partition of the joint Hindu family properties amongst the deceased and his sons have given rise to any disposition made by the deceased in favour of his relatives within the meaning of section 27 of the Estate Duty Act Held no

Issues Involved:
1. Reopening of assessment under Section 59 of the Estate Duty Act.
2. Accountability of Smt. Chander Mohni for estate duty.
3. Validity of notice under Section 59 if Smt. Chander Mohni is an accountable person.
4. Unequal partition of joint Hindu family properties as a disposition under Section 27 of the Estate Duty Act.

Detailed Analysis:

Issue 1: Reopening of Assessment under Section 59
The primary question was whether the Assistant Controller of Estate Duty had valid information to believe that property chargeable to estate duty had escaped assessment. The reopening of the assessment under Section 59 was based on the discovery that certain applicable sections of the Act were not applied during the original assessment. The accountable persons argued that all relevant information was provided initially, and thus, no new information warranted reopening. However, the court referenced the Supreme Court decision in Commissioner of Income-tax v. A. Raman and Co., which established that the jurisdiction to reassess arises if the officer has new information post-assessment, even if it could have been obtained earlier. Therefore, the court found no merit in the accountable persons' contention and answered the first question in favor of the department.

Issue 2: Accountability of Smt. Chander Mohni
The second issue was whether Smt. Chander Mohni, the daughter of the deceased, was an accountable person under the Estate Duty Act. The accountable persons argued that all legal representatives should be accountable, referencing Section 24B of the Income-tax Act. However, the court noted that Smt. Chander Mohni was disinherited by her father's will, which explicitly stated she would not receive any inheritance except for a trust worth Rs. 10,000 and a conditional payment of Rs. 5,000. Therefore, she did not receive any part of the estate upon her father's death, making her position that of a legatee, not an accountable person. The court concluded that she was not an accountable person, answering the second question in favor of the department.

Issue 3: Validity of Notice under Section 59
Given the court's decision that Smt. Chander Mohni was not an accountable person, the third question regarding the validity of the notice under Section 59 did not arise.

Issue 4: Unequal Partition as Disposition under Section 27
The fourth issue was whether an unequal partition of joint Hindu family properties constituted a disposition under Section 27 of the Estate Duty Act. The court acknowledged conflicting judicial opinions: the Gujarat High Court in Kantilal Trikamlal v. Controller of Estate Duty held that partition does not amount to a transfer, while the Madras High Court in S. P. Valliammai Achi v. Controller of Estate Duty took a contrary view, suggesting that unequal partition could be seen as a disposition. The court favored the Gujarat High Court's view, stating that partition merely transforms joint enjoyment into enjoyment in severalty without transferring property. It emphasized that disparities in partition could arise for various reasons and do not imply a disposition to evade tax. The court rejected the department's contention, answering the fourth question in favor of the accountable persons.

Conclusion:
The court answered the first question affirmatively, supporting the department's stance on reopening the assessment. The second and fourth questions were answered negatively, favoring the accountable persons. The third question was deemed unnecessary given the resolution of the second question. No order as to costs was made due to the complex nature of the case.

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