9911796707
TMI Blog1977 (4) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... respectively to be the son and daughter of the deceased, delivered to the Assistant Controller of Estate Duty an account in Form ED-1 of the properties in respect of which, according to them, estate duty was payable on the death of the deceased. The account was filed by respondents Nos. 3 and 4 in their capacity as executors of the will dated 20th December, 1957, said to have been made by the deceased prior to his death. The Assistant Controller issued notice under section 58, sub-section (2), to respondents Nos. 3 and 4 as accountable persons and after hearing them, made an order dated 23rd September, 1960, assessing the principal value of the estate of the deceased and determining a sum of Rs. 1,40,090.20 as the amount payable as estate duty. It appears that the Assistant Controller was not able to recover the amount of estate duty from respondents Nos. 3 and 4, since most of the estate of the deceased consisted of immovable properties which were let out to different tenants and according to respondents Nos. 3 and 4, rent was not being paid to them by the tenants. One of the immovable properties left by the deceased, namely, the building situate at No. 13, India Exchange Place, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the months of December, 1961, and January, 1962, aggregating to Rs. 2,800 to the Assistant Controller and informed the lessors about the same. The lessees, by their attorney's letter dated 24th February, 1962, however, contended that the notice issued by the Assistant Controller against the appellant was ineffectual, since the lessors had not been assessed to estate duty by the Assistant Controller as accountable persons and the Assistant Controller was, therefore, not competent to require the appellant to pay to him the amount of rent which was due from the appellant to the lessors and, moreover, the notice required the appellant to pay only such amount as was due from the appellant to respondents Nos. 3 and 4 as accountable persons and since the amount of rent was due from the appellant to the lessors and not to respondents Nos. 3 and 4, the appellant was not liable to pay the amount of rent in respect of the leased premises to the Assistant Controller. The appellant, acting on this letter of the lessors' attorneys, did not pay any further rent to the Assistant Controller but paid rent for the months from February to May, 1962, to the lessors. No further payment of rent was the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 9th January, 1962, issued by the Assistant Controller to the appellant was a valid notice under which the appellant was bound to pay the amount of rent in respect of the leased premises to the Assistant Controller, and, secondly, even if the notice dated 9th January, 1962, was a valid notice and it obligated the appellant to pay the amount of rent to the Assistant Controller, whether any penalty could be levied on the appellant for contravention of the terms of the notice. The first question is not free from difficulty but the second is relatively simple and hence it would be convenient to begin first with a discussion of the second question. Now, on the date when the notice dated 9th January, 1962, was issued by the Assistant Controller, the Act of 1922 was in force and hence the notice was issued under section 73, sub-section (5), of, the Estate Duty Act, 1953, read with section 46(5A) of the Act of 1922. Section 73, sub-section (5), of the Estate Duty Act, 1953, provides, inter alia, that the provisions of sub-sections (1), (1A), (2), (3), (4), (5), (5A), (6) and (7) of section 46 of the Act of 1922 shall apply as if the said provisions were provisions of Estate Duty Act, 195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance thereof to the Income-tax Officer, further proceedings may be taken by and before the Collector on the footing that the Income-tax Officer's notice has the same effect as an attachment by the Collector in exercise of his powers under the proviso to sub-section (2) of section 46. Where a person to whom a notice under this sub-section is sent objects to it on the ground that the sum demanded or any part thereof is not due to the assessee or that he does not hold any money for or on account of the assessee, then, nothing contained in this section shall be deemed to require such person to pay any such sum or part thereof, as the case may be, to the Income-tax Officer. " The penalty under sub-section (1) of section 46 can obviously be imposed on an assessee only when the assessee is in default in making payment of income-tax and under section 45, the assessee would be deemed to be in default when he fails to pay the amount of income-tax specified as payable in a notice of demand served, inter alia, under section 29 within the time mentioned in the notice of demand or if no time is so mentioned, then on or before the first day of the second month following the date of service of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 46, even if he fails to comply with the notice issued to him under sub-section (5A) of section 46. Now, the scheme of collection and recovery of estate duty under the Estate Duty Act, 1953, is substantially the same as that under the income-tax law. Section 73, sub-sections (1) and (2), of the Estate Duty Act, 1953, correspond to section 45, sub-section (1), of the Act of 1922. These two sub-sections provide that where any estate duty, penalty or interest is due in consequence of any order passed under the Act, the Controller shall serve upon the person accountable or other person liable to pay such estate duty, penalty or interest, a notice of demand in the prescribed form specifying the sum and the time within which it shall be payable and any amount specified as payable in the notice of demand shall be paid within the time, at the place and to the person mentioned in the notice, or if no time is so mentioned, then on or before the first day of the second month following the date of service of the notice and any person accountable failing so to pay shall be deemed to be in default. The Estate Duty Act, 1953, also, therefore, contemplates issue of a notice of demand to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yable on the death of the deceased. Then it goes on to require the appellant to pay to the Assistant Controller the amount which is due or may become due from him to the estate of the deceased or which is held or may subsequently be held by him for or on account of the estate of the deceased up to the amount of Rs. 1,40,090.20. Here the amount which the appellant is called upon to pay to the Assistant Controller is the amount due or to become due to the estate of the deceased. The purpose for which such amount is required to be paid is to meet " the amount due, by the accountable person in respect of the arrears of estate duty " and the appellant is intimated that any payment made by him in compliance with the notice would in law be deemed to have been made under the authority of the accountable person and the receipt of the Assistant Controller would constitute good and sufficient discharge of the liability of the appellant to the accountable person. The argument of the appellant was that the words " accountable person " here in the context meant respondents Nos. 3 and 4 and since the amount of rent was payable by him to the lessors and not to respondents Nos. 3 and 4, the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e duty on the property passing on the death but shall not be liable for any duty in excess of the assets of the deceased which he actually received or which, but for his own neglect or default, he might have received : ... (3) Every person accountable for estate duty under this section shall within six months of the death of the deceased, deliver to the Controller an account in the prescribed form and verified in the prescribed manner of all the properties in respect of which estate duty is payable : Provided that the Controller may extend the period of six months aforesaid on such terms which may include payment of interest as may be prescribed. (4) Where the person accountable knows of any property which he has not included in his account because he does not know its amount or value, he may state that such property exists, but he does not know the amount or value thereof and that he undertakes, as soon as the amount and value are ascertained, to bring a supplementary account thereof and to pay both the duty for which he may be liable in respect of such property and any further duty payable by reason thereof for which he may be liable in respect of the property mentioned in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards the regular assessment ........" Section 58 provides for the making of regular assessment and confers power on the Controller to assess the principal value of the estate of the deceased and to determine the amount payable as estate duty. Then there are provisions relating to reopening of assessment, penalty for default or concealment and rectification of mistakes in the assessment. Section 62 provides, inter alia, that any person objecting to any valuation made by the Controller, or to any order made by the Controller determining the estate duty payable under section 58 or section 59 or denying his liability to the amount of estate duty payable in respect of any property may within 30 days of the date of receipt of the notice of demand under section 73, appeal to the Appellate Controller and the Appellate Controller is given the power to dispose of the appeal. Then a further appeal is provided to the Appellate Tribunal under section 63 followed by a reference to the High Court under section 64 and an appeal to the Supreme Court under section 65. There are certain other provisions following on these sections which are not material for our purpose until we come to section 73 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be liable to pay the amount of estate duty, limited of course to " the assets of the deceased which he actually received or which, but for his own negligence or default, he might have received ". That is the plain effect of section 53, sub-section (1), read with section 73, sub-section (1). It may be noticed that so far as the estate duty payable on provisional assessment is concerned, sub-section (2) of section 57 provides that " the person so assessed " shall pay the amount of such estate duty to the Controller, but when we turn to sub-section (1) of section 53 and section 73, sub-section (1), we find that the words " the person so assessed " are absent in both these provisions and the liability to pay the amount of estate duty due in consequence of an order of assessment made under the Act is on every " person accountable ", irrespective of whether assessment is made on him or not. But here a question of some difficulty arises, namely, whether each of the accountable persons in sub-clauses (a), (b) and (c) in section 53, sub-section (1), is accountable for estate duty on the entire property passing on the death of the deceased or only for the estate duty on the particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tent of the estate duty on the particular property falling within the respective sub-clauses, there was no need for limiting it to the assets of the deceased which such person received or ought to have received. The appellant, however, contended that if this construction of sub-section (1) of section 53 were accepted, it would lead to consequences which could hardly have been intended by the legislature. He pointed out by way of an example that a trustee of an insurance policy taken out by the deceased under the Married Women's Property Act, 1874, which policy is exempt from payment of estate duty by reason of the total amount payable thereunder being Rs. 50,000 or less, would become accountable and consequently liable to pay, out of the policy monies, the estate duty payable in respect of the free estate of the deceased--to the extent of the whole of the policy monies in the hands of the trustees--even though the Married Women's Property Act expressly provides that the estate of the husband is not to have any interest in the policy monies. It is not necessary for us to decide whether such an anomaly would arise or not, because the possibility that an anomaly may arise on a particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of any and every property passing on the death of the deceased. Sub-section (5) does not, therefore, in our opinion, militate against the construction which we are inclined to place upon sub-section (1). In fact, section 76 clearly postulates that an accountable person may have to pay estate duty in respect of a property not passing to him and provides for his indemnification in such a contingency by saying that if a person accountable under section 53 pays any part of the estate duty in respect of any property not passing to him, it shall, where occasion requires, be repaid to him by the trustees or owners of that property. If an accountable person mentioned in sub-clause (a), (b) or (c) of sub-section (1) were liable for estate duty only in respect of the particular property passing to him, there would be no need for such a provision as section 76, because in such an event there would be no question of payment by an accountable person of estate duty in respect of any property not passing to him. The provision for indemnification enacted in section 76 clearly suggests that an accountable per son being liable for estate duty on the entire property passing on the death may have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vent interest in the leased premises became vested in them on the death of the deceased. The order of assessment made by the Assistant Controller was not challenged by the appellant in the writ petition nor was it at any time declared invalid by a superior authority at the instance of the lessors. Not even any steps appear to have been taken by the lessors for the purpose of challenging the order of assessment. The order of assessment must, therefore, be taken to be valid for the purpose of the present proceedings. The lessors were, in the circumstances, accountable for the whole of the estate duty on the entire property passing on the death of the deceased, and hence they were liable to pay the estate duty of Rs. 1,40,090.20 limited of course to the extent of the leased premises which constituted the asset of the deceased received by them. Since the rent of the leased premises was payable by the appellant to the lessors under the lease deed and the lessors were liable to pay the estate duty of Rs. 1,40,090.20, it was competent to the Assistant Controller to issue a notice under section 73, sub-section (5), read with section 46, sub-section (5A) of the Act of 1922 requiring the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e first time at the hearing of the appeal before us. This answer, in our opinion : affords complete refutation to the contention of the appellant. The question whether notice of demand was served on the lessors under section 73, sub-section (1), before issue of the notice dated 9th January, 1962, is essentially a question of fact and if it has not been raised in the writ petition, nor argued before the High Court, it cannot be allowed to be agitated for the first time before this court. Secondly, it was urged that, in any event, notice under section 73, sub-section (5), read with section 46, sub-section (5A), of the Act of 1922, could be validly issued against a garnishee without service of notice of demand on the accountable person under sub-section (1) of section 73 and hence the notice dated 9th January, 1962, could not be assailed as invalid on the ground that it was not preceded by a notice of demand on the lessors under section 73, sub-section (1). Support for this contention was sought to be drawn from the decision of this court in Third Income-tax Offcer, Mangalore v. M. Damodar Bhat [1969] 71 ITR 806, 812 (SC). Now, this was a decision given with reference to sub-section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the decision seems to have overlooked the fact that it is only when a notice of demand is served on the assessee under section 156 and the period for payment of tax mentioned in it expires that the tax becomes payable by the assessee and it is only then that the Income-tax Officer can proceed to recover it from the assessee. The garnishee proceeding under section 226, sub-section (3), is merely one of the modes of recovery prescribed by law and it is difficult to see how it can be resorted to before the tax has become payable by the assessee. Secondly, sub-section (3) of section 226 permits garnishee proceeding to be taken for recovery only of " arrears " and no tax can be said to be in arrears until the expiry of the period for payment of tax specified in the notice of demand, and, thirdly, the concept of recovery by any mode whatever before the expiry of the time allowed for payment of tax is foreign to the whole scheme of recovery both under the Act of 1961 and the Act of 1922. But, as we have pointed out, the decision in Third Income-tax Officer, Mangalore v. M. Damodar Bhat [1969] 71 ITR 806 (SC) is binding upon us and it affords a complete answer to the contention of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
