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TMI Blog1967 (9) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... sed was Rs. 1,275-7-0 and for Fasli 1359, the tax assessed was Rs. 1363-3-0. The assessee (Raja Krishtappa Naik) unsuccessfully appealed against the assessment order. Thereafter, he was duly served with a notice of demand. Before the amounts assessed could be realised, he died. Hence, steps are being taken against his legal representatives. When the petitioner, one of the legal representatives of the deceased assessee, was required to pay up the arrears of tax, he submitted an application to the second respondent in May, 1960, agreeing to pay the tax due in quarterly instalments of Rs. 100. In pursuance thereof, a sum of Rs. 100 was paid on May 7, 1960, and another sum of Rs. 100 was paid on July 14, 1960. Thereafter, the petitioner appeared to have changed his mind and taken the stand that the proceeding commenced against him under section 34(3) of the " Act" is without the authority of law. His only contention is that as no notice under section 23 of the Act had been issued to him, no action can be taken against him under section 34(3). Section 34(3) reads : " 34. (3) When an assessee is in default, the Agricultural Income-tax Officer may forward to the Taluqdar a certificate u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or other 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 agricultural income-tax assessed as payable by such person or any agricultural income-tax which would have been payable by him under this Act if he had not died. (2) Where a person dies before he furnishes a return as required under the provision of sub-section (1) of section 19 or before he is served with a notice under sub-section (2) of that section or under section 27, as the case may be, the Agricultural Income-tax Officer may serve oil his executor, administrator or other legal representative a notice under sub-section (2) of section 19 or under section 27, as the case may be, and may proceed to assess the total agricultural income of the deceased person as if such executor, administrator or other legal representative were the assessee. (3) Where a person dies, without having furnished a return which he has been required to furnish under the provisions of section 19 or having furnished a return which the Agricultural Income-tax Officer has reason to believe to be incorrect or incomplete, the Agricultural In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 22(1) the legal representative is merely made liable to pay the tax assessed on the deceased assessee. That provision fixes as well as quantifies the liability of the legal representative. Under that provision he (the legal representative) is not considered as a party to the assessment proceedings. His position is more or less that of a legal representative of a deceased judgment-debtor under the Civil Procedure Code. He cannot question the merits of the assessment. That is not the position under section 22(2). He is deemed to be an " assessee " even during the assessment proceeding. He can question the validity as well as the correctness of the assessment levied and also the legality or the regularity of the assessment proceedings. That position is made clear by sub-section (2) of section 22 which, amongst other things, says : "...... and may proceed to assess the total agricultural income of the deceased person as if such executor, administrator or other legal representative were the assessee. " Under sub-section (3) of section 22, the proceedings have to be continued against the legal representative according to law from the stage in which they were on the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e point in issue was read to us. In T. Govindaswamy v. Income-tax Officer, Special Survey Circle, Bangalore, this court was called upon to consider the scope of section 44 of the Income tax Act, under which the quondam partners of a discontinued firm are made jointly and severally liable to assessment for the income, profits and gains of the discontinued firm and are also made liable for the amount of tax payable by that firm. In the case in question, for the assessment year 1953-54, the unregistered firm of " Unni Co "., of which T. Govindaswamy (the petitioner therein) was a partner, was assessed to tax and a notice of demand was also served on the firm in question. Thereafter, the firm was discontinued. The Income-tax Officer issued a certificate of arrears of tax to the Collector under section 46(2) of the Income-tax Act. He also furnished to the Collector, the details of the constitution of the firm. Although no separate notice of demand was issued to the petitioner and he was not named in the certificate as the " assessee ", from whom arrears of income-tax were due, the Collector proceeded to attach and sell his properties. Thereupon, the petitioner applied to this court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... need not be any separate assessment as against the partners. It is a vicarious liability that is cast on the partners. What is being collected is the tax due from the partners of the firm. The notice of demand is based on the order of assessment made against the firm. Before issuing a notice under section 29 there need not be necessarily an order of assessment on the person against whom the notice is issued... A person against whom proceedings are taken in pursuance of section 44 is also an ' assessee ' within the meaning of the definition of that word found in section 2(2). In Additional Income-tax Officer, Circle I, Salem v. E. Alfred , the Supreme Court had to consider the scope of section 24B(2) of the Income-tax Act. Therein one E died intestate leaving behind him a son, the respondent therein, and eight daughters; for the assessment year 1946-47, a notice was issued to the respondent under section 22(2) of the Income-tax Act, in regard to his income and he was assessed under section 24B(2); as after service of a notice of demand, the respondent defaulted in payment of the tax, penalties were imposed on him under section 46(1) ; the respondent challenged the levy of penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 46(2) of the Income-tax Act. Therein an assessee, against whom proceedings for assessment as an individual had been commenced, died before the assessment order was made. After the assessment a demand notice was served only on one of his sons who had appealed from the assessment order. A certificate under section 46(2) was issued to the Collector and in pursuance of that certificate, the share of the petitioner therein, another son of the assessee, in the properties of the deceased was attached and brought to sale. He came up to this court under article 226 of the Constitution to restrain the Collector from proceeding against the properties in his possession. This court held that the petitioner therein was an " assessee " for the purpose of section 46(2), but as notice of demand had not been served on him under section 29 of the Income-tax Act, in respect of the arrears of tax due from his deceased father, a certificate for collection of such tax from the petitioner cannot be issued under section 46(2) and it was not lawful for the revenue authorities to recover the amount specified in the certificate from the petitioner before notice of demand was duly served on him. The ratio of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y such tax as if such person were alive, and (2) the liability of such executor, administrator or legal representative shall be limited to the estate of the deceased to the extent to which the estate is capable of meeting the charge. The liability of the executor, administrator or other legal representative is complete and absolute and can be enforced against the estate, as if the assessee had not died. This sub-section defines the extent as also the nature of the liability and read with the definition of " assessee " as contained in the Act, makes the legal representative, executor or administrator an " assessee " for all purposes of the Act. This is also clear from the other two sub-sections which expressly treat the executor, administrator or legal representative as an " assessee " for commencing and or completing the assessment proceeding. Sub-section (2) of the section contemplates a situation where a person liable to be assessed dies before he furnishes a return as required by the provisions referred to therein and empowers the Agricultural Income-tax Officer to proceed to assess the total income of the deceased person as if the legal representative himself were an assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of demand. Here the petitioner's liability is that of a legal representative of an " assessee in default " and he steps into the proceeding in his place. Under sub-section (3) of section 34 of the Act, the Agricultural Income-tax Officer had already forwarded a certificate to the Taluqdar to proceed to recover from Krishtappa Naik the amount specified in the certificate " as a public demand payable to the Taluqdar ". Sub-section (4) of section 34 of the Act refers to the issue of a similar certificate where the tax is payable by a trustee or muthavalli. Then comes a proviso which reads thus : " Provided that without prejudice to any other powers of the Taluqdar in this behalf, he shall for the purpose of recovering the said amount have the powers which under the Civil Procedure Code, 1323 F., a Civil Court has for the purpose of the recovery of an amount due under a decree." This proviso clearly indicates that the powers of the Taluqdar for the purpose of recovering the amount specified in the certificate shall be the same as the powers of the civil court for the purpose of recovery of an amount due under a decree. The provisions contained in the Code of Civil Procedure empower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hands of the petitioner, his legal representative. At this stage reference may be made to a decision of the Supreme Court in Additional Income-tax Officer, Circle I, Salem v. E. Alfred in which their Lordships have discussed the scheme of section 24B of the Indian Income-tax Act, 1922, which is identical with section 22 of the Act in material respects. Section 24B(1) is material for our purpose : " Where a person dies, his executor, administrator or other 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 tax assessed as payable by such person, or any tax which would have been payable by him under this Act if he had not died." It is unnecessary to reproduce sub-sections (2) and (3) which correspond to sub-sections (2) and (3) of section 22 of the Act. Dealing with the scheme of this section, Hidayatullah J., who spoke for the court, expounded the legal position in the following terms : " The scheme of this section, which was inserted by the Second Amendment Act of 1933 and modified further by the Amendment Act of 1939 is as follows : Sub-section (1) of section 24B makes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two sections to an assessee proper. The words ' other person ' cannot apply to a legal representative, if he is an ' assessee ' by fiction, and the fiction has to be worked out to its logical conclusion." Though the Supreme Court was not dealing with a case falling under sub-section (1) of section 24B, it clearly indicated that sub-section (1) of that section covered all situations and contingencies and made the liability of the legal representative absolute, limited, however, to the extent to which the estate of the deceased : was capable of meeting the charge, and that the fiction created by it has to be worked out to its logical conclusion. If the petitioner's contentions were to be upheld, it would mean that every proceeding for recovery of tax validly initiated before the Taluqdar (Deputy Commissioner) or his subordinate has to be closed with the death of the assessee and the proceedings, must be returned back to the taxing officer for taking fresh proceedings against the legal representative or the executor or administrator, as the case may be. Such a position would be inconsistent with the scheme and the fiction envisaged in section 22 of the Act. It would also negative i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued to the Collector and in pursuance of this certificate, the share of his brother (another son of the deceased upon whom no notice of demand had been served) in the property of the deceased was attached and brought to sale. On those facts their Lordships held that it was not lawful for the revenue authorities to recover the amount specified in the certificate from the petitioner before a notice of demand was duly served on him. Obviously the facts of the present case are different. The order of assessment had been passed against the deceased, a notice of demand had been served against him and a certificate of recovery issued against him had been sent to the Deputy Commissioner. If the notice of demand had not been served on the assessee himself before his death, it would have been necessary to serve such notice on his legal representative before he was proceeded against in the recovery proceedings. There is nothing in that decision which militates against the view that I am taking in this case. My attention was then drawn to another decision of this High Court in T. Govindaswamy v.Income-tax Officer, Special Survey Circle, Bangalore. in which the order of assessment had been m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for decision. Hence the only provision under which we can act is section 7 of that Act. The question of law that we had to consider is undoubtedly an important and substantial question of law. We are informed that the point in question is not covered by any decision of a High Court. Under these circumstances we think it proper that the question of law that arose for decision should be referred to a Full Bench, under the aforementioned section 7 of the Mysore High Court Act, 1961. We, therefore formulate the following question of law to be placed before the Full Bench for its opinion. " Whether, on the facts and circumstances of this case, the petitioner can be said to be 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) ? " The papers will be placed before the learned Chief justice for constituting a Full Bench for deciding the question of law referred. The case was heard by a Full Bench composed of A. R. SOMNATH IYER, B. M. KALAGATE and M. SADANANDASWAMY JJ. Full Bench 15-9-1967 SOMNATH IYER.---In Shorapur in the district of Gulbarga, there was a certain Raja Krish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the date of service of the notice shall be deemed to be in default. Section 34(3) to which we should now refer reads : " 34. Mode and time of recovery.- . . . (3) 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, and the Taluqdar, on receipt of such certificate, shall proceed to recover from such assessee the amount specified therein as a public demand payable to the Taluqdar . . . " It is plain that the Agricultural Income-tax Officer could forward a certificate under section 34(3) only when an assessee is in default. It is equally clear from the words " such assessee " occurring in it that the Taluqdar could recover the arrears only from that defaulting assessee, and that the Income-tax Officer's certificate is the source of his power to do so. So it is that the question arises whether the petitioner is an assessee in default. The defaulting assessee to whom section 34(3) refers, is the assessee who shall be deemed under section 33 to be in default. And he who could be so deemed to be in default is the assessee who does not, after se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of section 23. But that tax became payable by the petitioner only on his father's death and, so, the notice of demand served on the father did not dispense with its service on the son again. On the father's death, the petitioner became only an assessee, and would not become an assessee in default until the tax is again demanded under section 23, and is not paid within the time allowed by section 33. It is only then that the transformation of the petitioner from an assessee into an assessee deemed to be in default can happen under section 33. The observation of the Supreme Court that section 24B(1) of the Indian Income-tax Act, 1922, contains no provision for notices in respect of matters such as collection and the like, does not mean that the legal representative is excluded from the machinery provisions for collection. If so excluded, there would only be a liability without an apparatus for its enforcement both under that Act and under the Hyderabad Act. In the case before us, the notice of demand under section 23 was served only on the father and not on the petitioner after the father's death. Although the certificate forwarded under section 34(3) is not before us, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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