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TMI Blog1990 (8) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The tax amount for the assessment years 1122 (Malayalam Era) to 1956-57 was settled, as is seen from the second settlement, at Rs. 31,34,562. Thus, the total tax payable as per the two settlements came to Rs. 40,50,020. So far as the tax liability under the first settlement is concerned, it is the case of the petitioner that the assessee himself had paid it fully. But the petitioner has no such case in regard to the second settlement. According to the Revenue, the outstanding demands as in the year 1968 came to Rs. 50,42,970.34. These demands consisted of the following amounts : (i) Rs. 31,95,020-balance tax (ii) Rs. 14,42,020-penalty levied on Thangalkunju Musaliar before his death. (iii) Rs. 3,05,930-interest up to December 31, 1965. For realisation of the aforesaid amounts, the Income-tax Officer initiated the proceeding contemplated under rule 48 of the Second Schedule of the Income-tax Act, 1961. This proceeding was under challenge before this court in writ petition (O. P. No. 2265 series-13 in number of 1968) filed by the legal representatives. The main grounds on which the said proceeding (which is termed as the order of attachment in the judgment disposing of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in him under sub-section (2) of section 224, corrected the certificates and the fact of correction was intimated to the Tax Recovery Officer. Based on the corrected certificates, the Tax Recovery Officer issued exhibit P-7 notice under rule 53 of the Second Schedule informing the petitioner that "the 20th day of July, 1976, has been fixed for drawing up the proclamation" in connection with the sale of the properties for realisation of the amounts shown in the schedule attached to the said notice. The petitioner thereupon moved this original petition for the reliefs stated hereunder : ". . . this Hon'ble Court may be pleased to issue a writ of (i) prohibition forbearing the third respondent from recovering any amount in pursuance of the recovery proceedings initiated by the 4th respondent in exhibit P-7 ; (ii) to call for the records of the case leading to the issue of exhibit P-7 notice for settling a sale proclamation in respect of the properties mentioned in the list attached thereto issued by the respondent and quash the entire proceedings by the issue of a writ of certiorari or any other appropriate writ, order or direction in the nature of a writ of certiorari ; (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds for the interest accrued subsequent to December 31, 1965, cannot also be challenged in these proceedings since most of the issues raised in this proceeding, as submitted earlier, are supported by the principle of 'might and ought' or to put it differently, by the bar of res judicata." One other contention the petitioner can perhaps raise is that no proceeding for recovery by the Tax Recovery Officer, based on the corrected certificates dated July 29, 1969, which were issued after the decision of the learned single judge can be initiated against the legal representatives. It is further contended that the finding of the learned single judge in the earlier original petitions that "interest and penalty are also leviable under the terms of exhibits D-1 and D-2 settlements", as the same has not been interfered with by the Division Bench or the Supreme Court, has become final and conclusive between the legal representatives of the deceased and the Revenue. The finding of the Division Bench, which reads as follows, has become final because the supreme Court has not interfered with the said finding : "We see no reason to hold that the attachment is invalid" The settlements arrived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re sections 159, 220 to 222 and rule 85 of the Second Schedule. I shall now consider the scope of these sections and the Rule. Sub-section (1) of section 159 provides that where a person dies, his legal representative shall be liable to pay any sum which the assessee would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased. Sub-section (2) provides that, if the assessee dies after the initiation of the assessment proceedings, the same shall be deemed to have been taken against the legal representative and may be continued against him from the stage at which it stood on the date of the death of the deceased. But, in case no such proceeding has been initiated which could have been taken against the deceased if he had survived, then the same can be taken against the legal representative. Such proceedings, however, shall be dealt with and disposed of in accordance with all the relevant provisions of the Act. Sub-section (3) provides that the legal representative of the deceased shall, for the purposes of the Act, be deemed to be an assessee. Section 222 empowers the Income-tax Officer to forward to the Tax Recovery Officer (for short, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, can be initiated against the legal representative (except the proceedings contemplated under rule 85 of the Second Schedule) unless it be that he is treated as a defaulter within the meaning of section 222 on his failure to pay the tax in terms of the demand notice under section 156 served on him by the assessing authority. A Full Bench of the Mysore High Court has expressed the same view in Raja Pid Naik v. Agri. ITO [1968] 69 ITR 401, which reads (headnote) : "On the death of an assessee, the legal representative becomes only an 'assessee' ; he would not become 'an assessee in default' until the tax is again demanded from him under section 23 (corresponding to section 156) and is not paid within the time allowed by section 23." See also R. P. Janardhana v. Agri. ITO [1971] 79 ITR 305 (MYS). The Allahabad High Court, in Satya Pal Verma v. ITO [1977] 106 ITR 540 has also expressed the same view. The principles thus deducible from the above discussion are : (1) On the death of the assessee, the legal representative can be treated only as an assessee for the purpose of the recovery proceedings. (2) No proceeding for recovery against the legal representative under section 222, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as fresh certificates forwarded to the Tax Recovery Officer enabling him to recover the tax dues of the deceased assessee from the legal representatives cannot however be taken cognizance of because the Revenue, as already noted, has no case that the legal representatives failed to pay the dues as per the demand notice served on them by the Income-tax Officer after the death of the assessee. The legal representatives are yet to be declared as assessees in default. If that be so, the 11 certificates in dispute, to my mind, cannot be enforced against the legal representatives including the petitioner even assuming that those certificates, after the correction, must be deemed to be fresh certificates forwarded to the Tax Recovery Officer. The second point: It is a well-established principle that the doctrine of res judicata or estoppel by record does not apply to findings or decisions of the assessing authority since that authority is not a court. That is why it is always said that a finding or a decision of the income-tax authorities for one year may be departed from in a subsequent year. But there is an exception to this principle and it has been succinctly stated by a Full Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectness of the levy at the time of recovery in view of the provisions contained in article 265 of the Constitution. To attract article 265, it should be established that the levy or the collection of tax or both levy and collection are without the authority of law. The question, therefore is, could it be said that the dues in dispute has been levied without the authority of law ? The answer is no ; because the levy has, as its basis, the settlements made under section 9(1) of the Travancore Taxation on Income (Investigation Commission) Act which remained in force at the time when the settlements were made, by virtue of section 3 of the Central Act, namely, the Opium and Revenue Laws (Extension of Application) Act, 1950. I shall now read relevant parts of section 9, namely, sections 9(1) and 9(2) : "9(1) Settlement of cases under investigation. -Where any person concerned in any case referred to or pending before the Commission for investigation applies to the Commission, at any time during such investigation, to have the case or any part thereof settled in so far as it relates to him, the Commission shall if it is of opinion that the terms of the settlement contained in the appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court has said (headnote): ". . . there was no question of an agreement or settlement, because section 220(3) did not empower the Income-tax Officer to enter into an agreement or settlement in order to bind the Revenue, and it was not within the competence of the Income-tax Officer to vary the rate of interest fixed under section 220(2) from time to time." The above observations, in my view, the petitioner cannot press into service for two reasons : (1) the above contentions are barred by the doctrine of constructive res judicata. It is relevant in this context to refer to the decision of the Supreme Court in Virudhunagar Steel Rolling Mills Ltd. v. Govt. of Madras [1968] 70 ITR 726 ; AIR 1968 SC 1196. The Supreme Court has declared the law thus (headnote): "Where a writ petition under article 226 is disposed of on merits and the order of dismissal of the petition is a speaking order, that would amount to res judicata and would bar a petition under article 32 on same facts, irrespective of whether a notice was issued to the other side or not before such decision was given . . . " (2) the levies are based on the two settlements aforementioned made under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stipulated period although the tax recovery certificates in the beginning were invalid, is without substance. That does not mean that the Revenue has no power to initiate proceedings against the legal representative to recover the amount of arrears due from the deceased assessee by following the procedure prescribed under sections 159 and 220 to 224 of the Act. As already observed, no recovery proceedings can be initiated against the legal representative (unless it be a case falling under rule 85 of the Second Schedule) without declaring him to be a defaulter on his failure to pay the tax in terms of the demand notices served on him subsequent to the death of the assessee. No such proceedings, admittedly, have been taken against the legal representative by the Revenue. It is made clear that this judgment will not preclude the Revenue from initiating such proceedings against the legal representatives as provided for under the Act. The third question, to my mind, therefore, does not arise for consideration. Yet another argument advanced on behalf of the petitioner can be stated thus : Relying on the observations of the Supreme Court in Isha Beevi [1975] 101 ITR 449, namely, that ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so long as the recovery can be only in accordance with law, the choice of alternative laws substantially similar in character can well be left to the authority effecting the recovery. We think that the arrears of income-tax due for these two years which could have been recovered under the Indian Income-tax Act, 1922, can now be recovered under the provisions of the Income-tax Act, 1961 ? The aforesaid finding that the Department can initiate recovery proceedings under the 1961 Act as well was under challenge before the Supreme Court on the ground that the procedure for recovery available under the 1961 Act imposes additional burden or disadvantage to the legal representative when compared to the procedure prescribed in this regard under the Travancore Act. The question whether there was any additional burden or disadvantage imposed upon the legal representative by the procedure in the 1961 Act was not dealt with by the Supreme Court in view of the concession given by the Department, in the words of the Supreme Court, namely, that "the Tax Recovery Officer will only use the procedure in the Travancore Act so far as it is possible to apply it". It is none the less clear from these ..... X X X X Extracts X X X X X X X X Extracts X X X X
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