9911796707
TMI Blog1985 (11) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... mpose penalty under section 73(5) of the Act read with section 46(1) of the Indian Income-tax Act, 1922. A short resume of the intrinsic facts necessary for disposal of the case is set out hereinbelow : One Ambar Ali died on April 10, 1965, leaving behind his widow, sons and daughters including many minor children. The petitioner, son of Ambar Ali, and one of the accountable persons filed returns under the provisions of the Act. The provisional assessment was made by the Controller. On June 4, 1971, the Controller finally assessed the value of the properties left by the deceased under section 58(3) of the Act and demanded Rs. 25,133 as estate duty. In pursuance thereof, a notice of demand under section 73 of the Act was served on the petitioner demanding the duty on or before July 15, 1971. The petitioner preferred an appeal before the Appellate Controller under section 62(1)(a)(ii) of the Act. The petitioner also prayed before the Controller for time to pay up the duty, which was allowed. Thereafter, the Controller informed the petitioner that if he so desired, the Controller might allow an opportunity to him to make payment of the duty in instalments. The Controller extended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of some instalments and the Controller issued notice to show cause why the order allowing payment by instalments should not be withdrawn and why penalty should not be imposed upon the petitioner for such defaults. The petitioner again prayed that he might be treated " as not being in default " under section 73(4) of the Act and set out the grounds why the order should be made in his favour. The petitioner prayed for extension of time. Ultimately, when the petitioner failed to deposit five instalments, a notice of demand was issued by the Controller. The petitioner again prayed for treating him " as not being in default ". Thereafter, the Controller passed the impugned order dated April 18, 1972, whereby the prayers of the petitioner to pay the first instalment in June, 1972, as well as his prayer to treat him " as not being in default " were rejected and, a penalty of Rs. 10,470 was imposed upon him and other accountable persons under section 73(5) of the Act. On June 8, 1972, the petitioner filed this writ application under article 226 of the Constitution and obtained a rule. The operation of the impugned order was stayed on condition of depositing Rs. 6,000 towards the estate du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Estate Duty Act ? Ordinarily, the High Court does not entertain a writ petition under article 226 of the Constitution of India when the petitioner has an alternative remedy which without being unduly onerous provides an equally efficacious remedy: vide Thansingh Nathmal v. Superintendent of Taxes, AIR 1964 SC 1419; [1964] 15 STC 468 (SC). The view has been reiterated by the Supreme Court in Champalal v. CIT [1970] 76 ITR 692. In Himmatlal v. State of M.P. [1954] 5 STC II 5 (SC), the State Sales Tax Act provided a remedy of appeal against the order of assessment but the assessee had to deposit the whole amount of tax before he could prefer an appeal. It was not regarded as an adequate alternative remedy and was characterised by the Supreme Court as onerous and burdensome. In M. G. Abrol v. Shantilal Chhotelal Co., AIR 1966 SC 197, the remedy by way of appeal against the order of confiscation and the imposition of penalty under the Sea Customs Act was held by the Supreme Court to be not an effective remedy, for no appeal could have been filed without first depositing the penalty. In Shivram Poddar v. ITO [1964] 51 ITR 823 (SC); AIR 1964 SC 1095, it has been laid down that in matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of an alternative remedy and the parties were heard on merits, it would be unjustifiable for the High Court to dismiss the same on the ground of availability of an alternative remedy. In Madanlal Lohia v. Assistant Controller [1977] 108 ITR 627 (SC), an order of penalty imposed by the Controller of Estate Duty against the garnishee was set aside by the Supreme Court. The High Court had dismissed the writ petition. Their Lordships allowed the appeal holding that the Controller had no jurisdiction to impose the penalty. The decision is an authority for the proposition that if the Controller acts without jurisdiction or fails to exercise jurisdiction vested in him by law and prejudice is caused to a party, writ petition is entertainable under article 226 of the Constitution. In Asst. CED v. Prayag Das Agarwal [1981] 129 ITR 404 (SC), the respondents had challenged the discretionary power of the Government under section 52 of the Estate Duty Act to accept the offer of property in discharge of liability. The High Court had held that the discretionary power was not exercised bona fide and set aside the impugned order. On appeal, their Lordships upheld the order of the High Court. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mes the penalty amount to enable him to get relief in the appeal. We are conscious that by the Estate Duty (Amendment) Act, 1985, section 5C has been introduced and levy of estate duty in respect of the properties passing on the death after March 16, 1985, has been " discontinued ". We are not sure what the future holds in respect of the Act as levy of duty has merely been discontinued from March 16, 1985. There is just a break off or suspension of levy and the discontinuation may not be for a long period. And by deletion of section 5C, the provisions of the Act may come into play once again. As such, we say that the proviso to section 62(1)(a)(iv) of the Act which provides that a person aggrieved by an order imposing penalty under section 73(5) of the Act is to deposit the entire estate duty, is incongruous. We feel that the provision requires a second look by the Legislature. Section 246 of the Income-tax Act, 1961, corresponding to the proviso to section 62(1)(a)(iv) of the Act, does not contain any such rigour requiring the appellant to deposit any amount. This is one facet. The other side of the picture is that the other form of appeal including appeal against an order of pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire estate duty and then to prefer an appeal is a very onerous alternative remedy. The remedy provided is not an alternative efficacious remedy. Be that as it may, the writ petition has been entertained despite availability of a statutory remedy provided under the Act. The parties have been heard on merits and we consider that it would be unjustifiable for us to dismiss the same on the ground of availability of an alternative remedy. Further, the order refusing to treat the petitioner " as not being in default " is not an appealable order. Similarly, the order of the Controller in not allowing the petitioner to exercise his statutory right under section 70(2) of the Act is not appealable. If any of the contentions is allowed, the impugned penalty must fall through. This is also another relevant consideration to hold that we must decide the questions raised. We also find that the petitioner has claimed that the undisputed facts would show that the officer assumed jurisdiction to impose penalty under section 73(5) of the Act which he did not possess. The petitioner has also claimed that the Controller had arrogated to himself the power which he did not possess and committed s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned for such period, to such extent, and on payment of such interest not exceeding four per cent. or any higher interest yielded by the property, and on such other terms as he may think fit. (2) Notwithstanding anything contained in sub-section (1), estate duty in respect of immovable property may at the option of the person accountable be paid in four equal yearly instalments or eight equal half-yearly instalments with interest at the rate of four per cent. per annum or any higher interest yielded by the property from the date on which the first instalment is payable and the interest on the unpaid portion of the duty shall be added to each instalment and paid accordingly; but the duty for the time being unpaid with such interest to the date of payment may be paid at any time and in case where the property is sold shall be paid on the completion of the sale and if not so paid shall be recovered in the manner specified in section 73. " It would be seen that section 70(1) confers a discretionary power on the Controller to allow postponement of the payment of the ditty. The discretion can be brought into play on the fulfilment of the requirements contained in the sub-section. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early instalments. As such, the order of the Controller directing the petitioner to pay by monthly instalments as well as the order of the Controller rejecting the option of the petitioner to pay the duty by yearly instalments were illegal and without jurisdiction. The Controller could not alter the mode opted for by the petitioner or change the mode to monthly instalments as he did. Situated thus, we reach the conclusion that when the petitioner had opted for payment of the duty in instalments, the first yearly instalment could not have been due on any date prior to October 25, 1972, the extended date of payment, or at any rate prior to July 15, 1972, one year from the date on which the petitioner was called upon to pay the duty by July 15, 1971. As such, the petitioner could not have been a defaulter in payment of the instalments at least prior to July 15, 1972, but the penal proceeding was taken up under section 73(5) of the Act long before the expiry of the last date for payment of the first yearly instalment. As such, the proceedings as well as imposition of penalty before the petitioner was a defaulter must be held to be invalid and without jurisdiction. If the Controller h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his applications. By various applications, the petitioner claimed that he had preferred an appeal against the duty assessed, expressed his financial difficulties to pay the duty and took up various other points praying for treating him " as not being in default " until disposal of the appeal. There is no order disposing of any of the applications on merits. In the impugned order dated April 18, 1972, annexure 9, the Controller observed that those prayers were " repeatedly rejected ". We, however, do not find any such order. There is no order recording any reason for rejecting so many applications of the petitioner. The petitioner had preferred an appeal under section 62 of the Act, made applications setting forth the grounds why he should be treated " as not being in default " until final disposal of the appeal. We find that in one of the orders, the Controller stated that an appeal by itself did not prohibit the Controller to proceed to recover the duty under section 73 of the Act. In the final order, he said that the prayers had been repeatedly rejected. However, we do not find any such order rejecting the application on merits. In Hardeodas Jagannath [1961] 43 ITR 562, a Divisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercise it and if he does not exercise it or exercises it in perfunctory manner, he can be compelled to perform his duty under article 226 of the Constitution of India. In M. L. M. Mahalingam Chettiar v. Third ITO [1967] 66 ITR 287, the Madras High Court has held that the discretion vested in the Income-tax Officer under section 220(6) of the Income-tax Act, 1961, to treat the assessee " as not being in default " is not merely a naked and arbitrary power but a power coupled with responsibility and the concerned officer should take all the circumstances into account and all the considerations that could be urged or are urged by the assessee as to why he should not be treated " as not being in default " and then make such order as is appropriate to the facts of the case. Section 220(6) of the Income-tax Act, 1961, corresponds to the provisions of section 73(4) of the Act. In Om Prakash Agarwal v. ITO [1967] 66 ITR 175, the Allahabad High Court had held, inter alia, that before the Income-tax Officer could impose a penalty under section 221 of the Income-tax Act, 1961, he must determine whether the assessee is in default or is deemed to be in default in making payment of the tax. Whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If the duty is exercised properly according to law and reason, the order cannot be disturbed. In the instant case, repeated prayers were made by the petitioner to treat him " as not being in default ". There is no wrangle that the petitioner had preferred an appeal. The petitions were not considered at all. At least, no reason has been given by the Controller for not exercising the discretion in favour of the petitioner. There is no order giving reasons why the claim of the petitioner could not be accepted. Situated thus, and on the authority of the decisions just alluded to, we are of the view that the impugned order of penalty cannot be sustained until the applications filed by the petitioner for treating him " as not being in default " are disposed of according to law and reason. For the foregoing reasons, we hold that the impugned order of the Controller imposing penalty without considering the applications of the petitioner under section 73(4) of the Act to treat him " as not being in default " is liable to be set aside which we hereby do. We direct the Controller to consider the applications of the petitioner and dispose of them in accordance with law and reason. We also h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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