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TMI Blog1976 (9) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... court held the assessments to be invalid. In the meanwhile, Thomakutty had paid the tax due as per the assessments for these two years. Consequently, on the order of this court the tax so paid became refundable. On a petition by the assessee, the CIT granted the refund and also passed an order under s. 66(7) of the Indian I.T. Act, 1922, sanctioning payment of simple interest at 4% per annum on the amount of refund from the date of payment till date of repayment. The amounts so paid as interest during the accounting year ended March, 31, 1960, came to Rs. 12,353. Before this refund bad been received Shri Thomakutty bad converted his proprietary business into a partnership with his three sons to carry on the business in the same name and style of Mooken Devassy Ouseph Sons. Clause 4 of the partnership deed which is dated April 1, 1957, is as follows: "Amounts that may have to be paid and the obligations that may have to be answered on account of income-tax, sales tax or otherwise in respect of the business of number-I shall be borne and discharged and refunds taken and enjoyed by the partners herein in proportion to the share held by them in this partnership." The assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the escapement of income was as a result of the appellant's failure to disclose the relevant material. On the other hand, the escapement had taken place because of the Income-tax Officer's failure to consider the issue at the time of original assessment, even though from the records it was clear that the appellant had been given a refund on April 27, 1959". Against this order of the AAC, the department went up in appeal to the Income-tax Appellate Tribunal, Cochin Bench. The Tribunal held that the proceedings taken against the legal representatives were valid. They relied on the decision of this court in the case of K. P. Mathew v. Agrl. ITO [1974] 96 ITR 121, 126,127 (Ker). The following observations from that decision were quoted by the Tribunal : "One of the questions considered by the Division Bench was whether, in the case of joint executors, an assessment made without notice to all of them is valid under law. The court held that such an assessment would be void, ineffective and without jurisdiction, as the estate cannot be represented by some of them alone. It also held that, if the Income-tax Officer bona fide believed that one of them was the only executor, served ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Malegaon Electricity Co. P. Ltd. v. CIT [1970] 78 ITR 466, 471 (SC). The Supreme Court had observed therein: "It is true that if the Income-tax Officer had made some investigation, particularly if he had looked into the previous assessment records, he would have been able to find out what the written down value of the assets sold was and consequently he would have been able to find out the price in excess of their written down value realised by the assessee. It can be said that the Income-tax Officer if he had been diligent could have got all the necessary information from his records. But that is not the same thing as saying that the assessee had placed before the Income-tax Officer truly and fully all material facts necessary for the purpose of assessment." According to the Tribunal, this principle should apply in the instant case. The Tribunal also rejected the contention of the learned counsel for the assessee that the receipt of interest was not income, it being casual or non-recurring. On this point, they relied on the decision of the Madras High Court in Ramanathan Chettiar v. CIT [1963] 50 ITR 43 (Mad). The views of the Madras High Court, it was pointed out by the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case, the Appellate Tribunal was justified in holding that the interest on excess payment of income-tax made by the deceased is assessable in the hands of the deceased and it did not become part of the income of the firm which had taken over the assets and liabilities of the business of the deceased ?" It is this question which comes up for our answer in I.T.R. No. 84 of 1974. The original petition, O.P. No. 5119 of 1974, had been filed by the assessee's legal representative for compelling reference of the following questions of law which, according to him, arise out of the order of the Appellate Tribunal: "1. Whether the finding of the Appellate Tribunal that Jose T. Mooken represented the estate of late M. O. Thomakutty and that the other legal representatives impliedly accepted his representation, and that, therefore, the proceedings are valid is correct in law and supported by material or evidence ? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the assessment proceedings have been validly reopened, and in upholding the reassessment ? 3. Whether, on the facts of this case, the Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts found where the point for determination is a mixed question of law and fact ; and (3) a finding of fact unsupported by evidence or unreasonable and perverse in nature (See G. Venkataswami Naidu Co. v. CIT [1959] 35 ITR 594 (SC). In connection with this first question, we will quote the following passage from the decision of the Supreme Court in First Addl. ITO v. Mrs. Suseela Sadanandan [1965] 57 ITR 168, 173, 174 (SC): "The definition of a legal representative under section 2(11) of the Code of Civil Procedure also runs on the same lines: it means a person who in law represents the estate of a deceased person, and includes any person who intermeddles with the estate of the deceased. It has been held that one who intermeddles with the estate of a deceased person, even though it may be only with a part thereof, is a legal representative within the meaning of section 2(11) of the Code of Civil Procedure and is liable to the extent of property taken possession of by him. On the same analogy, it may be held that if all the executors or some of them administered the estate of a deceased without obtaining the probate, all of them or some of them who have administered the estate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person, in the hands of his legal representatives. Here again no material was placed before the High Court. The Income-tax Officer, who filed the affidavits, had no personal knowledge of what had happened at the time of the making of the assessment. Better material could have been placed to enable the court to come to a conclusion whether the Income-tax Officer acted bona fide its serving the notices only on E. D. Sadanandan, because he was the executor who intermeddled with the estate and was in actual management thereof." (underlining is ours). From this and also from the third point formulated by the Supreme Court in this case, we do not think that the Tribunal made any mistake in stating that the Supreme Court had posed a third test whether one in fact represented the estate and other executors or representatives expressly or impliedly accepted his representation. If the Tribunal, based on relevant materials, had come to such a conclusion, the fact that there may be a difference of opinion in regard to the sufficiency or adequacy of the materials, on the basis of which such a conclusion has been arrived at, may not pose a question of law for reference to the High Court und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiar v. CIT [1967] 63 ITR 458 (SC). The facts of the Supreme Court case as extracted in the headnote to the decision are: "A, his three wives, V, L and N, and his son, B, were members of a Hindu undivided family. The undivided son, B, died in 1934, leaving his widow, U. A died subsequently in 1938, leaving him surviving his two widows, L and N, and his son's widow, U. U filed a suit for administration and partition of A's estate claiming a half share therein. Pending the suit, receivers were appointed. Estate duty was demanded on the death of the undivided son, B, as well as on the death of A under Ceylon law. The receivers paid the estate duty under protest and filed a suit questioning the validity of the imposition of estate duty. This suit was ultimately decided by the Privy Council against the estate duty authorities and in consequence the estate duty authorities of Ceylon had to refund the estate duty and pay interest on the estate duty collected. In the meantime, at the stage when an appeal in the partition suit was pending before the Privy Council, the parties thereto compromised and, pursuant to the compromise, L, N and U each adopted a son and divided the estate into thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat amount from the date of the petition till the date of the payment. The receipt of interest in the present case by virtue of the decree of the Supreme Court of Ceylon bears no semblance, therefore, to a receipt of a casual character. It is not, therefore, possible to accept the argument of the appellant that the receipt of interest obtained under the decree of the Supreme Court of Ceylon was of a casual or non-recurring nature. We, accordingly, reject the submission of the appellant on this aspect of the case." Nothing has been placed before us which would indicate that the principle of the Supreme Court decision should not be applicable in regard to the refund of interest in the instant case also. In the light of the Supreme Court case which clearly enunciates the law on the matter, the Tribunal rightly rejected the request for reference. Now the question remains whether the Tribunal should have referred the question as regards the validity of the notice issued by the ITO in the matter of reopening the assessment. How the Tribunal dealt with the notice may be looked into. The Tribunal said: "It was next argued by the learned counsel for the assessee that the entire assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awarded by the court in exercise of its discretionary power under s. 3 of the Law Reform (Miscellaneous Provisions) Act, 1934, was not interest proper but damages. In meeting this argument in the course of his judgment, Lord Wright observed at page 189 of the report as follows: The contention of the appellant may be summarily stated to be that the award under the Act cannot be held to be interest in the true sense of that word because it is not interest but damages, that is, damages for the detention of a sum of money due by the respondent to the appellant, and hence the deduction made as being required under rule 21 is not justified because the money was not interest. In other words the contention is that money awarded as damages for the detention of money is not interest and has not the quality of interest. Evershed J., in his admirable judgment, rejected that distinction. The appellant's contention is in any case artificial and is, in my opinion, erroneous, because the essence of interest is that it is a payment which becomes due because the creditor has not had his money at the due date. It may be regarded either as representing the profit he might have made if he had had th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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