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TMI Blog1984 (10) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... ntative of the assessee who had died, contended that the question of assessment of the said amount was still in dispute and there was no question of levying penalty even if the Supreme Court had confirmed the addition. In fact, the Patna High Court had held that Shri Rana was not a benamidar for the assessee. The ITO, however, rejected this contention and levied penalty of Rs. 9 lakhs. 2. On appeal, the Commissioner (Appeals) was of the opinion that there was a difference between the relevant provisions of the 1922 Act and the Income-tax Act, 1961 ('the 1961 Act'). Under the 1922 Act, penalty for concealment could not be levied upon the legal representative of a deceased assessee. Moreover, there had been considerable difference of opinion with regard to the ownership of the shares and in view of the decision of the Hon'ble Supreme Court in the famous case of CIT v. Anwar Ali [1970] 76 ITR 696, it could not be said that the assessee had concealed the particulars of his income or had deliberately furnished inaccurate particulars thereof. He, therefore, cancelled the penalty. The revenue has come up in second appeal before us. 3. We have heard the representatives of the parties a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of the assessee that under the 1922 Act, penalty proceedings could not be started and continued against the legal representative for any default committed by the deceased. This opinion has been given in the first four lines of para 3. The said opinion is sought to be supported by the authorities referred to in foot-note 23. We, however, do not feel that it in any way helps the assessee. Two authorities are referred to in the foot-note-one is the decision of the Bombay High Court in Ellis C. Reid v. CIT 5 ITC 100. Now this decision was given by the Bombay High Court before the insertion of section 24B of the 1922 Act. In this behalf, we may refer to the commentary on the Law of Income-tax of India by V.S. Sunderam, Eighth edn., wherein at page 791, the learned author has traced the history of section 24B and mentioned that this section was inserted in 1933 to fill the said gap in the Act. Prior to that the Bombay High Court had in the case of Ellis C. Reid thought that no assessment could be made on a deceased person in the absence of an express provision to that effect. This section had rendered obsolete the old rulings. Therefore, the decision in the case of Ellis C. Reid would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petent. On a reference, the High Court held that the appeal was competent, but the provisions relating to the imposition of penalty were not saved by the Finance Act and, therefore, the order imposing the penalty was bad. On an appeal to the Supreme Court, it was held (reversing the decision of the High Court) : " That penalty imposed under a taxing statute upon a person in view of his dishonest or contumacious conduct was in the nature of an additional tax and the fact that under the Hyderabad Income-tax Act, distinct provisions were made for recovery of tax due and penalty did not alter the true character of penalty imposed under the Income-tax Acts of India and Hyderabad. The proceedings for imposing penalty initiated under section 40 of the Hyderabad Income-tax Act could be continued after the enactment of section 13(1) of the Finance Act, 1950. The order levying penalty was, therefore, valid. " 8. Yet another important Supreme Court decision in this behalf is Addl. ITO v. E. Alfred [1962] 44 ITR 442. In this case, one E had died intestate leaving behind him a son and eight daughters. For the assessment year 1946-47, a notice was issued to the respondent under section 22 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions can be made applicable to him under section 19. It may be pointed out that section 19 and the other sections following it find place in Chapter V of the 1957 Act which deals with the liability to assessment in special cases. As pointed out above, section 18 specifically excluded from sub-section (3) of section 19 and that was the reason behind the two decisions under the 1957 Act. As against this, section 24B finds place in Chapter IV of the 1922 Act itself which primarily deals with assessment. The liability in special cases corresponding to Chapter V of the 1957 Act is dealt with in Chapter V of the 1922 Act, which deals with guardians, trustees, agents, etc. These two separate Chapters provide for liability in special cases and, therefore, their scope would be strictly restricted to the provisions providing for such liability whereas Chapter IV of the 1922 Act deals with the case of normal assessments and section 28 relating to penalty also finds place therein. What we mean to say is that section 24B of the 1922 Act does not exactly serve the same purpose as section 19 of the 1957 Act though the language of the two may be similar. There is also a small difference in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fference existing between the chargeable events themselves and the decision under that Act would have no application to cases falling under the 1957 Act. In the result, we are of the opinion that the conclusion of the Commissioner (Appeals) in this behalf is not sustainable and penalty proceedings could be continued against the present respondents. 10. The next question that arises is as to whether the penalty proceedings can be said to have been taken after unreasonable lapse of time. The argument taken by the assessee before the Commissioner (Appeals) was that there had been inordinate delay in the levy of penalty. The Commissioner (Appeals) has also relied upon this as a ground for his decision. However, taking into consideration the over all facts and circumstances of the case, we are of the opinion that the delay in the present case could not be considered to be fatal. It was conceded on behalf of the assessee that there was no limitation prescribed for penalties under the Act. The addition itself was being agitated by the assessee and it was ultimately confirmed by the Hon'ble Supreme Court by its order dated 19-9-1972 in CIT v. S.P. Jain [1973] 87 ITR 370. Earlier the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either D.J.C. Ltd. nor M.C. Ltd. nor the Rana nor Durga Prasad had any account with the Allahabad Bank in May or August 1953, the shares were not in the bank's custody, the sale transactions were not through the bank and no reason was given for the unusual procedure of routing the money through Wood. The letters of Wood produced by the assessee, confirming the transactions, though written on official note-paper of the bank, gave no reference number of the bank and there were no office copies of the letters with the bank. The Rana never attended any general meeting of the shareholders nor appointed any proxy in his behalf, and did not take any steps till April 1955, to have the shares registered in his name or to collect the dividends amounting to Rs. 2 lakhs. It was only in April 1955, when the price of those shares went up in the market and they had to be sold, that the Rana opened an account with the Allahabad Bank and in that account were credited sums amounting to Rs. 38 lakhs got by the sale of those shares. Practically the entire sum of Rs. 38 lakhs was encashed by nine bearer cheques for large amounts by Das, a peon of Ashoka Marketing Co., a company controlled by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t follows that the amount invested for purchase of these shares was obviously the income of the assessee. Therefore, it can be concluded without any fear of contradiction that the assessee not having disclosed the purchase of these shares or the source thereof concealed the particulars of his income or deliberately furnished inaccurate particulars thereof and was liable to penalty within the meaning of section 28(1)(c). The conclusion arrived at by the Commissioner (Appeals) on this behalf cannot be supported in view of the observations of the Supreme Court and the assessee was clearly liable to penalty as levied by the ITO. 12. In the result, the appeal is accepted. The order of the Commissioner (Appeals) is set aside and the order of the ITO is restored. Per Shri Anand Prakash, Accountant Member-- I have had the privilege of going through the order of my learned brother, the Hon'ble Judicial Member. I entirely agree with his reasoning and conclusions. Yet I will like to make certain observations of my own as follows : 2. The learned Commissioner (Appeals) has deleted the penalty on three grounds : (i) that the order of penalty has been passed very late, (ii) that on me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e circumstances under which he purchased those shares. 3. The purchase price of the shares amounting to several lakhs of rupees was not paid by cheque or cheques. The same is said to have been paid in cash. This is wholly improbable circumstance. 4. The Rana had not entered into any correspondence with the companies concerned for the purchase of the shares. He had not engaged the services of any brokers for making purchases. It is not shown how the Rana came to know that the companies in question were wanting to sell the shares. 5. It is not shown why the transactions in the said shares should have taken place in the presence of Wood. Wood had nothing to do with the transactions. Neither the Rana nor the companies which sold the shares had any dealings with the Allahabad Bank at the relevant time. The share scrips were not in the possession of the Allahabad Bank. The money was not paid through the Allahabad Bank. The letters of Wood on which considerable reliance was placed did not bear any office serial number. No copies of those letters were available in the Allahabad Bank. It is not explained how Wood came into the picture. 6. If the Rana was the purchaser of the shares, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the Rana was the benamidar for somebody. It must go further and establish that Rana was the benamidar of the assessee. There are good reasons to come to a conclusion that the Rana was the benamidar of the assessee. These are, as have been noted already : 1. The close association of the assessee with the Rana, which is evident from the record. It was the assessee who introduced the Rana to Nandlal, who was a close associate of the assessee and it was Nandlal, who introduced the Rana to the Allahabad Bank. Rana did not go to collect the money from the Allahabad Bank, but is said to have stayed in the premises of Sahu Jain Co. a company with which the assessee was closely associated and further a peon who got the money from the bank was residing in the house of Sahu Jain, 11, Clive Row, when the notice under section 37 of the Act was served on him. According to this peon, A.C. Das, it was Dujaria who asked him to render that service to the Rana. According to Dujaria, it was the assessee Jain, who introduced him to the Rana and asked him to assist the Rana. It also appears from the evidence adduced on behalf of the assessee that the huge amount of about Rs. 38 lakhs collecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee, Sahu Jain at 11, Clive Row. From the circumstances above enumerated the Income-tax Officer and the Appellate Assistant Commissioner were fully justified in drawing an inference that the Rana was a name-lender for the assessee. Neither the Tribunal nor the High Court has given good reasons for displacing the conclusions reached by the Income-tax Officer and Appellate Assistant Commissioner. They had a duty to examine the reasons given by those authorities before rejecting them. " 6. In view of the aforesaid observations of their Lordships of the Hon'ble Supreme Court, it is not possible to hold that the deceased assessee had not withheld the truth from the department. Rana was the assessee's as such (sic), the assessee knew this fact, and yet he did not disclose it. Rather he did his level best to confuse and camouflage the facts as becomes clear from the reading of the Hon'ble Supreme Court's decision. The design and deliberateness of the assessee's action is, thus, too patent to be missed. it is in fact writ large throughout the text of the decision of the Hon'ble Supreme Court. 7. It is no doubt true that the entirety of the circumstances must reasonably poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, has vested in him all the inheritable rights, and has imposed upon him all the inheritable liabilities of the deceased. Inheritance is in some sort a legal and fictitious continuation of the personality of the dead man, for the representative is in some sort identified by the law with him whom he represents. The rights which the dead man can no longer own or exercise in propria persona, and the obligations which he can no longer in propria persona fulfil, he owns, exercises, and fulfils in the person of a living substitute. To this extent, and in this fashion it may be said that the legal personality of a man survives his natural personality, until, his obligations being duly performed, and his property duly disposed of, his representation among the living is no longer called for (b). The representative of a dead man, though the property of the deceased is vested in him, is not necessarily the beneficial owner of it. He holds it on behalf of two classes of persons, among whom he himself may or may not be numbered. These are the creditors and the beneficiaries of the estate. Just as many of a man's rights survive him so also do many of his liabilities ; and these inheritab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocedure of assessment, the entire appellate, revisional and rectificatory process, depending on the context in which the said term is used. What is the true scope and connotation of 'assessment under Chapter IV', was considered by their Lordships of the Hon'ble Supreme Court in C.A. Abraham's case. This is what their Lordships observed : " ...the expression 'assessment' used therein [i.e., Chapter IV] does not merely mean computation of income. The expression 'assessment' as has often been said, is used in the Income-tax Act with different connotations... A review of the provisions of Chapter IV of the Act sufficiently discloses that the word 'assessment' has been used in its widest connotation in that Chapter. The title of the Chapter is 'Deductions and Assessment'. The section which deals with assessment merely as computation of income is section 23 ; but several sections deal not with computation of income, but determination of liability, machinery for imposing liability and the procedure in that behalf. Section 18A deals with advance payment of tax and imposition of penalties for failure to carry out the provisions therein. Section 23A deals with power to assess individual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pter. Section 40 deals with assessment of 'guardians, trustees and agents', section 41 with 'Court of Wards etc.', sections 42 and 43 with the agent of a non-resident and section 44 with 'liability in case of firm or association discontinued or dissolved'. Section 40 and 41 spell out the liability by using, inter alia, the following phraseology : 'The tax shall be levied upon and recoverable from...' Section 44 also used similar language in C.A. Abraham's case " ...a partner of such firm,... shall in respect of the income, profits and gains of the firm... be jointly and severally liable to assessment under Chapter IV and for the amount of tax payable.... " (Emphasis supplied) In none of the above sections the word 'penalty' has been separately used and yet the charging of penalty is justified for the reasons explained by their Lordships in C. A. Abraham's case. Charging of penalty is part of 'assessment' and is covered by the term 'tax' for penalty for the purpose of effectuating these sections is additional tax. 13. The above view of the scheme of the Act was again reiterated by their Lordships of the Hon'ble Supreme Court in Bhikaji Dababhai's case. Their Lordships were int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the law, and taking into account the scheme of the 1922 Act, it has to be held that the procedure of assessment of tax in the case of a deceased person would include the imposition of penalty also, for penalty, as their Lordships have explained, is additional tax for the purpose of 'assessment' under Chapter IV of the Act. 16. The scheme of section 24B(1) was considered by their Lordships of the Hon'ble Supreme Court in E. Alfred's case. This is what their Lordships said : " ...Sub-section (1) of section 24B makes, inter alia, the legal representative 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 the Act, if he had not died. By this sub-section, a legal representative as made liable to pay the tax which might have been assessed after his death. It covers all situations and contingencies, and makes the liability absolute, limited, however, to the extent to which the estate of the deceased is capable of meeting the charge. The sub-section does not provide for issue of notices, assessment, collection o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be imported into the appearing under Chapter V. Similar scheme had to be followed in respect of section 159 of the 1961 Act, once it was kept in Chapter XV rather than in Chapter XIV. Then, under the 1961 Act, provisions pertaining to penalty also do not appear under Chapter XIV. They appear in Chapter XXI. Once the scheme of the 1961 Act makes above departures from that of the 1922 Act, it would not at all be correct to interpret the scheme of the 1922 Act in the light of the 1961 Act. On account of the placement of section 159 in Chapter XV, it had to be provided that all the provisions of this Act shall apply, accordingly. Similar phraseology was used under the 1922 Act in respect of sections similarly placed in Chapter V of the said Act as seen above. The absence of such phraseology in section 24B would not give rise to the inference that may be permissible to draw under the 1961 Act. Section 24B under the 1922 Act was part of Chapter IV and its scope has to be interpreted as per the decision of their Lordships of the Hon'ble Supreme Court in C.A. Abraham's case as discussed above. 18. Under the Wealth-tax Act also, section 19 appears under Chapter V dealing with 'liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or defaults mentioned in section 28, proceedings for the imposition of a penalty cannot be instituted against him. But it will be found that neither section 23(1) nor section 23(3) nor section 23(4) all of which say that the Income-tax Officer shall assess the total income of the assessee or shall make the assessment, says anything at all with regard to the imposition of a penalty. Section 24B(2) also is concerned only with providing for the making of an assessment in cases where the assessee concerned is no longer available for being proceeded against, being dead. It is no more the concern of section 24B(2) to provide for the imposition of a penalty than it is the concern of section 23(1) or 23(3) or 23(4). Whether or not proceedings for imposition of a penalty can be instituted in a given case must be ascertained from the terms of section 28 itself. They are not to be sought in the sections providing for the making of assessments and, therefore, not to be sought either in section 23(1) or in section 23(3) or in section 23(4) or section 24B(2). The argument, that since section 24B(2) says only that the Income-tax Officer may proceed to assess the total income of the deceased asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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