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Raja Pid Naik Vs. Agricultural Income-tax Officer, Yadgiri and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKarnataka High Court
Decided On
Case NumberWrit Petition No. 778 of 1963
Judge
Reported in[1968]69ITR401(KAR); [1968]69ITR401(Karn); (1968)1MysLJ1
ActsIncome Tax Act, 1922 - Sections 19(1), 22(2) , 22(3), 23, 27, 46(2); Hyderabad Agricultural Income Tax Act, 1950 - Sections 2 and 34(3)
AppellantRaja Pid Naik
RespondentAgricultural Income-tax Officer, Yadgiri and anr.
Appellant AdvocateK. Srinivasan, Adv.
Respondent AdvocateR.S. Mahendra, Adv.-General
Excerpt:
- industrial disputes act, 1947. [c.a. no. 14/1947]. section 33-c (2): [subhash b. adi, j] application under removal of workman from service- award for reinstatement in service with 85% of back wages and consequential benefits challenge to award modification of back wages from 85% to 50% - claim of the workman for shoe allowance, uniform allowance, stitching allowance, washing allowance etc., - held, the uniform is given to the employee to use the same while he is on duty. uniform is not given for regular or casual wear of the employee. if the employee is not admittedly on duty or was not worked during the said period, he cannot claim the uniform allowance just because that he has been directed to be reinstated with consequential benefits with continuity of service. continuity of.....k.s. hegde, j.1. in this petition under article 226 of the constitution, the petitioner prays for a writ of prohibition or a direction in the nature of prohibition, restraining the respondents from pursuing the collection proceedings in the petitioner's case for the assessment for faslis 1358 and 1359 in respect of the tax due from his father, late raja krishtappa naik. 2. the material facts are not in dispute. the same may be stated thus : the petitioner's father was assessed to agricultural income-tax under the hyderabad agricultural income-tax act, 1950 (to be hereinafter referred to as the 'act') for faslis 1358 and 1359. for fasli 1358, the tax assessed was rs. 1,275-7-0 and for fasli 1359, the tax assessed was rs. 1363-3-0. the assesses (raja krishtappa naik) unsuccessfully appealed.....
Judgment:

K.S. Hegde, J.

1. In this petition under article 226 of the Constitution, the petitioner prays for a writ of prohibition or a direction in the nature of prohibition, restraining the respondents from pursuing the collection proceedings in the petitioner's case for the assessment for Faslis 1358 and 1359 in respect of the tax due from his father, late Raja Krishtappa Naik.

2. The material facts are not in dispute. The same may be stated thus : The petitioner's father was assessed to agricultural income-tax under the Hyderabad Agricultural Income-tax Act, 1950 (to be hereinafter referred to as the 'Act') for Faslis 1358 and 1359. For Fasli 1358, the tax assessed was Rs. 1,275-7-0 and for Fasli 1359, the tax assessed was Rs. 1363-3-0. The assesses (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 assesses, 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 assesses 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 assesses, and the Taluqdar, on receipt of such certificate, shall proved to recover from such assesses the amount specified therein as a public demand payable to the Taluqdar'.

3. The provision is in pari materia with the provisions contained in section 46(2) of the Indian Income-tax Act, 1922 (to be hereinafter referred to as the Income-tax Act). The contention is that before action can be taken under section 34(3), it must not only be shown that the petitioner is an 'assesses' but it must also be shown that he is an 'assesses in default'.

4. There is no dispute that the petitioner is an 'assesses'. 'assesses' is defined in section 2(e) of the 'Act' thus :

''assesses' means a person by whom agricultural income-tax is payable.'

5. This very definition was found in the Income-tax Act prior to its amendment in 1953. Section 22(1) of the 'Act' says that 'the 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'. The liability of the petitioner to pay agricultural income-tax assessed on his father to the extent mentioned in section 22(1) is not disputed. Hence, he is an 'assesses'. See Additional Income-tax Officer, Circle I, Salem v. Alfred and Shah Mahmood v. Asst. Commissioner, Ramanagaram.

6. The next question is whether the petitioner can be considered to be an 'assesses in default'. It was urged by Sri Srinivasan, the learned counsel for the assesses, that before action can be taken under section 34(3), the person proceeded against should not only be an 'assesses' but he should also be an 'assesses in default'. According to him, no 'assesses' can be considered as an 'assesses in default' unless a notice under section 23 had been given to him. It was urged that in the instant case no such notice had been given to the petitioner, and, therefore, he cannot be considered as an 'assesses in default'; which means that no action can be taken against him under section 34(3).

7. Let us now see how far these submissions are correct Section 22 reads :

'22.(1) 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 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 on 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 assesses.

(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 Income-tax Officer may make an assessment of the total agricultural income of such person and determine the tax payable by him on the basis of such assessment, and for this purpose may require from the executor, administrator or other legal representatives of the deceased person any accounts, documents or other evidence which he might under the provisions of sub-sections (2) and (3) of section 20 have required from the deceased person'.

8. This section is similar to section 24B of the Income-tax Act. Section 23 of the 'Act' provides :

9. '23. When any tax or penalty is due in consequence of any order passed under or in pursuance of this Act, the Agricultural Income-tax Officer shall serve on the assesses a notice of demand in the prescribed form specifying the sum so payable'.

10. Section 24 provides for appeal against assessment under the 'Act'. The next relevant section is section 33, which says :

'(1) Any amount specified as payable in a notice of demand under section 23 shall be paid at the place specified in the notice, and within thirty days from the date of the service of the notice, and any assesses failing so to pay shall be deemed to be in default :

Provided that where an assesses has presented an appeal under section 24, the Agricultural Income-tax Officer, may, in his discretion, treat the assesses as not being in default so long as such appeal is undisposed of.

(2) If an assesses makes an application within the time mentioned in the notice of demand under section 23 or an order under section 24 or 25 for being allowed to pay the tax due by instalments, the Agricultural Income-tax Officer may, in his discretion, by order in writing allow the assesses to pay the tax due in instalments not exceeding four in number at such intervals as the said officer may fix in his discretion :

Provided that if, as a result of an application made by the assesses, the Agricultural Income-tax Officer allows the assesses to pay tax due in instalments, the assesses shall be deemed to have waived all his rights of appeal under this Act :

Provided further that if, on being allowed to pay the tax due by instalments, the assesses defaults in the payment of any one instalment, he shall be deemed to be a defaulter in respect of the total remaining amount of tax due'.

11. On an analysis of section 22, it is seen that under section 22(1) the legal representative is merely made liable to pay the tax assessed on the deceased assesses. That provision fixed as well as quantifies the liability of the legal representative. Under that provision he (the legal representative) is not considered as a part 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 'assesses' 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 assesses'.

12. Under sub-section (3) of section 22, the proceedings have to be continued against the legal representative according to law from the state in which they were on the date of the death of the deceased assesses. When we read the three sub-sections together, what emerges is that, except in cases where assessment proceedings have not commenced either by the issue of a general notice or a special notice as contemplated by law, the legal representative merely steps into the shoes of the deceased assesses. The proceedings have to be continued against him from the stage in which they were on the date of the death of the deceased assesses. The view expressed above accords with the ratio of the decision of this court in I.T.R.C. No. 4 of 1959 (Abdul Rahaman v. Commissioner of Income-tax).

13. This takes us to section 34(3) of the 'Act'. Prima facie, the language of that provision does not accord with the principles enunciated in section 22. It not only speaks of an 'assesses in default' but further says 'specifying the amount of arrears due from the assesses' and 'shall proceed to recover from such assesses'. Section 22 contemplates two different kinds of 'assessess'. i.e., the person whose income is assessed to tax and the person who is merely liable to pay. Who then is the 'assesses' referred to in section 34(3), the person whose income is assessed to tax or the person who is merely liable to pay or both If it is the former, the words 'shall proceed to recover from such assesses' become incongruous. The recovery in question cannot be made from the deceased assesses. Hence, we have to hold that the 'assesses' mentioned in section 34(3) denotes a person liable to pay either because his income was assessed to tax or because he is liable to pay the tax assessed. If that is so, the said person cannot be considered as an 'assesses in default' unless a demand notice under section 23 had been served on him. Though the distinction maintained in section 22 is logical and reasonable, we are compelled by the language of section 34(3) to conclude that a person liable to pay under section 22(1) of the 'Act' the tax assessed on a deceased person can be considered as an 'assesses in default' only after a notice under section 23 is served on him. It is true that in cases like the present one the fresh notice of demand to be given to the legal representative of the deceased assesses reduces itself to a mere formality.

14. Now we shall consider the decided cases bearing on the point under consideration. No decision directly covering the point in issue was read to us.

15. 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 'assesses', from whom arrears of income-tax were due, the Collector proceeded to attach and sell his properties. Thereupon, the petitioner applied to this court for the issue of writ quashing the recover proceedings on the ground that the proceedings could not have been validly initiated against him as no notice of demand had been served on him. The department contended that, as the auditor of the firm had informed by a letter that the firm had no idea of continuing the business and contemplated dissolution, section 44 applied and it was on to the department to proceed against the partners to recover the tax levied on the firm.

16. Repelling the contention of the department, this court held that proceedings for the recovery of tax could be initiated under section 46(2) only against an 'assesses in default' and that, although by virtue of section 44, the petitioner was liable to pay tax assessed on the firm before discontinuance, as no notice of demand under section 29 was served on him, he could not be said to have failed to pay the amount demanded in the notice and hence was not an 'assesses in default'. Consequently, it was held that the Collector had no jurisdiction to take recovery proceedings against the petitioner under section 46. In the case cited above, the petitioner therein was not assessed to tax. He was merely proceeded against on the ground that under section 44 of the Income-tax Act, he was liable to pay the assessment levied on 'Unni & Co.'. In the present case also, as seen earlier, the petitioner was not assessed to any tax. He is proceeded against on the ground that he is liable to pay the tax assessed on his deceased father. Hence, the ratio of the decision in Govindaswamy's case supports the petitioner's contention.

17. In N. Subba Rao v. Third Income-tax Officer, City Circle II, Bangalore, another Bench of this court, of which I was a member, affirmed the decision in Govindaswamy's case. Therein, it was held that, though when a firm against which an order of assessment has been made has been discontinued, proceedings against a former partner of the firm for recovery of the tax assessed on the firm cannot be taken on him without issuing a notice of demand under section 29 of the Income-tax Act, there is no need to make an order of fresh assessment on the quondam partners. Dealing with that aspect, this is what I observed in that case :

'Under section 44, the partners are made liable for the payment of the tax due from the firm which has discontinued its business. In such a case, there need not be any separate assessment as against the partners. It is 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 'assesses' within the meaning of the definition of that word found in section 2(2).'

18. 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 penalty. The High Court of Madras quashed the order of penalty holding that Alfred was not an 'assesses' as defined in the Income-tax Act. On appeal, the Supreme Court held reversing the decision of the High Court of Madras that the penalties could be imposed on the respondent as an 'assesses' and that the orders levying the penalties were valid as Alfred himself was an assesses; he was, therefore, an 'assesses in default' and liable to the imposition of penalty for that default. The court went further and observed that the generality of the definition of 'assesses' in section 2(2) of the Income-tax Act is sufficient to include even a legal representative who is to pay the tax, though out of the assets of the deceased person. It was further laid down therein that by section 24B(1), a legal representative is made liable to pay the tax which might have been assessed but not paid by the deceased 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. Their Lordships also observed that as the legal representative is an assesses by fiction, he does not fall within the words 'other person' in section 29 of the Income-tax Act. It is true that in that case the Supreme Court was considering the scope of section 24B(2) of the Income-tax Act. That is why their Lordships observed in the course of the judgment :

'We are not concerned in this case with the position of the legal representative under the third sub-section of section 24B and are not required to consider what his position would be, if he made a default in the payment of the tax. The fiction is enacted at least for the purpose of sub-section (2), and it is to that sub-section that we are confined in this case. Nor can the fiction in that sub-section be limited by provisions of law for a totally different situation'.

19. But from the various observations found in the above decision, it is clear that the Supreme Court was of the opinion that the legal representative is an 'assesses' as defined in the Income-tax Act and that before he can be held to be an 'assesses in default' a notice under section 29 of the Income-tax Act has to be served on him.

20. In B. Shah Mahmood v. Assistant Commissioner, Ramnagaram, this court had to consider the scope of sections 2(2), 24B and 46(2) of the Income-tax Act. Therein an assesses, 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 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 assesses, 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 petition therein was an 'assesses' 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 to amount specified in the certificate from the petitioner before notice of demand was duly served on him. The ratio of this decision considerably supports the petitioner's case.

21. In view of the language of section 34(3) of the 'Act', I am constrained to hold that the petitioner though an 'assesses', yet cannot be held to be an 'assesses in default'; hence, no action can be taken against him under that provision without complying with the requirements of section 23.

22. In the result, the respondents are prohibited from proceeding against the petitioner or his properties under section 34(3) of the 'Act' without complying with the requirements of section 23 of the 'Act'.

T.K. Tukol, J.

23. I have had the advantage of reading the judgment of my learned brother but I have not been able to agree with the view taken by him.

24. The facts relevant to the points at issue are stated in the judgment of my learned brother. The sole question of law that arises for decision is : Whether a proceeding validly initiated against 'an assesses in default' for recovery of agricultural income tax can be continued and enforced, on his death during the pendency of such proceeding, against his legal representative to the extent of the estate of the deceased in his hands under the provisions of the Hyderabad Agricultural Income-tax Act, 1950

25. The substance of the contentions advanced by Mr. K. Srinivasan on behalf of the petitioner is that, as the petitioner had not been served with any notice of demand by the assessing officer under section 34(3) of the Hyderabad Agricultural Income-tax Act, 1950 (hereinafter called the Act), he was not an 'assesses in default' and that therefore the continuation of the proceedings pending before the Tahsildar for recovery of the tax from the estate of the deceased would be without jurisdiction.

26. In order to assess the merits of these contentions it is necessary to refer to some of the relevant provisions of the Act. The scheme envisaged by section 22 of the Act has a very significant bearing on the determination of the point at issue. Sub-section (1) of that section provides generally for the liability to tax of the executor, administrator or legal representative of a person who dies either before or after he has been assessed to agricultural income-tax. It lays down two things : (1) the executor, administration or legal representative of a person who is assessed to agricultural income tax or would have been assessed to such tax shall be liable to pay 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 assesses had not died. This sub-section defines the extent as also the nature of the liability and read with the definition of 'assesses' as contained in the Act, makes the legal representative, executor or administrator an 'assesses' 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 'assesses' for commencing and/or completing the assessment proceeding. Sub-section (2) of the section contemplating 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 assesses. Sub-Section (3) has reference top a situation where a person dies without having furnished a return as required by law or having furnished a return which the Income tax Officer has reason to believe to be incorrect or incomplete, and empowers the Agricultural Income-tax Officer to require from the legal representative of the deceased person any accounts, documents or other evidence which he might have required from the deceased person under section 20 of the Act and then assess him as if he were an assesses. In substance, the section lays down that the assessment proceedings against a person liable to pay tax under the Act shall be commenced or continued after his death against his executor, administrator or legal representative from the stage at which such proceeding would have been commenced or continued by issue of requisite notices under the Act, if the person had not died. The term 'legal representative' means a person who in law represents the estate of the deceased person and includes any person who intermeddles with the estate of the deceased as also the person on whom the estate of the deceased devolves. The principle laid down by the section is that the legal representative steps into the shoes of the deceased assesses and the proceeding for assessment under the Act can be continued against him from the stage which it has reached against the deceased.

27. If the legal representative is an 'assesses' under the Act, then the next question is, does the law contemplate the service of a notice of demand on him for continuing the recovery proceedings started against an 'assesses in default' on the latter's death The relevant sections in this connection are sections 23 and 34 of the Act. According to section 23, where any tax is due in consequence of any order passed under the Act, the Agricultural Income-tax Officer must serve on the assesses a notice of demand in the prescribed form. Failure to pay within the time and at the place specified in the notice makes him an 'assesses in default'. Such notice had been served in this instant case of Raja Krishtappa Naik and hence he was an 'assesses in default'. Considering the fiction and the implications of the section 22 of the Act, service of such a notice on the petitioner as legal representative would have been necessary had his father died after the order of assessment but before the service of notice of demand. Here the petitioner's liability is that of a legal representative of an 'assesses 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.'

28. 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 under a decree. The provisions contained in the Code of Civil Procedure empower a civil court to entertain a petition for execution of a decree filed against the legal representative of a deceased judgment-debtor or continue an execution proceeding against a legal representative who might be brought on record on the death of the judgment-debtor during the pendency of such proceeding. A certificate issued under section 34(3) of the Act for recovery of the amount specified therein is, in law, as good as a decree in favour of the Taluqdar for recovery of the amount as a public demand and the proceedings taken by the Taluqdar under the certificate are in the nature of execution proceedings.

29. Section 144 of the Hyderabad Land Revenue Act 1317 F. enumerates the sums that are recoverable under the provisions contained in Chapter IX of the Act which provides for 'realization of land revenue and other Government demands'. The relevant portion of section 144 may be read here :

'144. All the Government sums under the following heads may be recovered under the provisions of this Chapter :

(1) Land revenue....,

(5) Taxes.....

(15) Taccavi loans

(16) All sums in receipt of which provision has been made in this Act or in any other Act that they be recovered as arrears of land revenue'.

31. That Chapter contains provisions for recovery and of the measures provided for recovery under section 116 is 'Distrait and sale of defaulter's immovable property'. There is no provision either in the Act or the Land Revenue act which requires the certificate issued under section 34(3) of the Act to be sent back to the assessing officer on the death of the assesses in default named therein for the issue of a fresh certificate after complying with the provisions of section 23 of the Act as against the legal representative or administrator. Section 22(1) of the Act has made the liability of the legal representative absolute to the extent of the deceased's estate in his hands and his liability for the tax can be enforced against him in the same manner as against the assesses in default, if he had not died. On a consideration of the relevant provisions of the Hyderabad Land Revenue Act and the provisions contained in section 22(1) and section 34 of the Hyderabad Agricultural Income-tax Act, I have no hesitation in holding that the Tahsildar has jurisdiction to continue the recovery proceedings against the estate of deceased Raja Krishtappa Naik in the hands of the petitioner, his legal representative.

32. 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.'

33. 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, 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 is made liable to pay the tax which might have been assessed but not paid by the deceased person or which might be 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 or anything connected with the imposition, levy and collection of the tax. Sub-sections (2) and (3) next provide for different contingencies.'

34. The case before their Lordships was however governed by the second sub-section, because a manager who was liable to pay the tax, died before the end of the year of account and so the service of notice had been made upon one of his sons - the respondent. The question before their Lordships was about the liability of the respondent to pay the penalty and the High Court of Madras had held that the respondent was not liable to pay the penalty. In reversing the judgment, their Lordships observed : 'Under section 45, if a notice of demands is issued under section 29 on an assesses and has not been complied with, the assesses is deemed to be in default and under section 46(1), if the assesses is in default, a penalty can be imposed. All these stages the respondent went through in this case. He was himself an assesses qua the assets and liability to tax of Ebenezer; he was, therefore an assesses in default and liable to the imposition of penalty for this default. The question is whether section 29, which makes a distinction between an assesses and 'other person', makes any difference.

35. ... The High Court reasoned, therefore, that the words 'an assesses' in sections 45 and 46 in their application are limited to an assesses, who is assessed on his own behalf and not 'other person', who is not an assesses. This distinction, it observed, must be borne in mind in interpreting the word 'assesses' used in sections 45 and 46, and so construing limited the word 'assesses' in those two sections to an assesses proper. The words 'other person' cannot apply to a legal representative, if he is an 'assesses' by fiction, and the fiction has to be worked out to its logical conclusion.'

36. 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 its logical conclusion. If the petitioner's contentions were to be upheld, it would mean that every proceeding for recovery of tax validity initiated before the Taluqdar (Deputy Commissioner) or his subordinate has to be closed with the death of the assesses 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 in effect the provisions of the proviso in section 34 of the Act which clothe the Taluqdar enforcing the certificate of recovery with the powers of a civil court. There is no reason why the principles embodied in Order XXI of the Code in so far as they pertain to the powers of an executing court should not be invoked in such cases by the Taluqdar or Tahsildar. It would be pertinent to refer to the decision of our High Court in B. Abdul Rahaman v. Commissioner of Income-tax (Income-tax Referred Case No. 4 of 1959, decided on 13-6-1961) where their Lordships upheld, on the analogy of the provisions contained in Order XXII of the code, the validity of an assessment order made by the Income-tax Officer after the death of an 'assesses' in a proceeding in which he had been fully heard during his lifetime. In taking that view, their Lordships extended the analogy of a judgment delivered after death of a party in a suit which had been adjourned for judgment prior to his death, to the making of an assessment order in an assessment proceeding. As already indicated, the certificate of recovery is in the nature of a decree and the proceedings initiated before the Taluqdar or the Deputy Commissioner on the strength of the certificate are in the nature of a proceeding for execution of a decree and as under the Act the Deputy Commissioner possesses all the power of a civil court executing a decree, he would be well within his jurisdiction in continuing the proceedings by bringing the legal representative of the deceased defaulter on record and enforcing the recovery against the estate of the deceased in the hands of the legal representative.

37. It is admitted that there is no direct authority on the point. The decisions cited by Mr. K. Srinivasan for the petitioner have no bearing on the point at issue. In Shah Mahmood v. Assistant Commissioner, Ramanagaram, a Division Bench of this High Court had to deal with a case falling under sub-section (2) of section 24B and section 46(2) of Income-tax Act. In that case one Bademiya, who was the proprietor of Nizamia Oil Mills, died after the enquiry in the assessment proceedings had been completed but before the order of assessment was actually passed. Thereafter, a demand notice under section 29 was served on one only of his sons who appealed from the assessment order. A certificate under section 46(2) of the Act was issued 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 assesses 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.

38. 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 order of assessment had been made against in unregistered firm and recovery proceedings were started against a partner individually in respect of a certificate for recovery of tax issued against the firm, after the firm had discontinued its business. Their Lordships held that an unregistered firm under the Income-tax Act had a separate status and existence, distinct and different from its partners. They accordingly held that if a personal liability were to be enforced against a partner it was necessary that he should be served with a notice of demand. No analogy can be drawn between an unregistered firm and the liability of its partner on the one hand, and a deceased assesses in default and his legal representative on the other. Every partner of a firm is an agent of the firm and each of the partners is jointly and severally liable for the debts due from the firm. It is however open to a partner to show that his liability is limited to the extent of his share in the assets of the firm. The principle laid down by the aforesaid decision cannot be extended to the facts of the present case which are altogether different. The decision in N. Subba Rao v. Third Income-tax Officer, City Circle II, Bangalore, to which my learned brother was party, also deals with the case of a firm against which order had been passed and initiation of enforcement proceedings after its discontinuance, against a former partner of the firm. Confirming the view in T. Govindaswamy's case their Lordships held that the recovery proceedings against the partner personally cannot be taken without issue of a notice of a notice of demand section 29 of the Income-tax Act served on him.

39. On a careful consideration of the provisions of the Act and the cases cited at the Bar, I am of the view that the Tahsildar is within his jurisdiction in continuing the proceedings for recovery against the estate of the deceased assesses in the hands of the petitioner and no order of prohibition as prayed for can be issued against that authority.

40. Order of Reference to Full Bench

41. BY COURT. - We have differed on the question whether the petitioner can be considered as an 'assesses in default' within the meaning of that expression found in section 34(3) of the Hyderabad Agriculture Income-tax Act, 1950.

42. Under the Mysore High Court Act, 1961, there is no provision under which this matter could be placed before a single judge 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 'assesses 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) ?'

43. The papers will be placed before the learned Chief Justice for constituting a Full Bench for deciding the question of law referred.

44. The case was heard by a Full Bench composed of A.R. SOMNATH IYER, B. M. KALAGATE and M. SADANANDASWAMY JJ.

45. Full Bench 15-09-1967

Somnath Iyer, J.

46. In Shorapur in the district of Gulbarga, there was a certain Raja Krishtappa Naik. In assessment proceedings under the Hyderabad Agricultural Income-tax Act, 1950 (Act No. XIII of 1950), which will be referred to as the Act, a sum of Rs. 1,275-7-0 was the tax determined to be payable by him in respect of the assessment year 1358 Fasli, and a sum of Rs. 1,367-3-0 for the assessment 1359 Fasli.

47. But Raja Krishtappa Naik died before any part of this any part of this tax was recovered from him. On July 5, 1955, the Agricultural Income-tax Officers forwarded to Taluqdar a certificate under section 34(3) of the Act specifying the amount arrears due from Raja Krishtappa Naik. On July 7, 1957, the concerned Tahsildar sent a notice to Krishtappa Naik's son, Raja Pid Naik, demanding the payment of the arrears.

48. This writ petition was in that situation presented by Raja Pid Naik for a writ of prohibition restraining the Agricultural Income-tax Officer and the Tahsildar from continuing the recovery proceedings.

49. When this petition was heard by a bench of two judges, it was contended that arrears of tax could be recovered under section 34(3) of the Act only from an assesses in default, and that the petitioner was not one. It was argued that the assesses in default was Raja Krishtappa Naik and not the petitioner.

50. On the question whether the petitioner was an assesses in default, there was a difference of opinion between the two learned judges who composed the bench, and that bench referred to a Full Bench the question of law which reads :

'Whether, on the facts and circumstances of this case, the petitioner can be said to be an 'assesses in default' within the meaning of that expression found in the section 34(3) of the Hyderabad Agricultural Income-tax Act, 1950 (Act 13 of 1950) ?'

51. Now, it becomes necessary to refer to the relevant statutory provisions, and they are sections 2(e), 22(1), 23, 33 and 34(3) of the Act. When Raja Krishtappa Naik died before he paid the tax, his legal representatives became liable under section 22(1) of the Act to pay it out of the estate of Raja Krishtappa Naik. Under section 23 of the Act, when the tax becomes due in consequence of an order of an order passed under the Act, Agricultural Income-tax Officer is under a duty to serve on the assesses a notice of demand in the prescribed form, specifying the sum so payable. Section 33 provides that the assesses who fails to pay the tax so demanded within thirty days 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 assesses is in default, the Agricultural Income-tax Officers may forward to the Taluqdar a certificate under his signature specifying the amount of arrears due from the assesses, and the Taluqdar, on receipt of such certificate, shall proceed to recover from such assesses the amount specified therein as a public demand payable to the Taluqdar...'

52. It is plain that the Agricultural Income-tax Officer could forward a certificate under section 34(3) only when assesses is in default. It is equally clear from the words 'such assesses' occurring in it that the Taluqdar could recover the arrears only from that defaulting assesses, and that the Income-tax Officer's certificate is the source of his power to do so.

53. So it is that the question arises whether the petitioner is an assesses in default. The defaulting assesses to whom section 34(3) refers, is the assesses who shall be deemed under section 33 to be in default. And he who could be so deemed to be in default is the assesses who does not, after service of a notice of demand under section 23, pay the tax within the time allowed.

54. It is common ground that the only notice of demand which was served under section 23 of the Act was that served on Raja Krishtappa Naik. Mr. Advocate-General appearing for the respondents did not controvert the truth of the petitioner's allegation that no notice of demand was served on the petitioner at any stage.

55. Now, the liability of the petitioner to pay the arrears of tax payable by his father which is limited to the extent of the father's estate arises out of section 22(1) of the said Act which reads :

'22. Tax of deceased person payable by representative. - (1) 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 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...'.

56. This Statutory liability takes the petitioner into the definition of an assesses contained in section 2(e) of the Act and makes him one. That definition is :

'2. Definitions. - In this Act, unless there is anything repugnant in the subject or context...

(e) 'assesses' means a person by whom agricultural income-tax is payable...'

57. The language of section 22(1) of the Hyderabad Agricultural Income-tax Act is similar to that of section 24B of the Indian Income tax Act, 1922. while an assesses as defined by the Hyderabad Act means a person by whom agricultural income-tax is payable, an assesses under the Indian Income-tax Act, 1922, means a person by whom income-tax or any other sum of money is payable under that Act. In Additional Income-tax Officer, Circle I, Salem v. E. Alfred, the Supreme Court made the elucidation that the definition of an assesses in section 2(2) of the Indian Income-tax Act sufficient to include a legal representative who is liable to pay the tax out of the assets of the deceased under section 24(B)(1) of the Indian Income-tax Act.

58. Section 22(1) of the Hyderabad Act which imposed a similar liability on the petitioner, likewise made him an assesses. The tax due from his father became due from him, and that tax was what became due in consequence of an assessment order made under the Act, within the meaning 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 assesses, and would not become an assesses 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 assesses into an assesses deemed to be in default can happen under section 33.

59. 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 both Act and under the Hyderabad Act.

60. 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 clear from the notice sent by the Tahsildar to the petitioner that that certificate named the father as the assesses in default. That notice in which there is misdescription of the Agricultural Income-tax Officer reads :

'To Sri Raja Pid Naik, Legal heir of Raja Krishtappa Naik, R/O. Shorapur.

Sub : Recovery of Agri. Income-tax arrears.

Sir,

Notice is hereby given to you that Sales-tax Officer, Yadgiri, has informed that the following dues of agricultural income-tax are recoverable from Raja Krishtappa Naik.

Rs.1. 1358 F. 1,275- 7-2. 1359 F. 1,367- 3-0---------------Total 2,642-10-0--------------- You are therefore requested to kindly credit the dues within a week as a legal heir to the deceased.'

61. That certificate so prepared exhausted itself when the father died, and so, the power for recovery of the arrears, flowing from it also perished. In that situation, the recovery of the tax from the petitioner under section 34(3) in enforcement of the liability springing from section 22(1), was not possible until he also became an assesses in default by disobedience to the notice of demand to which section 33 refers.

62. Section 22(1) transmits the liability of the deceased assesses and not his default. So, the character of an assesses in default which had fastened itself on the father did not descend upon the son. There can be a default only when there is a duty to pay, and so, the father's default was not the son's when the tax had not yet become payable by the son.

63. We cannot import into proceedings for the recovery of agricultural income-tax in respect of which section 34(3) is, in a case like the one before us, a complete and exhaustive provision, the machinery of the Code of Civil Procedure for execution of decrees. A certificate forwarded under section 34(3) authorises recovery of arrears only from the assesses in default named in that certificate, and when that assesses dies, the efficacy of the certificate comes to an end and the recovery proceedings cannot continue.

63. The power of the Taluqdar under section 34(3) which is so limited by the certificate, does not extend to recovery from the legal representative of the deceased, until another certificate properly prepared names him as the assesses in default, and, for that purpose, the Income-tax Officer has to find the legal representative and make a demand.

64. The proviso to section 34(4) which confers on the Taluqdar the powers exercisable by a civil court in execution proceedings, is not a proviso to subsection (3) of that section. Even if it is, those powers could be exercised for the recovery which is authorised. And the recovery so authorised is the recovery from the named assesses in default and from no other. Subsections (2) and (3) of section 22 under which an assessment may be made or continued against a legal representative as if he was the assesses, are inapposite to recovery proceedings expressly regulated by section 34(3).

65. Our decision on the question of law referred to us, therefore, is that the petitioner was not an assesses 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).

66. BY THE COURT

67. A.R. Somnath Iyer and B. M. Kalagate JJ. (6-11-1967)

Somnath Iyer, J.

68. Since the Full Bench has expressed the opinion that the petitioner was not an assesses in default, we allow this petition and quash the impugned proceedings.

69. The petitioner will be entitled to his costs. Advocate's fee rupees one hundred.


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