Satish Chandra, C.J.
1. The question of law which requires our consideration in this reference is whether peualty proceedings under the W.T. Act for late filing of the returns commenced against the person who had filed the returns can validly be continued after his death against his legal representative.
2. This reference relates to the eassessment years 1961-62 to 1969-70. For the first eight years Rameshwar Prasad filed returns under the W.T. Act on 12th April, 1970, while for the assessment year 1969-70, return was filed on 12th March, 1970. The belated returns were entertained. The WTO, in due course, finalised and completed assessments for all these years on 23rd May, 1970.
3. Subsequently, the WTO initiated penalty proceedings under Section 18(1)(a) of the W.T. Act by issuing show-cause notice under that provision. Rameshwar Prasad filed a reply on 23rd June, 1970. He took the plea that the total wealth for the aforesaid year was below the taxable limit. He did not commit any deliberate default in delaying the filing of returns. While the proceedings were pending, Rameshwar Prasad died on 22nd February, 1973.
4. His son and legal representative, Inder Bhushan, appears to have been brought on record and the proceedings were continued. Inder Bhushan filed an objection submitting that the penalty proceedings which were initiated against his deceased father could not validly be continued against him. This submission was repelled. Ultimately, penalties were imposed for each of the aforesaid nine years for varying amounts.
5. Inder Bhushan went up in appeal, which failed. He then approached the Tribunal in further appeal. The Tribunal upheld the levy of penalty.
6. At the instance of the legal representative, the Tribunal has submitted a statement of the case and has sought our opinion on the question of law mentioned at the beginning of this judgment.
7. Under section 3 of the W.T. Act, wealth-tax is a tax which is charged in respect of the net wealth on the corresponding valuation date of every individual, HUF and company at the rates specified in the Schedule.
8. Section 14 requires every person who is assessable under the Act to furnish to the WTO a return in the prescribed form before the 30th day of June of the assessment year, setting forth the net wealth as on that valuation date.
9. Section 15 entitles a person to furnish a return or a revised return at any time before assessment is made.
10. Under section 16 of the W.T. Act, the WTO is to assess the net wealth of the assessee and determine the amount of wealth-tax payable by him. Sub-section (4) of Section 16 authorises the WTO to serve on the person filing the return a notice requiring him to produce or cause to be produced on a date specified in the notice such accounts, records or other documents as the WTO may require.
11. Clause (c) of Section 2 defines an assessee to mean a person by whom wealth-tax or any other sum of money is payable under the Act, and includes-
'(i) every person in respect of whom any proceeding under this Act has been taken for the determination of wealth-tax payable by him or by any other person or the amount of refund due to him or such other person;
(ii) every person who is deemed to be an assessee under this Act;
(iii) every person who is deemed to be an assessee in default under this Act.'
12. It is thus apparent that wealth-tax is a tax which is charged and is payable by the assessee, that is to say, a person who is liable to pay tax as determined, or who is deemed to be an assessee.
13. Section 17 deals with wealth escaping assessment. It authorises the WTO to initiate proceedings against a person whose net wealth has escaped assessment in order to assess him to wealth-tax.
14. Section 18 deals with penalty for failure to furnish returns or to comply with notices and concealment of assets, etc. Clause (a) of Sub-section (1) entitles, inter alia, the WTO to impose penalty for, inter alia, failure to furnish return within the time allowed by Section 14(1). Under section 18 proceedings can be taken against a person who has furnished the return beyond time. Such person can be directed to pay penalty. For belated filing of return the measure of penalty is 2 per cent. of the assessed tax for every month during which the default continued.
15. The question is what is to happen if after initiation of proceedings for imposition of penalty under Clause (a) of Section 18(1), the person who is being proceeded against, dies. Can proceedings be continued against the legal representative and he be made liable to pay penalty ?
16. Chapter V of the W.T. Act deals with liability to assessment in special cases. Section 19 relates to tax of a deceased person payable by the legal representative. Other special cases mentioned in this Chapter are:
(1) assessment in case of executors (Sec 19A);
(2) assessment after partition of a HUF (Section 20);
(3) assessment when assets are held by courts of wards, administrators-general, etc., (Section 21); and
(4) assessment in cases of diversion of property, or of income from property, held under trust for public, charitable or religions purposes (Section 21A) and assessment of persons residing outside India (Section 22).
17. It is evident that liability of a legal representative is dealt with by Section 19 of the Act alone.
Section 19 provides:
'19. (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 wealth-tax assessed as payable by such person, or any sum, which would have been payable by him under this Act if he had not died.
(2) Where a person dies without having furnished a return under the provisions of Section 14 or after having furnished a return which the Wealth-tax Officer has reason to believe to be incorrect or incomplete, the Wealth-tax Officer may make an assessment of the net wealth of such person and determine the wealth-tax payable by the person on the basis of such assessment, and for this purpose may, by the issue of the appropriate notice which would have had to be served upon the deceased person if he had survived, require from the executor, administrator or other legal representative of the deceased person any accounts, documents or other evidence which might under the provisions of Section 16 have been required from the deceased person.
(3) The provisions of Sections 14, 15 and 17 shall apply to an executor, administrator or other legal representative as they apply to any person referred to in those Sections.'
18. The scheme of Section 19 is that by Sub-section (1) liability to pay is created on the legal representative, etc. Sub-sections (2) and (3) deal with liability to assessment. Sub-section (2), however, is specifically confined to proceedings for assessment of net wealth and determination of the wealth-tax payable by the deceased person. It will not, of its own force, apply to proceedings for imposing penalty or interest or any other sum.
19. Sub-s. (3) makes provisions of ss, 14, 15 and 17 to apply to an executor, administrator or other legal representative, as they apply to any person referred to in those sections.
20. Under Sub-section (3) a legal representative is as much under a duty to file a return under Section 14, or to file a revised return, if necessary, under Section 15, or to be proceeded against for escapement of wealth-tax under Section 17 as the deceased person was. Sections 14, 15 and 17 contemplate and authorise initiation as well as continuance of proceedings for determining wealth-tax on the basis of returns, as well as in cases of escapement of wealth-tax, against, inter alia, a legal representative. Sub-section (3) does not, however, make Section 18 applicable to, inter alia, a legal representative.
21. When Chap. V of the W.T. Act specially deals with liability to assessment in special cases and by Section 19 provides for situations where a legal representative is either liable to proceedings or is liable to pay the wealth-tax or any sum, then liability to assessment or liability to pay has to be positively found within the statutory provisions of Chap. V. If in a given situation there is no statutory provision for initiation or continuance of proceedings against a legal representative, they cannot either be initiated or continued.
22. Learned counsel for the revenue invited our attention to the phrase 'or any sum which would have been payable by him under this Act if he had not died' occurring in Sub-section (1) of Section 19. Sub-section (1) of Section 19 makes a legal representative liable to pay wealth-tax or any sum provided it was payable if the person had been alive.
23. Section 30 of the W.T. Act deals with notice of demand. It provides:
'30. When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act, the Wealth-tax Officer shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable.'
24. Section 31 specifies as to when an assessee is deemed to be in default. He is an assessee in default if the amount specified in the notice of demand under Section 30 is not paid within the period mentioned in it.
25. These provisions make it clear that liability to pay tax, interest, fine or any other sum accrues or arises in consequence of any order passed under the Act. It is evident that liability to assessment, to tax, interest, penalty, fine, etc., is different from liability to pay. The phrase 'which would have been payable by him under this Act if he had not died' refers not to liability to assessment but liability to pay in consequence of an order passed under the Act. The existence of an order passed under the Act is a prerequisite to accrual of liability to pay. Liability to pay continues till payment is made. Sub-section (1) of Section 19 is confined to liability to pay, and it casts upon the legal representative liability to pay wealth-tax or any sum which would have been payable by the deceased if he had not died. Section 19(1) by itself does not create on the legal representative liability to pay which was non-existent till the date of death of the deceased. In other words, if an order creating liability to pay under the Act had not been passed till the date of death of the original assessee, Sub-section (1) does not authorise creation of the liability to pay on the legal representative..
26. These aspects, namely, creation of liability to assessment and then to pay, are dealt with by Sub-sections (2) and (3). Sub-section (2) authorises initiation as well as continuance of proceedings for determining wealth-tax against the legal representative. Sub-section (3) applies Sections 14, 15 and 17 to legal representatives. They are hence liable to furnish return or revised return, and so proceedings for determination of wealth-tax can be initiated or continued in respect of the executor, administrator or other legal representative. Similarly, proceedings under Section 17 can also be taken against the legal representative.
27. In this context, the absence of Section 18 from being mentioned in Sub-section (3) is significant. Penalty proceedings under Section 18 cannot be initiated against a legal representative, because a legal representative has not been made liable to assessment to penalty. A notice to show cause cannot be issued to a legal representative, firstly, because he has not been made liable to show any such cause, and, in the next place, he, namely, the legal representative, cannot be said to have committed any default in cases where the deceased assessee delayed filing of the return. Default was committed by the original assessee. Legal representative has not been made liable to be assessed for such a default of the original assessee.
28. Till an order is passed under this Act, there is only liability to assessment. When an order has been passed, liability to pay arises or accrues. If in a given situation a legal representative is not liable to be assessed under the Act, he cannot be assessed by passing an order, and, consequently, no liability to pay will arise against him. If, for example, penalty proceedings had been initiated by the issuance of a show-cause notice to the original assessee and during the pendency of such proceedings the original assessee dies, such proceedings will come to an end. They cannot be continued against the legal representative, because the legal representative is not liable to be assessed; and since no order determining liability can be passed after the death of the person who was liable to be assessed, it is obvious that no valid order can be passed after his death against the legal representatives.
29. We are hence clear that penalty proceedings could not validly be continued against the legal representative.
30. The view we have taken rinds support from the decision of the Andhra Pradesh High Court in Smt. Yawarunnisa Begum v. WTO : 100ITR645(AP) . In that case, the notice itself was issued after the death of the original assessee. It was held that it was bad and was quashed. The ratio of that case applied to the facts of the present case.
31. It was faintly argued by learned counsel for the revenue that wealth-tax or any other sum payable under the Wealth-tax Act is a charge on the estate and not on the person holding the estate; it is hence immaterial whether the person who holds the estate for the time being, dies.
32. We are unable to agree. Under Section 3, wealth-tax is a charge on an individual, HUF and company. It is assessable in respect of the net wealth. Penalty under Section 18 is a liability imposed on the assessee for defaults committed by him. It has nothing to do with the estate or the assets held by him.
33. In ITO v. Ram Prasad : 86ITR145(SC) , the Supreme Court held that the Excess Profits Tax Act, 1940, contemplates assessment of the tax on a person though on the basis of profits from a business, and it is not correct to say that, so long as the business continues, the change of the person who carries on the business is immaterial. It held that excess profits tax cannot be levied on a HUF after it has disrupted. Section 44 of the Indian I.T. Act, 1922, which was made applicable by Section 21 of the Excess Profits Tax Act to proceedings under the latter Act was confined to firms or association of persons. Since a HUF was a separate assessable entity, that provision was inapplicable to it. Consequently, proceedings could not be continued under the Excess Profits Tax Act after disruption of a HUF.
34. Section 159 of the I.T. Act, 1961, provides for continuance of proceedings, inter alia, for imposing penalty against the legal representatives. But this section has not been made applicable to proceedings under the W.T. Act.
35. We answer the questions referred to us, namely :--
(1) Whether, on the facts and in the circumstances of the present case, the Income-tax Appellate Tribunal is right in holding that the Wealth-tax Act enabled continuance of penalty proceedings which were pending at the time of death of late Rameshwar Prasad ?;
(2) Whether the Tribunal is right in holding that in spite of the clear omission of section 18 from section 19(3) of the Wealth-tax Act, penalty could be imposed on the legal representative for default of the deceased ;
(3) Whether, on the facts and in the circumstances of the present case, the Income-tax Appellate Tribunal is justified in sustaining the validity of penalty proceedings against the legal representative even when no specific notice in the name of legal representative was ever issued by the Wealth-tax Officer before imposition of penalty in spite of intimation of death of Sri Rameshwar Prasad having been conveyed to him ?
in favour of the assessee and against the department. The assessee will be entitled to costs which are assessed at Rs. 200.