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Raghunath Sarda Vs. Wealth-tax Officer. - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Nagpur
Decided On
Reported in(1986)17ITD765(Nag.)
AppellantRaghunath Sarda
RespondentWealth-tax Officer.
Excerpt:
.....to accrual of liability to pay. liability to pay continues till 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 dies. section 19(1) by itself does not create on the legal representative liability to pay that 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) of section 19 does not authorise creation of liability to pay on the legal representative.the absence of section 18 from being mentioned in section 19(3) is significant. penalty proceedings under section 18 cannot be initiated against a legal representative because a.....
Judgment:
Per Shri P. I. Mohan Singh, Judicial Member - These appeals of the assessee relate to the assessment years 1975-76 and 1976-77 and arise out of the order of the AAC, R-Range, Nagpur dated 21-8-1982. The aforesaid appeals involve a common issue and are, therefore, heard together and disposed of by a common consolidated order for the sake of convenience.

2. The aforesaid appeals are directed against the order of the IAC who confirmed the penalties of Rs. 24,700 and Rs. 1,184 levied by the WTO for the assessment years 1975-76 and 1976-77, respectively, under section 18(1) (a) of the Wealth-tax Act, 1957 (the Act).

The assessee filed the returns of wealth for the aforesaid assessment years on 9-12-1977 declaring net wealth of Rs. 2,76,920 and Rs. 2,76,680, respectively. The returns were due to be filed on 31-7-1975 and 31-3-1976. As the assessee failed to file the returns within the statutory period without any reasonable cause. penalty proceedings under section 18(1) (a) were initiated by the WTO. In response to a show-cause notice, none attended nor any reply was filed. The WTO.therefore, came to the conclusion that there was no reasonable cause which prevented the assessee from filing the returns in time and levied penalties of Rs. 24,780 and Rs. 1,184 for the assessment years in question. On appeal before the AAC, it was contended by the learned counsel for the assessee that the penalties have been levied on the legal heir of Shri Raghunath Sarda and that penalty on legal heir was not valid in law. He further contended before the AAC that there are valid reasons for the default as the deceased was detained under the MISA. Rejecting the contention of the learned counsel for the assessee, the AAC confirmed the penalties levied by the WTO, taking support from section 19(1) as according to him, the aforesaid section makes a legal heir of the deceased person liable for not only for wealth-tax purposes but also makes him liable for any sum which would have been payable by him under this Act if he had not dies. He further observed in his order that since the assessee did not care to furnish any explanation before the WTO he is debarred from furnishing any explanation now given before him cannot be accepted, as according to him, it amounts to fresh evidence. In a nutshell, the AAC has not considered the case of the assessee on merits. As against this order of the AAC, the assessee is in appeal before us.

4. The learned counsel for the assessee, at the outset, narrated the brief facts of this case which are very material for disposing of these appeals. The returns for both the assessment years were filed by the assessee on 9-12-1977 and as the assessments were completed by the WTO on 29-1-1980. The assessee died on 16-2-1981 and the penalty orders were passed on 23-7-1982 after the death of the assessee. Relying on the decision of the Allahabad High Court in the case of Rameshwar Prasad v. CWT [1980] 124 ITR 77, the learned counsel for the assessee contended before us that the penalties levied on the legal heir was not valid in law. He further contended that the deceased was detained under MISA from 30-6-1975 to 27-9-1976 and further he was externed from limits of the Nagpur Corporation for 6 months from 28-9-1976 till 28-3-1977 and, therefore, he could not file the returns in time. He further filed before us, a copy of the order of the AAC, B-Range, Nagpur dated 19-3-1980 wherein a similar plea was taken on the penalty levied by the ITO, under section 271(1) (a) of the Income-tax Act, 1961, and the AAC after considering the aforesaid facts condoned the delay in filing the returns up to 27-9-1976. He, therefore, contended that even on merits, the delay in filing the returns by the assessee should be condoned and the penalties levied by the WTO and confirmed by the AAC be cancelled.

5. The learned departmental representative, on the other hand, strongly supported the order of the AAC placing reliance on section 19(1).

6. We have carefully considered the facts and circumstances of the case and the arguments advanced by the learned counsel for the assessee and on record, it is clear that Shri Raghunath Sarda died on 6-2-1981 whereas the penalty orders against the legal heir of Shri Raghunath Sarda were passed on 27-3-1982. From the aforesaid facts, it is clear that on the date of death of the deceased, no penalty order has been passed by the WTO. In the case, relied upon by the learned counsel for the assessee in Rameshwar Prasads case (supra), their Lordships of the Allahabad High Court have laid down two important propositions of law while dealing with section 19(1). They are as follows : "Liability to assessment, no tax, interest, fine, penalty, etc., is different from liability to pay. The phrase which would have been payable under the act if he had not dies occurring in section 19 refers not 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 pre-requisite to accrual of liability to pay. Liability to pay continues till 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 dies. Section 19(1) by itself does not create on the legal representative liability to pay that 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) of section 19 does not authorise creation of liability to pay on the legal representative.

The absence of section 18 from being mentioned in section 19(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 be assessed 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, the legal representative cannot be said to have committed any default in the cases where the deceased assessee delayed filing of the return.

Default was committed by the original assessee. The legal representative has not been made liable to be assessed for such a default of the original assessee." (p. 78) If the aforesaid propositions of law are applied to the facts of this case; since the orders of penalty are passed by the WTO after the death of the deceased, no liability can be fastened on the legal representative as there was no order in existence passed under the Act, which is pre=requisite for accrual of liability to pay. Their Lordships have gone a little further and laid down the second proposition as mentioned above by holding that since there is no mention of section 18 of the Act in section 19(3), legal representative cannot be made liable to pay penalty as default has been committed by the original assessee.

It was further laid down that if, for example, penalty proceedings had been initiated by issuance of show-cause notice to the original assessee and during the pendency of the proceedings the original assessee dies, the proceedings will come to an end. They cannot be continued against the legal representative, because the legal representative is not liable to be assessed to penalty and since no order determining liability can be passed after the death of the person who was liable to be assessed, no order can be passed after his death against the legal representative. The proposition laid down in the aforesaid case by their Lordships of the Allahabad High Court squarely apply to the facts of this case. We have to accept the contention of the learned counsel for the assessee that the penalties levied on the legal heir were not valid in law. The penalties confirmed by the AAC are, therefore, cancelled.

7. Even on merits, if it is seen that Shri Raghunath Sarda was detained under MISA from 30-6-1975 to 27-9-1976 and he was further extended from the limits of Nagpur Corporation for six months from 28-9-1976 to 28-3-1977. The due dates for filing the returns of wealth were on 31-7-1975 and 31-7-1976, respectively, during which period he was detained under MISA. The assessee filed the returns of wealth for both the years under consideration 9-12-1977. Having been away from home for nearly two years, the assessee cannot be expected to file the returns immediately after coming to Nagpur, namely, on 28-3-1977 as it would naturally take some time for him to set right house hold affairs and to attend to the taxation matters. We are, therefore, of the opinion that the delay in filing the returns by the assessee is supported by reasonable cause. Even on merits, the penalties sustained by the AAC are hereby cancelled.


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