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Controller of Estate Duty Vs. R. Brahadeeswaran - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case No. 1170 of 1979
Judge
Reported in[1987]163ITR680(Mad)
ActsIncome Tax Act - Sections 271(1)
AppellantController of Estate Duty
RespondentR. Brahadeeswaran
Cases ReferredGhanshyamdas v. Regional Asstt.
Excerpt:
.....self-regulating in character and do not in any way circumscribe, or control, the power of the tribunal as an appellate body under the income-tax act. 9. this trilogy of the supreme court cases, all of them addressed to the precise coverage of the tribunal's jurisdiction in appeal, show clearly that an appellant before the tribunal can raise any new or additional point for the first time in the appeal before that body even though it had not been raised in any form at early stages, and in such a situation, the tribunal is duty bound to entertain that ground and render. 10. we pointed out that the three supreme court cases summed up above arose under the income-tax act, but the rationale of the decisions rendered by the court apply with full force to the powers of the tribunal under..........in this case is as follows : 'whether, on the facts and in the circumstances of the case, the appellate tribunal was right in law in holding that the additional ground raised by the accountable person before the tribunal regarding the validity of inclusion of the lineal descendant's share under section 34(1)(c) in the principal value of the share was permissible even though the admission of such additional ground raised an entirely new point which went beyond the scope of the appeal as originally filed by the accountable person ?' 4. as we earlier pointed out, the tribunal had upheld the contention of the accountable person that the lineal descendant's share cannot be clubbed along with the share of the deceased for ascertaining the dutiable estate. this point, however, was raised.....
Judgment:

Balasubrahmanyan, J.

1. There are two questions for our consideration in this estate duty reference. The second question is as follows :

'Whether the Appellate Tribunal was right in law in holding that the inclusion of the lineal descendant's share in the principal value of the estate was not proper and, therefore, it should be excluded therefrom ?'

2. The answer to this question has been supplied by the Tribunal themselves citing a decision of a Division Bench of this court in Devaki Ammal v. Asst. CED : [1973]91ITR24(Mad) . In that case, it was held that section 34(1)(c) of the Estate Duty Act, 1953 (hereinafter called 'the Act'), which enjoins the clubbing, along with the deceased's undivided share in Mitakshara coparcenary property, of the share or shares of the deceased's lineal descendants, is inconsistent with article 14 of the Constitution and, therefore, void. The Tribunal had to give effect to the decision of this court striking down section 34(1)(c) as unconstitutional in the manner aforesaid. Their decision not to sustain the inclusion of the lineal descendant's share in the principal value of the deceased's estate was, therefore, quite in keeping, as it ought to be, with the decision of this court in V. Devaki Ammal's case : [1973]91ITR24(Mad) . Our answer to the question, therefore, is in the affirmative and against the Department.

3. The other question of law which we are asked to decide in this case is as follows :

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the additional ground raised by the accountable person before the Tribunal regarding the validity of inclusion of the lineal descendant's share under section 34(1)(c) in the principal value of the share was permissible even though the admission of such additional ground raised an entirely new point which went beyond the scope of the appeal as originally filed by the accountable person ?'

4. As we earlier pointed out, the Tribunal had upheld the contention of the accountable person that the lineal descendant's share cannot be clubbed along with the share of the deceased for ascertaining the dutiable estate. This point, however, was raised by the accountable person for the first time before the Tribunal. The accountable person did not raise this matter either before the Assistant Controller at the time of assessment or before the Appellate Controller at the stage of appeal against that assessment. The Department's contention before us is that the accountable person, not having put forward this contention at earlier stages, was precluded from raising this point for the first time in the appeal before the Tribunal. Mr. Jayaraman, learned standing counsel for the Department or the Controller of Estate Duty, referred to the language of section 63(1) of the Act and pointed out that the provision speaks of an accountable person objecting to any order passed by the Appellate Controller. The objection to the order, he said, must be the basis of his appeal before the Tribunal. Learned counsel suggested that an accountable person can really raise an objection to the order of the Appellate Controller on a particular point, only if he had raised that point before the Assistant Controller and had failed to carry conviction. Learned counsel submitted that the accountable person cannot, under section 63, make a grievance of the Appellate Controller's order, or blame the Appellate Controller, for not having dealt with a point which was not raised before him at all. On the basis of this reasoning, learned counsel submitted that it was not open to an accountable person in this case to object to the order of the Appellate Controller in the further appeal before the Tribunal on a brand new point of law or fact.

5. We think that too much is read into the expression 'any person accountable objecting to any order passed by the Appellate Controller'. In our view, in order to be able to object to an order, it is not necessary that the objector should already have lodged his objection in that matter at any earlier stage. An objection is an objection even if it is put forward for the first time against a particular order. The real question, however, is whether the Tribunal has the jurisdiction to entertain and decide some point of law or of fact which had not been raised by the appellant, or dealt with by any of the authorities either in the course of assessment or in the course of an appeal from the assessment. For considering this question, we think, it is permissible to regard the Act, as belonging to a group, or joint family of direct tax enactments, the other fiscal measures being the Income-tax Act, 1961, the Wealth-tax Act, 1957, the Gift-tax Act, 1958, and so on. Under all these taxing enactments which form an integrated direct tax system, the Tribunal has the same role to play, namely, the role of the ultimate appellate authority on fact and the penultimate decision making authority on law. It may also be stated as a general observation covering all these enactments, that an order of assessment can be questioned in an appeal before the first appellate authority and subsequently before the Tribunal by way of a further appeal against the order of the appellate authority. In both the appeals, the subject of controversy would be the order of assessment. A common feature of these enactments levying direct taxes is than an appeal before the Tribunal may be preferred either by the taxpayer or by the taxing authority. There may be slight variations between one direct tax and another in the enumeration of the Tribunal's powers in appeal. But, by and large, we may take it that the Tribunal has got the power, after giving the parties to the appeal an opportunity of being heard, to pass such orders thereon as the Tribunal thinks fit. In the Act, section 63(5) employs the following words : 'The Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders therein as it thinks fit.' The preferred expression in this provision is 'therein' involving a slight variation from the usual expression 'thereon' used in the Income-tax Act, in the Wealth-tax Act, in the Gift-tax Act and other direct tax enactments. There have been many cases in the books which have gone into the scope of the Tribunal's appellate jurisdiction, particularly, as to what is meant by 'passing such orders thereon as it thinks fit.' The list of these decisions, which may be described as the cases thereon, is legion. Three decisions of the Supreme Court, however, stand out from among the rest. Not only because they are decisions of the Supreme Court in the land, but also because, with respect, they lay down the width of the Tribunal's jurisdiction clearly. They are of overwhelming importance for the decision of the question which we are asked to decide in this case, namely, of the competency of the Tribunal to decide a new point raised for the first time before the Supreme Court. (See CIT v. McMillan & Co. : [1958]33ITR182(SC) , Hukumchand Mills Ltd. v. CIT : [1967]63ITR232(SC) and CIT v. Mahalakshmi Textile Mills Ltd. : [1967]66ITR710(SC) . All these decisions arose under the Indian Income-tax Act, 1922.

6. The decision of the Supreme Court in McMillan & Co.'s case : [1958]33ITR182(SC) , was that the appellate authority's powers are co-equal to those of the assessing authority. The court laid down further, that even though a particular statutory provision mentions by name, only the assessing authority and not the appellate authorities, as the repository of a given power connected with the assessment, yet, as a matter of construction, that power must be held to inhere even in the appellate authorities, exercisable by the appellate authorities at the appellate stage, in the same way the assessing authority would do in the assessment in the first instance.

7. In Hukumnchand Mills Ltd.'s case : [1967]63ITR232(SC) , a new point was raised for the first time before the Tribunal not by the appellant in that case, who happened to be the taxpayer, but by the respondent department. The Supreme Court held that the Tribunal possessed the requisite power to entertain that new point. Referring to the rules framed by the Tribunal for regulating their own procedure, the Supreme Court held that those rules including the one relating to additional ground and the like are merely self-regulating in character and do not in any way circumscribe, or control, the power of the Tribunal as an appellate body under the Income-tax Act.

8. In Mahalakshmi Textile Mills Ltd.'s case : [1967]66ITR710(SC) , the Supreme Court held that there was nothing in the Income-tax Act, which restricted the Tribunal to the determination of questions raised before the departmental authorities, but, on the contrary, all questions, whether of law or of fact, which related to the assessment of the assessee may be raised before the Tribunal. The court proceeded to hold that in such cases, it would be open to the Tribunal and, indeed, they would be under a duty, to grant relief, on the principle that the right of the assessee to relief is not restricted to the plea raised by him before the departmental authorities.

9. This trilogy of the Supreme Court cases, all of them addressed to the precise coverage of the Tribunal's jurisdiction in appeal, show clearly that an appellant before the Tribunal can raise any new or additional point for the first time in the appeal before that body even though it had not been raised in any form at early stages, and in such a situation, the Tribunal is duty bound to entertain that ground and render. a determination either themselves or by remanding the matter if further investigation into the facts was warranted. This view of the Tribunal's jurisdiction had commended itself to the Supreme Court because, the appellate power under the taxing enactments is in no way different in substance from the assessment power exercisable by the assessing authority in the first instance.

10. We pointed out that the three Supreme Court cases summed up above arose under the Income-tax Act, but the rationale of the decisions rendered by the court apply with full force to the powers of the Tribunal under other direct tax enactments as well, including the Estate Duty Act. If anything, the comprehensive power of the Tribunal to entertain new grounds is a fortiori under the Act. This is because the Tribunal can be more closely equated to the assessing authority under this Act than, possibly, under any other direct tax enactment, for, under section 63(5), the Tribunal has been conferred with an additional power of enhancing the estate duty, from the figure at which it had been originally assessed by the assessing authority or sustained by the first appellate authority.

11. We are, therefore, satisfied that in this case, the Tribunal, while hearing the appeal grounds, was not incommoded in the least by the fact that the accountable person had not objected to the inclusion of the lineal descendant's share in the dutiable estate at any of the earlier stages of the proceedings. As the Supreme Court observed in Mahalakshmi Textile Mills Ltd.'s case : [1967]66ITR710(SC) , hearing an appellant on a new or additional point is not a mere matter of discretion with the Tribunal, but the Tribunal are duty bound to hear and determine that point. In the present case, the objection put forward by the accountable person was based on a decision of this court striking down section 34(1)(c). The clubbing of the lineal descendant's share in the dutiable estate was done by the assessing authority under this provision in the statute. When once this court, in exercise of its special powers under the Constitution, had struck down a part of the statute as violative of article 14, that decision has got to be given effect to by the Tribunal, the moment their attention was drawn to it, in the appeal. The Tribunal could not very well ignore the effect of this court's decision nullifying section 34(1)(c) merely on the feeble technicality that it had not occurred to the accountable person to invoke the decision of this court at any earlier stage of the proceedings. We are, therefore, satisfied that the Tribunal acted perfectly legitimately when they entertained the objection to the inclusion of the lineal descendant's share and rendered their decision in accordance with the ruling of this court in V. Devaki Ammal's case : [1973]91ITR24(Mad) . This conclusion of ours is based on our summation of the three decisions of the Supreme Court we have earlier discussed.

12. Learned counsel for the Department referred to a recent decision of the supreme court in Addl. CIT v. Gurjargravures (P.) Ltd. : [1978]111ITR1(SC) . We do not think this decision of the Supreme Court can be regarded as going against the grain of the three earlier Supreme Court decisions though none of them incidentally has been cited in this later case. The question before the court on this last case related to a claim for relief under section 34 of the Income-tax Act. This claim happened to be put forward by the taxpayer for the first time before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner did not entertain the claim on the score that it had not been raised at the assessment stage before the Income-tax Officer. On further appeal, the Tribunal took the view that the Appellate Assistant Commissioner ought to have entertained the claim for relief. They accordingly sent the case back to the Income-tax Officer for working out the relief. The Supreme Court held that the Tribunal was wrong in holding that the Appellate Assistant Commissioner should have entertained the claim for relief, which was put forward before him, in the appeal for the first time. A reference to the concluding portion of the Supreme Court's judgment in this case shows that the court were impressed by the fact that there was no material even before the Income-tax Officer, on the basis of which the assessee could apply for grant of relief under section 34 even in the appeal. The implication of this last observation by the Supreme Court seems to us to be that where there are already materials in the record of the assessment brought before the Tribunal on a given matter of relief asked for in the appeal, but the assessee had omitted to make a claim before the Income-tax Officer, he is not precluded from putting forward the claim before an appellate authority, because the basic materials are already on record. So understood, this case can be regarded as a decision turning on its own peculiar facts. To regard this decision otherwise and accept it as a new precedent, generally on the scope of the appellate jurisdiction in taxing enactments, would to be read into this decision, by implication, an intention on the part of the Supreme Court to overrule the three decisions which have stood without a word of contradiction in the later decisions of that court. As we pointed out that McMillan & Co.'s case : [1958]33ITR182(SC) , Hukumchand Mills Ltd.'s case : [1967]63ITR232(SC) and Mahalakshmi Textile Mills Ltd.'s case : [1967]66ITR710(SC) have not been noticed in the latest case cited for the Department, we do not think that the Supreme Court could have intended to throw overboard, by implication, all these well-considered judgments.

13. Although we have considered the scope of the Tribunal's appellate jurisdiction purely on the basis of the decisions of the Supreme Court, we must mention that there is yet another way of reaching the same conclusion, especially that expressed by the Supreme Court in Mahalakshmi Textile Mills Ltd.'s case : [1967]66ITR710(SC) . In that case, as a matter of construction of the Indian Income-tax Act, the court held that there was nothing in the taxing statute which restricts the Tribunal to the determination of the questions raised before the assessing authority and all questions, whether of law or of facts, which relate to the assessment, can be raised before the Tribunal. This conclusion can be arrived at by considering the essentials of fiscal jurisprudence. The central purpose of any taxing enacatment is to relieve the taxpayer of some of the contents of his purse. All the same, it is part of the fundamental jurisprudence of liberal democracies, such as ours, that the tax which can be levied on, and collected from, the taxpayer must be precisely that which is sanctioned by a statute passed by an accredited legislature. No taxation without representation is the time-honoured slogan behind the first principles of fiscal jurisprudence. This doctrine has been incorporated in our Constitution in article 265. Because of these fundamental compulsions of the law, a popular legislative body not only lays down the charge as accurately as possible in the words of the taxing enactment but also takes care to ensure that the machinery created under the statute for administering the provisions closely adheres to the precise terms of the charge. Not a pie more, nor a pie less than what is actually due from a taxpayer can be levied or collected by the authorities charged with those tasks. This is one reason why the taxing authorities are armed with special powers for rectification of mistakes, for reopening of assessments, for making reassessments and the like. These provisions ensure that nothing which the statute seeks to get at escapes from being brought under the charge in an assessment. In the same way, the taxing enactment carries provisions which act as a corrective to tendencies of quite an opposite kind, namely, over-assessments, wrong assessments on those who are not really liable and cases of that kind. Provisions are invariably enacted into the taxing statutes which enable a person assessed to contest the assessment order in appeal, revision, review, reference and the like. These measures are all directed to the end that the taxpayer is not mulcted of more than what is strictly due from him under the taxing enactment. However, fair and equitable, a taxing legislation might look on paper, actual enforcement of its provisions may lead to horrible distortions. By and large, it is the harassment and the repressive over-assessments which bring a bad name to the taxing statutes. This aspect of credibility of the legislative measure among the citizenry also accounts for the provisions for appeal, revision and the like. Indeed, the absence of an appeal provision in a taxing enactment might render the enactment not only non-liberal, but also bad in point of constitutional law.

14. Given the indispensable requisites of a taxing enactment, the real function of an appeal against an assessment must be considered to be the same as the function of the assessment itself and not in any way different from it. That function, as we have earlier pointed out, is to adjust the taxpayer's liability, as far as it is humanly possible, to the correct pie and make it accord with the relevant taxing provisions. If an assessing authority for any reason, either owing to ignorance or overzealousness or sheer devilment, makes an over-assessment and an appeal is carried from his order, the function of the appellate authority in that appeal is to set right the assessment and adjust the taxpayer's liability in accordance with the statutory provisions. In the appeal, as in the assessment, the task is one of adjustment of the taxpayer's liability. This is a phrase which English judges are fond of employing in discussion of tax matters. The function of a tax appeal is thus precisely the same as that of a tax assessment. All other questions are irrelevant in a discussion as to what the scope of a tax appeal is for the scope of the appeal is the same as the scope of the assessment. The statute sometimes confers on the appellate Tribunal, the power of enhancement of tax in which event also the scope of the appeal is only the scope of the assessment. Enhancement is only in the nature of a supplementary assessment. The power of enhancement implies that the Tribunal has power to do what the assessing authority ought to have done, even in the first instance.

15. There is yet another aspect to this discussion. A taxpayer who carries the assessment in appeal is not to be regarded as being engaged in a lis with the taxing department. He is only interested in ensuring that he is not burdened with payment of an amount which is more than what is due from him as tax. In this sense, an appeal is merely a reconsideration of the assessment by a higher authority. Such an appeal is not to be regarded as a forensic controversy between two parties ranged on opposite sides as adversaries. The taxpayer, on the one side, and the department on the other, are not to be treated as litigants, in the ordinary sense. Indeed, there cannot be any difference, in the ultimate objective, between the department and the taxpayer. For both are interested in making the assessment as accurate as possible in accordance with the statutory provisions. In this sense, there is no lis at all. It must always be a common ground between an assessee and the assessing officer that the assessment must be in accordance with the statute. Even where the statute provides for a representation of the assessing authority before the appellate body at the time of the appeal hearing, still, the nature and function of the appeal remains precisely the same, that is to say, a correct assessment of the taxpayer's liability.

16. Civil litigation between private parties is notoriously procedure-ridden. In the early stages of the development of the law, even substantial rights and obligations of parties used to be discovered by reference to the particular forms of section with legal procedure prescribed for them. Much of the criticism of modern court systems stems from the obstacles placed in the way of a just determination of legal disputes by a surfeit of procedure. Mercifully, as it were, our fiscal enactments do not adopt the procedure codes except to a limited extent in the matter of summoning witnesses and the like. But we have made the mistake of adopting in our tax legislations, the phraseology of the civil law, especially while establishing the machinery for the correction of errors in tax assessments. We have called these institutions of correction 'appellate Tribunals' or by some appellation containing the cognates of appeal. Thereby, however, the intention is not to make these bodies into the very images of civil appellate courts. Those who preside over the Tribunals, as well as the professional gentlemen who practise before them, might have been instrumental in endowing these bodies with the aura or the external trappings of appellate courts. But that is no reason why we should regard these bodies as replicas of appellate courts functioning in civil litigation, and hem them in on all sides by procedural shackles and technical rules of all kinds which really hinder the administration of fiscal justice according to law.

17. These are the philosophic, or basic, considerations on which we have gotto comprehend the real scope of the jurisdiction of the Tribunal in an appeal. In a recent decision of a Full Bench of this court, this broad approach had been pursued for determining the scope of the appellate powers of a similar tax Tribunal, namely, the Sales Tax Appellate Tribunal in State of Tamil Nadu v. Arulmurugan & Co. [1982] 51 STC 381 (Mad). The decision of the Full Bench in this case is an echo of one of the judgments rendered in an earlier sales tax case in Dy. Commissioner v. Govindaraju Chettiar [1980] 46 STC 341. The Full Bench, while dealing with the powers of the Sales Tax Appellate Tribunal, observed that an appeal is a continuation of the process of assessment, that the appellate authority is as much committed to the assessment process as the assessing authority, that it can itself enter the arena of assessment and, hence, functionally speaking, the appellate authority is no different from the assessing authority itself.

18. The Full Bench decision in Arulmurugan & Co.'s case [1982] 51 STC 381 has been adopted in an income-tax reference concerning the powers of the Tribunal in a recent judgment of a Division Bench of this court in CIT v. Indian Fxoress (Madurai) Pvt. Ltd. : [1983]140ITR705(Mad) . Incidentally, as the Supreme Court have observed, even sales tax statutes can be regarded as being in pari materia with direct tax enactments, especially in matters concerning the machinery of assessment, collection and recovery - Ghanshyamdas v. Regional Asstt. CST : [1964]51ITR557(SC) We, therefore, adopted the reasonings of the Full Bench of this court in Arulmurugan Co.'s case [1982] 51 STC 381 and apply the same as expounding the jurisdiction of the Tribunal under section 63 as well.

19. For the reasons stated above, our answer to the reference as a whole is in favour of the accountable person and against the Department. The Department will pay to the accountable person the costs of this reference. Counsel's fee Rs. 500.

20. Mr. Jayaraman, learned standing counsel for the Estate Duty Department, makes an oral application for leave to appeal to the Supreme Court from this judgment. A Full Bench ruling in a sales tax decision of this court in Arulmurugan & Co.'s case [1982] 51 STC 381 was one of the decisions which we adopted for deciding this case arising under the Act. We also followed the principles of three Supreme Court decisions - all on income-tax. However, having regard to the importance of the subject-matter and having regard to the fact at a recent Supreme Court decision in Gurjargravures (P.) Ltd.'s case : [1978]111ITR1(SC) , might be regarded as going against the trend of the decision in the three earlier cases of the Supreme Court we had relied on, we think this is a fit case for being considered by the Supreme Court. This is as regards one of two questions decided by us in this tax case. The other one relates to the validity of section 34(1)(c). This section had been struck down by a decision of this court in V. Devaki Ammal's case : [1973]91ITR24(Mad) . V. Devaki Ammal's case : [1973]91ITR24(Mad) is now pending before the Supreme Court in Civil Appeal No. 91 of 1975.

21. Learned standing counsel for the Department submits that our decision in this case following V. Devaki Ammal's case : [1973]91ITR24(Mad) must also be permitted to be taken in appeal to the Supreme Court. In similar cases such as this which came after V. Devaki Ammal's case : [1973]91ITR24(Mad) , we have granted leave to appeal to the Supreme Court. This being so, even on the second question, we think that the Department is entitled to a certificate of fitness for appeal to the Supreme Court.

22. Accordingly, leave is granted. Issue certificate of fitness on both the questions under section 65 of the Act.


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