JAGADISAN J. - The expression 'legal representative' occurring in section 24B of the Indian Income-tax Act has not been defined under that Act, and the question raised in this reference application turns upon the proper interpretation of that expression.
The following facts are not in dispute. Chidambara Reddiar and Vridhachala Reddiar were two brothers, who originally constituted a Hindu joint family. They became divided in the year 1942. Thereafter, each of them was assessed to income-tax as an 'individual' in regard to their respective incomes. Chidambara died issueless on February 24, 1951, leaving behind his wife, Ponnammal. She succeeded to his properties as a limited heir under the Hindu law. It seems that Chidambara was adopting the calendar year as his year of account for purposes of income-tax. The income for the calendar year 1950, the relevant previous year for the assessment year 1951-1952, was assessed against Ponnammal treating her as the legal representative of her deceased husband. Ponnammal, however, surrendered her husbands estate on March 17, 1951, in favour of Vridhachala Reddiar, the nearest reversioner to succeed to the estate of Chidambara. For the assessment year 1952-1953, Vridhachala was assessed as the legal representative of Chidambara for the period between January 1, 1951, to March 16, 1951, and as the karta of the Hindu undivided family consisting of himself and his two sons, Ramanathan and Rajagopalan for the rest of the year. This was dated June 5, 1953. In the meantime Ponnammal died on June 29, 1952, and Vridhachala died on January 1, 1956. For the year ended March 31, 1951, the previous year for the assessment year 1951-52, the original assessment of the income of Chidambara against his wife, the deceased Ponnammal, was sought to be reopened under section 34 of the Act on the ground that a sum of Rs. 39,362 has escaped tax. A notice under this provision was issued on March 26, 1956, on Ramanathan who was then the karta of the joint family consisting of himself and his brother, Rajagopalan. In response to this notice Ramanathan filed his return on August 2, 1956. In that return he described his status thus :
'Estate of late K. Chidambara Reddiar formerly by legal representative late Sri Ponnammal, now by legal representative, V. Ramanathan.'
Ramanathan also sent a covering letter along with his return wherein he stated thus : 'I beg to submit that in this case proceedings initiated under section 34 is invalid as K. Chidambara Reddiar died on or about February 24, 1951, leaving a widow, Sri Ponnammal, who also died on or about June 29, 1952, without any issue and who prior to her death has surrendered (as per registered deed No. 1007/March 28, 1951) her properties, etc., to her husbands brother, K. Vridhachala Reddiar, who also died on January 1, 1956'.
The Income-tax Officer overruled the objection of Ramanathan and included the sum of Rs. 39,362 as undisclosed income under section 12 of the Act. The assessee preferred appeals to the Appellate Assistant Commissioner and to the Income-tax Appellate Tribunal but failed. On the application under section 66(1) of the Act, the Tribunal was referred the following question to this court : Whether the assessment on V. Ramanathan as legal representative of the estate of K. Chidambara Reddiar is valid in law ?'
Vridhachala and his two sons, Ramanathan and Rajagopalan, were undoubtedly members of a Hindu undivided family but the surrender by Ponnammal was and could only have been in favour of Vridhachala as the nearest reversioner entitled to succeed to the estate of Chidambara if the limited owner were to die on the date of the surrender. The result was that Vridhachala inherited the properties as the next heir of Chidambara. The effect of a valid surrender under the Hindu law is to efface the existence of the limited owner and to accelerate the succession to the estate of the last full owner. The capacity in which Vridhachala inherited the properties was only in his individual right as the nearest and next reversioner of the estate of Chidambara and not in his capacity as the manager of the Hindu family consisting of himself and his sons. So much is clear and indisputable. Factually, however, it appears that Vridhachala who already held properties as the manager of the undivided family of himself and his sons blended the properties, which he obtained as a result of surrender from Ponnammal, with those properties and made no distinction between the two sets of properties. In his hands all the properties, namely, the properties which he had obtained as a result of partition in the year 1942, and the properties he obtained by reason of the surrender became stamped with the character of joint family properties. The treatment of the properties inherited by Vridhachala did not affect his character as the succeeding reversioner of Chidambara. After the inheritance of the properties it is always open to the person inheriting to deal with the properties in any manner he likes. But his character as the personal heir of the deceased continues irrespective of the manner of the dealing of the properties and his liability attributed to such character cannot certainly be affected by the mode of his dealing with the properties. Vridhachala died and of course there was no inheritance to the family properties held by him by reason of the continuance of the joint family of himself and his sons. Ramanathan and Rajagopalan, therefore, became entitled to the properties by the operation of the rule of survivorship. The properties which came into their hands partly comprised of the properties inherited by Vridhachala as reversioner of the estate of late Chidambara.
Now, the question is who is the legal representative of the deceased Chidambara The department having initiated proceedings under section 34 of the Act has necessarily to serve notice upon the executor or administrator or legal representative of the deceased assessee, namely Chidambara. Chidambaras estate is not represented by any executor or any administrator. After his death, there has been a devolution of the properties first by inheritance by his widow, Ponnammal, then by the Surrender of Ponnammal in favour of Vridhachala and thereafter by survivorship to the sons of Vridhachala after his death. But the department has to ascertain who is or who are the legal representatives of the deceased Chidambara at the moment when notice under section 34 is issued. In the view of the department Ramanathan is the legal representative. It is not however clear whether Ramanathan has been treated as an individual or as karta of the undivided family consisting of himself and his brother. The contention of Ramanathan is that he is not the legal representative to be proceeded against under section 34 of the Act in respect of an alleged escaped income in the assessment of Chidambara Reddiar accrued during the accounting year 1950. In the memorandum of the grounds of appeal before Appellate Assistant Commissioner, Ramanathan set out his objection in the following words : 'Your petitioner submits that the Income-tax Officer is not justified in making an assessment under section 34 on him on the ground that the income of Rs. 39,362 relating to money-lending has escaped assessment in the hands of late K. Chidambara Reddiar........... As K. Chidambara Reddiar was an individual in status his estate also became individual in the hands of K. Vridhachala Reddiar who threw them into the family hotchpot by opening new account books on April 1, 1951, and incorporating all the assets of late K. Chidambara Reddiar as also his own assets, etc., which belonged to a family comprising himself and his two sons of which one is V. Ramanathan, the above-said petitioner. K. Vridhachala Reddiar died by about January 1, 1956. Therefore, under section 24B Ponnammal alone could have been proceeded against under section 34. But since she was transferred all her assets to K. Vridhachala Reddiar on March 17, 1951, who had converted them into family assets from April 1, 1951, the liability to any tax on the estate of Chidambara Reddiar cannot attach to your petitioner now.'
The substance of this contention is that the individuality of the estate of Chidambara has become merged in the joint family assets held by Vridhachala and his sons and after Vridhachalas death by his sons alone, and that therefore, Ramanathan as an individual is not a legal representative within the meaning of action 24B. It must be noted that it is not Ramanathans contention that he is not the heir of the deceased Chidambara, and that he is not in possession of the estate of the late Chidambara.
There is no definition of 'legal representative' in the Income-tax Act. Section 2(11) of the Civil Procedure Code defines it as follows :
'2. (11) Legal representative means a person who in law represents the estate of a deceased person, and includes any person who intermeddles with the estate of the deceased and where a party sues or is sued in a representative character the person on whom the estate devolves on the death of the party so suing or sued.'
Whether that definition can govern the construction of the expression in the Income-tax Act or not, if can guide its proper interpretation. It is the representation of the estate of the deceased that invests a person with a representative character. Heirs who succeed to the estate, an executor or administrator in whom the estate vests virtute officii and even an intermeddler in possession of the estate purporting to be a heir at law, though not in fact all alike, effectively represent the estate to the outside world. This is plain enough and is not controvertible. The heir of the deceased in possession of the estate is a legal representative whether under the definition in the Civil Procedure Code or in its popular sense.
The liability of a legal representative under section 24B of the Act to pay the tax which might have been assessed but not paid by the deceased or which might be assessed after his death is absolute, but is however limited to the extent to which the estate of the deceased is capable of meeting the charge (see Additional Income-tax Officer, Circle I, Salem v. E. Alfred). Where a deceased person leaves behind several heirs to succeed and after his death the estate is not represented by any executor or administrator duly appointed all the heirs together constitute the body of legal representatives who can properly represent the estate. It is not necessary that all of them should be jointly in possession of the totality of the estate. Each one of the heirs is undoubtedly a legal representative and the representative character attributable to each of them cannot be taken away merely because there are other persons of the same class who can answer the said description. But in respect of proceedings for or against the estate the ordinary and normal rule is that all of them should join or be joined together or at least all of them should be parties to the proceedings. But it may so happen that a third party suing the estate may not know or be aware of the existence of several heirs together constituting the legal representatives of the estate against which relief is sought. Any action against the estate by a third party impleading only one of several legal representatives cannot be said to be incompetent by the mere omission to implead all the heirs. If in such a case the person impleaded puts forward the plea that there are other legal representatives who ought to be joined in the action, and that he alone cannot represent the estate the default on the part of the person suing in not taking note of the plea, and not taking the proper steps to have all of them before the court may be fatal to the maintainability of the action. But if the legal representative impleaded does not put forward any such plea but merely contents himself by saying that he is not the legal representative and the person suing bona fide believes that he is the legal representative and prosecutes the action, the proceedings would be valid.
In Alfred v. First Additional Income-tax Officer, this court held that the liability imposed by section 24B(2) of the Indian Income-tax Act on the legal representative of a deceased person attached itself to all the legal representatives on whom notices are served, and that all such legal representatives are liable to be served with notices under that section. At page 406, the learned judges posed the following question :
'The question before us, however, is whether where there is plurality of legal representatives and that fact is shown to the Income-tax Officer, does section 24B(2) enable him to choose one of those legal representatives for completing the assessment of a deceased assessee Another aspect of that question is, whether the legal representative so selected for service of notice whose objection that the other legal representatives also should be brought on record before the assessment is completed is overruled or ignored by the Income-tax Officer, can subsequently assail the validity of the assessment.'
The question were answered in the following way at page 406 :
'If for example (1) the Income-tax Officer bona fide believed acted on that belief that Alfred was the only legal representative of Ebenezer, (2) Alfred did not bring to the notice of the Income-tax Officer that there were other legal representatives who should be brought on record and assessment completed in their presence as well, (3) Alfred represented the estate of the deceased Ebenezer in the assessment proceedings, and (4) there was no fraud or collusion, it could well be that the entire body of legal representatives including Alfred would be bound by the adjudication, that is, the assessment made by the Income-tax Officer.'
In that case Alfred was one of the legal representatives and he alone was sought to be proceeded against by the department.
The decision is clear authority for the position that an assessment proceeding cannot be rendered invalid or void by merely pointing out to the fact that all the legal representatives in a case where there are many were not present before the assessing office because no notice were issued to all of them. It is to be presumed in every case where the department proceeds against one of the legal representatives alone that it is under the bona fide belief that person proceeded against is the only person who can validly represent the estate. It is only in a case where the department fails to take note of facts placed before it to show that there are other persons besides the person proceeded against who are also legal representatives that it can be said that the proceedings are defective, on the ground that the estate is not fully and completely represented. There can hardly be any case of fraud and collusion between the department and the person not proceeded against. The department is entitled only to make the assessment or collect the tax levied and it is not likely that a person of ordinary prudence or common sense would agree to his being treated as a legal representative so as to cause prejudice to the estate.
Learned counsel for the assessee referred us to the decision of this court in Muniammal v. Third Additional Income-tax Officer. The facts in that case were as follows : R was an assessee. He was running a bus service. He died intestate in October, 1956, leaving surviving his widow, his daughter and his mother. The widow entered into possession of his estate and claimed to be the proprietrix of the bus service and submitted returns, in income-tax assessments for the years 1956-57 and 1957-58. She was assessed to tax on the basis of these returns, and she duly paid the tax. Rs mother filed a suit against the widow and the daughter claiming partition and a share in the estate of R including the asset involved in the business of bus service. In order to establish her title to obtain there lief by way of partition, she applied to the Income-tax Officer for grant of certified copies of the returns submitted by R and by his widow for the years 1951-1952 to 1956-1957, and the orders of assessments for those years. The widow, thereupon, applied to this court for the issue of a writ of prohibition restraining the Income-tax Officer from granting the copies. This court held that the principle of section 54 of the Income-tax Act was not applicable where an assessee died leaving legal representatives and those legal representatives applied to inspector take copies, that in a case where a person died leaving more than one legal representative, the estate was represented by all of them jointly one of them alone, that the right to inspect or obtain copies was a mere privilege and not a heritable right which would devolve on the heirs of the assessee after his death. Reliance has been placed upon the following observation, at page 670 :
'The word legal representative in section 24B, sub-clause (1), would mean all the legal representatives collectively, if there were more than one. The question of liability to income-tax where an assessee left more than one legal representative was considered by a Bench of this court (to which one of us was a party) in Alfred v. Income-tax Officer. It was held in that case that the liability imposed under section 24B(2) of the Act attached itself to all the legal representatives of the deceased person on who notices were served, and that all the legal representatives of deceased would be liable to be served with the notices under that provision. Therefore, when there is a plurality of legal representatives, it would follow that all of them should concur in applying for the inspection of the statements made to the Income-tax Officer or for obtaining certified copies of the same from him. But where they do not agree, one of them alone could not be held to represent the deceased, and, therefore, one of them alone could not have inspection.'
With respect we agree with this observation.
The question that arises for decision in the present case cannot be answered in favour of the assessee even on the principles laid down by the decisions referred to above. As stated already a proceeding against one of several legal representatives alone on the ground that he represented the estate of the deceased in not rendered defective or bad by the mere omission to implead the others as well. It is one thing to say that an estate is represented jointly by all the heirs of the deceased person, and a totally different thing to say that the proceeding against one of them alone in a representative capacity should be held to be bad on the ground that the person impleaded alone cannot fully represent the estate. It is not as if that the representative character is distributed, fractionally among all the legal representatives giving rise to the conception of a fractional representation, because of the fact of impleading one of them alone. The representative character of one of several co-heirs is always there and he can represent the estate so that any decision rendered in the proceedings against him would bind not merely himself but the estate also as such. In a case where fraud and collusion are established between the person impleaded and the adversary the proceedings are vitiated not so much because that there has been no full representation of the estate but because fraud is a circumstance which would not vitiate even the most solemn proceedings in a court of law.
In the present case the facts are quite clear. It was not the contention of Ramanathan that he is only one of the legal representatives and should not be discriminatingly proceeded against in the absence of his brother, Rajagopalan. His contention was that the estate of the deceased has become altered in its character by becoming part and parcel of the joint family estate of himself and his brother. For the purpose of an escaped assessment against Chidambaras estate the subsequent character of the property in the hands of Vridhachala or Ramanathan is of no consequence as the only question is who is the legal representative liable to be proceeded against under the Act. Ramanathan admits that he is the karta of a joint family of himself and his brother. If that is the true position his brother also is effectively represented in these proceedings. Whichever way one looks at the matter, it is obvious that the estate of Chidambara is properly represented in the proceedings under section 34. The question is answered against the assessee who will pay the costs of the department. Counsels fee Rs. 250.