B.N. Banerjee, J.
1. The unending competition in ingenuity between the tax-gatherer and the taxpayer renders the application of the income-tax Law increasingly complicated. One such corn-plication requires to be resolved in this rule.
2. One Srimati Padmavati Thakur was an assesses, having some income assessable to tax. For the years 1957-58 to 1961-62, the said Srimati Thakur was assessed to income-tax under Section 23(4) of the Income-tax Act 1922, in the following manner :--
Assessment yearIncome assessedTax demanded
1957-58Rs. 16,000/-Rs. 1506/- 1958.59Rs. 16,000/-Rs. 1506/- 1959-60Rs 20,500/-Rs. 2770.66 p.1960-61Rs. 20,500/-Rs. 2687.33 p.1961-82Rs. 20,500/-Rs. 2604/-
According to the petitioner two of the notices of demand were issued on August 28, 1961, and the remaining three on January 12, 1962. Srimati Thakur appears to have filed five appeals against the five assessments referred to above, before the Appellate Assistant Commissioner, 'B' Range, Calcutta. Before, however, the appeals were heard, Srimati Thakur died, on April 17, 1962, leaving her surviving as her heirs and legal representatives-
(1) B.T Thakur - husband
(2) N B Thakur |
(3) A B.Thakur | sons
(4) K.B Thakur |
(5) Mrs Hirarani Paniekker |
(6) Mrs Hansakumari Deb Burman. | daughters.
(the petitioner) |
On coming to know the death of the assessee appellant, the Income-tax Department wanted to ascertain from B.T. Thakur (the husband of the deceased assessee and the father of the petitioner) the names of the heirs of the deceased, by a letter dated August 28, 1962. B.T. Thakur replied to that letter, on September 20, 1962, and disclosed the names and addresses of all the heirs and legal representatives of the deceased assessee.
3. While the appeals were still pending, the petitioner alleges, certain notices under Section 154 of the Income-tax Act 1961 were received by B.T. Thakur above named, on May 1, 1963, wherein it was inter alia, stated that the respective assessments for the years 1959-60 and 1960-61 required to be rectified on account of mistakes apparent on the face of the records and it was proposed to enhance the assessments respectively by sums of Rs. 83.43 paise and Rs. 83.39 paise. The said notices were addressed to 'Mr. B.T. Thakur and others, legal heirs of late Padmavati Thakur'. The individual names of the legal representatives, the petitioner says were not mentioned in the notices. By the said notices, the persons notified were called upon to appear before the Income-tax Officer. 'E' Ward, Companies District II, on April 22, 1963. so as to be heard in person or to send beforehand written objections against the proposed rectification. Since the date fixed for hearing was already over, when the notices were received on May 1, 1963, nothing could be done and this fact was brought to the notice of the Income-tax Officer by B.T. Thakur. in his letter dated May 7, 1963. with a request to him not to take action in the matte'.
4. Although the notices of rectification related to the years 1959-60 and 1960-61, the petitioner alleges, the assessments for the years 1957-58 to 1961-62 were all taken up for rectification and as a matter of fact assessments for the years 1957-58 and 1958-59 were reduced by way of rectification, the assessment for the year 1.961-62 was left untouched and the assessments for the years 1959-60 and 1960-61 were increased. From copies of the rectification orders, said to have been received by the petitions on November 25, 1963, it appeared that three of the orders were made on June 24, 1963 and one order was undated in the copy. The orders were all addressed to late Padmavati Thakur through legal heirs. The petitioner says that she forgot all about the orders and did not take steps against the said orders of rectification.
5. In the mean time, on September 6, 1963, B.T. Thakur above named received a notice dated August 30, 1963, under Section 31 of the Income-tax Act 1922, addressed to 'Mr. B.T. Thakur and others, legal heirs of the estate of Mrs. Padmavati Thakur', informing him that the date of hearing of the appeals, preferred by the original assessee (Srimati Padmavati Thakur), was fixed for September 18, 1963 and calling upon him to take steps. On receipt of the notice, B.T. Thakur wrote to the Appellate Assistant Commissioner, on September 13, 1963. asking him to serve separate notices upon the other heirs of the deceased appellant and also for an adjournment of the hearing of the appeals by three months. He did not receive any reply to this letter.
6. Shortly thereafter, on September 27, 1963, B.T. Thakur above named received five several notices, from the Tax Recovery Officer, all dated September 2, 1963 and all jointly addressed to
'(i) B.T. Thakur,
(ii) N.B. Thakur,
(iii) K.B. Thakur,
(iv) Mrs. H.K. Dev Burman, and
(v) Mrs. Hirarani Panickkar.'
whereby he was informed of the initiation of five certificates proceedings for recovery of income-tax in arrears for the years 1957-58 to 1961-62, on the requisition made by the Income-tax Officer concerned, dated March 14 and 15 1963. The notices called upon him to pay up. The notices were not addressed, according to the petitioner, to A.B. Thakur one of the sons and legal representatives of the deceased assessee. B.T. Thakur above named moved against the initiation of the certificate proceedings, by an application under Article 226 of the Constitution, and obtained a Rule. The said Rule is said to be pending. The certificate proceedings have, however, in the meantime been cancelled by the Central Board of Direct Taxes and the petitioner appears to have no further grievance on that score.
7. The appeals preferred by the Original assessee, Sm. Padmavati Thakur deceased, however, were dismissed ex parte. A copy of the order of dismissal of the appeals, along with five several notices of demand, under Section 29 of the Income-tax Act 1922, were received by B.T. Thakur above named, on October 7, 1963. The petitioner also received 5 notices of demand dated March 4, 1965, on the basis of the rectified demand, on or about March 20, 1965.
8. The petitioner moved this Court, on April 30, 1965, under Article 226 of the Constitution, praying for the quashing of the notices of demand, dated March 4, 1965. and for a writ of Mandamus alternatively a Writ of Prohibition restraining the respondents from giving effect thereto and obtained this Rule.
9. Mr. B. Sen, learned Advocate for the petitioner argued three points for my consideration. He contended in the first place, that the orders of rectification were bad because
(a) notice of the intended order was not given to all the heirs of the deceased assessee,
(b) notice as issued did not cover all the years that were rectified, and
(c) notices were anachronistic, in that that they were received long after the data fixed for rectification was over.
He further contended that the dismissal of the appeals without service of notice on all the heirs of the deceased appellant was bad and no demand should have been made on the basis of assessment illegally confirmed in appeal. He lastly contended that the Income-tax Act 1922 provided for only one notice of demand and steps of recovery were to be taken under Section 46(7) of the Act within one year from the last day of the financial year in which the demand was made. The demands, in respect of the assessments for the years 1957-58 to 1961-62 were first made on August 28, 1961 and January 12, 1962. Time for recovery, he argued, began to run from March 31, 1962 and has run out. No fresh start of time can be obtained, according to him, by serving a fresh notice of demand on the petitioner on March 20, 1965.
10. Now the first proviso to Section 85(1) of the Act of 1922, the section relating to 'rectification of mistake', reads as follows :--
Provided that no such rectification shall be made, having the effect of enhancing an assessment or reducing a refund unless the Commissioner, the Appellate Assistant Commissioner or the Income-tax Officer, as the case may be, has given notice to the assessee of his intention so to do and has allowed him a reasonable opportunity of being heard.'
The corresponding provision in the Income-tax Act, 1961, Sub-section (3) of Section 154, is couched in the following language:
''An amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assesses, shall not be made under this Section unless the authority concerned has given notice to the assessee of his intention so to do and has allowed the assessee a reasonable opportunity of being heard.'
In the instant case, a notice of intended rectification dated April 16, 1963 (despatched on April 19, 1963, as Mr. S. Mukherjee, learned Advocate for the respondents showed from the records) was received by B. Thakur, on May 1, 1963. By the said notice the persons notified were called upon to appear at the hearing of the intended rectification, on April 22, 1963. This notice was a useless notice, received as it was by B. Thakur long after the date of hearing was over, and did not give to the legal representatives of the deceased assessee the reasonable opportunity of being heard as required by the first proviso to Section 35(1) of the 1922 Act or the corresponding section, namely, Subsection (3) of Section 154 of the Act of 1961. The rectification orders enhancing the assessments for the years 1959-60 and 1960-61 cannot therefore, be upheld.
11. Mr. Sabyasachi Mukherjee, learned Advocate appearing for the respondents, no doubt wanted to salvage the rectification of assessment orders for the years 1959-60 and 1960-61 with the contention that the rectifications were not made until June 24, 1963 find prior to that date B. Thakur above named filed his objections in writing which were considered before the rectifications were made. In my opinion, this has not the effect of salvaging the rectification order from the mischief of the first proviso to Section 35 (1) or its corresponding Section in the new Act, namely, Sub-section (3) of Section 154. B.T. Thakur above named did, in his letter, dated May 7 1963, point out the late receipt of the notice of intended rectification. He could not appear for being heard on any other date, because no other date was fixed. The fact that the order for rectification was not made until June 24, 1963, did not help him. Thus, apart from the question that the notice of rectification should have been served on all the heirs of the deceased assessee (which I do not decide), the notice as served on B.T. Thakur was bad and no demand can be made on the basis of such invalid rectification and consequential enhancement of assessments for the years 1959-60 and 1960-61. The reduction of assessments for the year 1957-58, on the basis of such rectification, is, however, good because no notice of such reduction need be served under law.
12. I now turn to the next argument made my Mr. Sen. Under Section 31 of the Income-tax Act 1922, the Appellate Assistant Commissioner is required to fix a date and place for hearing of the appeals, but it was not necessary for him under the section to serve notice of hearing on the assessee appellant. The corresponding section in the new Act of 1961, namely, Section 250, however, provides for such service of notice. Nevertheless one notice of the date of hearing of the appeal was sent to B.T. Thakur addressed to 'B.T. Thakur and others legal heirs to the estate of Mrs. Padmavati Thakur', informing him about the date of hearing of the appeal. Were it necessary for me to decide the validity of this notice in this Rule, I would have upheld its validity, if service of such notice was at all necessary under the old law, on the analogy of the line of reasoning as in Harihar Banerjee v. Ramshashi, 45 Ind App 222: (AIR 1918 PC 102). It is, however, not necessary for me to do so in this Rule, regard being had to the nature of the prayers made. Assuming for the sake of argument the appeals were illegally dismissed ex parte and must be deemed to be pending, such pendency will not affect the validity of the demands made, because the filing of an appeal does not automatically stay demand for taxes.
13. I now take up for consideration the last argument made by Mr. Sen. It is true that under Section 46(7) of the Income-tax Act, 1922, the modes of recovery prescribed by the section cannot be resorted to after the expiry of one year from the last day of the financial year in which demand was made. In the instant case, that time began to run from March 31, 1962, regard being had to the time when the first demand was made and the time limit has now run out. Thus, the modes of recovery prescribed by Section 46 of the Income-tax Act, 1922 may not now be available to the respondents. But there may be other modes of recovery still left to the respondents, say recovery of the demands by a suit, if such a suit lies. I am, therefore, not in a position to hold that the demands must in any event be quashed.
14. The result is that the respondents are still left with their original demands, excepting for the years 1957-58 and 1958-59 in which the demands were reduced by rectification. So much of the demands as were enhanced by rectification for the years 1959-60 and 1960-61 are irrecoverable, the orders of rectification being bad, for reasons already stated. The demands as originally made or as reduced may be still recovered by the respondents, by modes other than the modes prescribed by Section 46 of the Act of 1922.
15. Therefore, so much of the demands, dated March 4, 1965, as may exceed the limits indicated above must stand quashed and the rest of the demands must be upheld, the illegal portion of the demands being severable from the legal portions thereof. The respondents are, however, restrained from taking steps for recovery of such demands, in the modes prescribed by Section 40 of the Act of 1922. They are, however, at liberty otherwise to try to recover such demands.
16. This Rule is made absolute in part to the extent indicated above. Let a Writ of Certiorari and consequential Writ of Mandamus accordingly issue, I make no order as to costs.