1. One Sri B. Mukherjee used to carry on a proprietary business under the name and style of Mill Stores and Belting Company and used to be assessed to income-tax as the proprietor of that concern. He died on the 16th of June, 1943, leaving him surviving an only son of the name of Sri Sukumar Mukherjee. Thereafter, on the 11th of September, 1943, the Income-tax Officer issued a notice under Section 22(2) of the Income-tax Act addressed to the proprietor, Mill Stores and Belting Company and requiring him to submit a return of his income for the accounting year 1942, relative to the assessment year 1943-44. The notice was served on Sri Sukumar Mukherjee on the 13th of September, 1943. In compliance with that notice, Sri Sukumar Mukherjee submitted a return, showing an income of Rs. 13,2427- and along with that return he filed copies of a balance-sheet and Profit and Loss account, said to have been prepared by a firm of Auditors during the lifetime of his father. On the examination of the books of account, however, the Income-tax Officer found substantial omissions in the return and when he brought them to the notice of Sri Sukumar Mukherjee, he submitted a revised return in which a sum of Rs. 56,000/- was added to the previously declared income. The Income-tax Officer was not satisfied that the entire income had been disclosed and upon a further examination of the accounts, he made an assessment on an income of Rs. 79,106/-. The assessment was made on Sri SuKumar Mukherjee, described as the legal representative of the late Bibhutibhusan Mukherjee proprietor of Mill Stores and Belting Company. No question with regard to the validity of that assessment arises in these proceedings.
2. The Income-tax Officer, however, also thought that Sri Sukumar Mukherjee had deliberately furnished inaccurate particulars of the income with respect to which he had been required to file a return and, in that view, he initiated a penalty proceeding under Section 28 of the Act. The plea taken by Sri Sukumar Mukherjee in that proceeding before the Income-tax Officer was that the return initially filed by him had been prepared on the basis of a draft return,drawn up by his father before his death and that as soon as the inaccuracies in that return had been pointed out to him, he had submitted a revised return. It appears also to have been contended that the notice served on him was bad in fact and in law as the previous approval of the Inspecting Assistant Commissioner had not been obtained and communicated to him. Apart from the ground of law which I have just mentioned, taken by him, the entire defence put forward by Sri Sukumar Mukherjee appears to have been a defence on the facts. The Income-tax Officer was not impressed by that defence and held that there had been a deliberate concealment of income. Accordingly, he imposed a penalty of Rs. 40,000/- on Sri Sukumar Mukherjee under Section 28(1) (c) of the Act.
3. In the appeal to the Appellate Assistant Commissioner which Sri Sukumar Mukherjee preferred, he, for the first time, raised the question of law which falls to be decided in this Reference. He submitted that the Income-tax Officer had misapplied Sections 28 and 24B of the Income-tax Act in holding him liable for a penalty in respect of inaccuracies in a return filed by him as the legal representative of his father. According to his submission, there was no provision in the Act for the imposition of a penalty on the heir or legal representative of a deceased person, because the liability for assessment was only a vicarious liability and the expression 'his income', occurring in Section 28 (1) (c) could have no reference to the income shown by a person in a return filed by him in a representative capacity. The contention thus formulated by Sri Sukumar Mukherjee did not find favour with The Appellate Assistant Commissioner. He held that Section 24B (2) of the income-tax Act, which was the section applicable to the case, provided that the Income-tax Officer might proceed to assess the total income of the deceased person as if the 'legal representative were the assessee'. The implication of that provision, according to the Appellate Assistant Commissioner, was that the legal representative was to be taken as the asses-see for all purposes and the income which was to be assessed in his hands was to be treated as his income. The appeal was in that view dismissed. On further appeal, the Income-tax Appellate Tribunal before whom the same contention was repeated, rejected it on the same grounds and they upheld the imposition of the penalty. The Tribunal placed it on record that the appellant's Counsel had not pressed the legal objection very seriously. 'Wisely,' observed the Tribunal, 'the learned Counsel for the appellant did not lay too much stress on the above legal grounds raised by Mm.'
4. Apparently, Sri Sukumar Mukherjee did not share the Tribunal's view of the wisdom of his Counsel and by an application made under Section 66 (1) of the Act, he required the Tribunal to refer to this Court five questions of law. The Commissioner of Income-tax in tis reply submitted that one of the questions was a question of law and did arise out of the appellate order. The Tribunal, agreeing in that view, referred the question in the following form :
'Whether the Appellate Tribunal was right in their interpretation of Section 24B (2), read with Section 28 (1) and in confirming the levy of penalty on the applicant who concealed particulars of income of his father in the return filed by him (Applicant)?'
5. The facts stated by the Tribunal to this Court are perfectly simple and the question oflaw on which they have asked for the Court's opinion is a perfectly plain question. What it asks is this : if a person, in the course of his assessment under Section 24B (2) of the Income-tax Act as the legal representative of a deceased person, commits one or other of the faults or defaults mentioned in Section 23, is a proceeding under that section maintainable against him and can a penalty be imposed?
6. Before us Dr. Radhabinod Pal, who appeared for the assessee, wanted to raise two further questions. In my view it was not open to his client to raise either of them. Dr. Pal said, in the first instance, that he had seen the assessment order in the case and it appeared from that order that a notice under Section 22 (2) had been served on Sri B. Mukherjee during his lifetime. If such a notice had been served, Dr. Pal contended that the subsequent issue of a further notice on his client was utterly illegal and, therefore, the whole proceedings were void. There is, however, not the slightest trace of any such contention having been advanced before any of the authorities at any stage of the proceedings and surely the question referred to this Court does not, ask us to decide whether the entire proceedings were void in law on the ground that before the notice under Section 22 (2) had been served on Sri Sukumar Mukherjee, a notice under the same section had already been served on his deceased father during his lifetime. The assessment order has not been included in the paper book, and naturally, because the present Reference is concerned only with the validity of the penalty proceedings. We had, however, an opportunity of ascertaining what the assessment order actually contained, because, according to the practice of this Court, whenever a Reference is heard, an Officer of the Department attends with relevant records. Mr. Meyer informed us that there did occur in the assessment order a statement to the effect that a notice under Section 22 (2) had been served on Sri B. Mukherjee during his lifetime, but he added that there was a note in the margin, scribbled by someone which said that the statement was not correct. In view of the fact that the question referred to this Court does not raise any point about the validity of the assessment proceedings, we are not really called upon to enquire and decide what the actual fact was. I may, however, point out that the statement contained in the assessment order appears really to be incorrect, as noted by someone, because, according to the statement of Sri Sukumar Mukherjee himself, made in the present case, and according to the finding of the Income-tax Officer, as Contained in his order imposing the penalty, a notice under Section 22 (2) was served for the first time upon the son and no notice had previously been served on the father. In the Statement of Pacts annexed to his application for a Reference, Sri Sukumar Mukherjee refers to the fact that his father died on the 16th of June 1943. Then he proceeds to make the following statement :
'Thereupon, a notice under Section 22 (2) for the aforesaid year was Issued in the name of the proprietor of Mill Stores ana Belting Co., on 11th September, 1943 and it was served on 13th September, 1943.'
That is a statement of Sri Sukumar Mukherjee himself. Then as to the Income-tax Officer, he states in his order under Section 28 as follows :
'Moreover, the assessee had actually died on 16th June, 1943 before the issue (11th September, 1943) and service (13th September, 1943) of thenotice under Section 22(2) and as such the question of filing the Return by Sukumar Mukherjee on the basis of the draft return prepared by his father prior to his death hardly arose at all.'
I think I need not say more to point out that not only is the question sought to be raised by Dr. Pal not open to him, in view of the form of the Reference, but the basis of fact on which he wanted to rest it does not appear to have ever existed.
7. The second question sought to be raised by Dr. Pal was that the penalty proceedings hadnot been taken against his client in his capacity of the legal representative of his deceased father, but had been taken against him in his personal capacity as an individual. Again I fail to see how any question of that kind could possibly be allowed to be raised in the present proceedings. What the question referred is, I have already read. It rests on the basis that Sri Sukumar Mukherjee was assessed as the legal representative of his deceased father and it was because he was so assessed that a question has been raised as to whether a penalty proceeding could be maintained against him in respect of any inadequacy of his statement regarding the income of his father. But that is not all. As in the case of the other question, Sri Sukumar Mukherjee himself has stated in there very proceedings that he was proceeded against under Section 28 in his capacity of the legal representative of his father. In the Statement of Facts annexed to his application for a Reference, he makes the following statement:
'The case was subsequently transferred to N. C. I. T. Cum E. P. T. District Calcutta and I. T. O., N. C. I. T. cum E. P. T. District I, Calcutta imposed a penalty of Rs. 40,000/- on the applicant i.e., the heir and legal representative of the deceased assessee, on 30th November, 1953 without giving the opportunity of being heard.'
In view of that statement made by Sri Sukumar Mukherjee himself, I am entirely unable to see how it could be open to the learned Advocate to raise any contention on the basis that his client had not been proceeded against as a legal representative. I have already pointed out that one of the questions and in fact the main question raised by Sri Sukumar Mukherjee himself before the Appellate Assistant Commissioner was that Section 28 (1) (c) had been wrongly applied to his case, because he had furnished the return only in the capacity of a legal representative and, therefore, he could not come within the ambit of the section. That indeed is the question referred to this Court and I cannot understand how we can be invited to travel outside it and engage in an enquiry as to questions based on allegations of fact which are completely opposed to the statements made by Sri Sukumar Mukherjee himself and completely inconsistent with the basis on which he raised the Question which he caused to be referred to this Court.
8. I may now turn to the question which actually arises in the case and which has actually been referred. Its answer depends on the true construction of Sections 24B (2) and 28 (1) (c), the relevant terms of which I may conveniently read at this stage.
9. Section 24B (2) reads as follows :
'Where a person dies before the publication of the notice referred to in Sub-section (1) of Section 22 or before he is served with a noticeunder Sub-section (2) of Section 22 or Section 34, as the case may be, his executor, administrator or other legal representatives shall, on the serving of the notice under Sub-section (2) of Section 22 or under Section 34, as the case may be, comply therewith, and the Income-tax Officer may proceed to assess the total income of the deceased person as if such executor, administrator or other legal representative were the assessee.'
Section 28 (1) (c) is, so far as is material, in the following terms :
'If the Income-tax Officer x x x is satisfied that any person-
(c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income he x x x may direct that such person shall pay by way of penalty certain sums.'
So far as Section 24B (2) is concerned, it will be noticed that it speaks of the income concerned, as 'the total income of the deceased person,' but it also says that the Income-tax Officer may Proceed to assess that income 'as if such executor, administrator Or other legal representative were the assessee.' So far as Section 28 (1) (c) is concerned, what' is to be particularly noticed is that the income, in respect of which a mis-statement is said to have been made, is described as 'his income.' The question, therefore, is whether the provision contained in Section 24B (2) to the effect that the income of the deceased person is to be treated as the income of such legal representative as if the 'legal representative were the assessee' involves that the income concerned is to be treated as the income of such legal representative, so that it becomes 'his income' for the purposes of Section 28 (1)(c). The point is free of authority, but the answer, to my mind, is plain.
10. Dr. Pal pointed out that Section 24B (2) itself said, and said in express terms, that the income concerned was the income of the deceased person. According to him, it was clear from the language used in the section that, in its view, the income was not the income of the legal representative, I do not find any force in that argument, because if the section regarded the income as the income of the legal representative in truth and in fact, it would not be necessary to provide particularly that it should be assessed in his hands. It was because the income was in fact the income of the deceased person, but was nevertheless going to be assessed in the hands of the legal representative that it was necessary to make the special provision. The question, therefore, is not whether, initially and in actual fact the income was the income of the deceased person, but the question is whether the effect of Section 24B (2) is to convert it into income of the legal representative himself for assessment purposes.
11. On that narrower question, the provision to be construed is the provision to the effect that the income-tax Officer may proceed to assess the income as if the legal representative were the assessee. Dr. Pal contended that while a fiction had undoubtedly been introduced, it was a fiction of a very limited character and went no further than making the legal representative the nominal assessee for the purposes of the process of assessment. In other words, the effect of the section in Dr. Pal's contention was that the income of the deceased person was to be assessed in the hands of his legal representative and the assessment was to be in the name of the latter, but the income would nonetheless remain theincome of the deceased predecessor-in-interest. According to him, the Provision that the assessment could be made as if the legal representative were the assessee did not mean or involve that the income was to be assessed, as if it was the income of the legal representative himself.
12. Mr. Meyer, who appeared for the Commissioner of income-tax, advanced a broad contention to the effect that when, by the direction of a statute, something was to be deemed to be something else, it was to be so deemed for all purposes and to the fullest extent. In support of that proposition, he invoked the aid of the decision of the House of Lords in the case of East End Dwellings Co. Ltd. v. Finsbury Borough Council, (1962) AC 109 (A), and particularly the observations of Lord Asqutth at page 132. He also pointed out that the view expressed by the House of Lords had since been approved or by the Supreme Court in the case of State of Bombay v. Pandurang Vinayak, : 1953CriLJ1049 . I do not consider it necessary to rely on general propositions in order to meet the contention of Dr. Pal. In my view, It is abundantly clear from the provisions of the Income-tax Act itself that the legal representative cannot possibly be treated for assessment purposes as if he were the assessee, unless the Income concerned is also treated as his Income. The latter implication of the provision Is a necessary and indeed an unavoidable implication.
13. Only two sections of the Act need be referred to for showing what the effect of the provision that the legal representative is to be treated 'as if he were the assessee,' must necessarily be. The first is Section 3 which provides inter alia that rates of tax fixed by Central Acts shall be charged in respect of the total income of the previous year 'of every individual, Hindu undivided family, company and local authority and of every firm and other association of persons or the partners of the firm or the members of the association individually.' What is to be charged to tax is thus the Income of the person who is assessed. Coming next to the assessment section, namely, Section 23, it provides by Sub-section (1) that when the Income-tax Officer is satisfied about the correctness of a return made by an assessee, 'he shall assess the total income of the assessee.' To the same effect is Sub-section (3) of the section which deals with the case where the Income-tax Officer finds it necessary to make some further enquiry. The sub-section provides that after hearing such evidence as the assessee may produce or such other evidence as he himself may require, the Income-tax Officer shall by an order in writing 'assess the total income of the assessee.' What is thus assessed under the Act is the income of the assessee and it is not the scheme of the Act that the income of one person shall be taxed as the income of another, remaining all the time the income of the other person. Dr. pal contended that while it was true that, in general, the scheme of the Act was that a person was to be assessed on his own income, a fiction had been introduced for application in certain cases, where-under a person might be assessed on income which was not his but another person's income and that it was precisely for that reason that it had been necessary to provide that the assessment Was to be made as if the former were the assessee. In my view, the true effect of the fiction to which Dr. Pal referred is exactly the opposite. One of the sections by which the fiction has been introduced is Section 24B(2), Two other sections maybe named, namely, Section 42 (1) and sec. 42(2). Under Section 42 (1), an agent shall be deemed to be for all the purposes of the Act the assessee in respect of the income-tax payable by his principal in certain cases and, under Section 42(2), a resident person shall be similarly deemed to be the assessee in respect of the Income-tax payable by a non-resident person with whom he has business connection, producing profits to the latter, The effect of these sections, when they say that the legal representative or the agent or the resident person is to be treated as if he were the assessee, is not to make an exception to the rule that a person is to be assessed on his own income, but it is to convert by fiction the income of one person into the income of the other, so that it can be taxed in the hands of the latter as his own income, consistently with the scheme of the Act and the main charging provision contained in Section 3. The effect of the provision of Section 24B (2) that the income of the deceased person may be assessed as if his legal representative were the assessee is thus to provide by necessary implication that the income is to be assessed as if it is the income of the legal representative.
14. When in the course of the discussion I had occasion to point out the provisions of Sections 42(1) and 42(2), Dr. Pal contended, plausibly I must say, that those sections were distinguishable, since they said expressly that the agent or the resident person would be deemed to be the assessee for all the purposes of the Act. There is no such comprehensive expression in Section 24B (2) and accordingly Dr. Pal contended that the scope of the fiction in section 24B(2) was narrower and was limited to making the legal representative the assessee without making the relevant income his income. I have already indicated that it cannot be possible to work the Act and apply the assessment sections, unless the income is taken to be the income of the person when is to be treated as the assesses, it must not be forgotten that while Section 24B (2) names the person in whose hands the assessment is to be made the actual assessment must be made under Section 23 and, therefore, it must be made in such a manner that the provisions of that section are complied with and satisfied. The real reason why a further expression has been added in Sections 42(1) and 42(2) appears to me to be that those sections contemplate a representative of a living person and, therefore, matters other than assessment had to be provided for. In the case of the assessment of the income of a deceased person, the necessity of proceeding against the legal representative and making him the assessee arises out of and is limited to the necessity of assessing the income. The owner of the income is dead and he cannot be required any longer to perform any of the duties which are required to be performed by a living assessee. Only the income left unassessed has to be assessed. Not so, however, is the case where an agent or a resident per-son is treated as the assessee in respect of the tax payable by the principal or a non-resident person, because if he is to be treated as the assessee, it is necessary to Provide riot only that the Income should be assessed in his hands, but also that the Act will look to him for the performance of the other duties which it lays on assessees. For example, an assessee has to make payments under Section 18A of the Act in respect of the current year's income and unless it was provided in Sections 42 (1) and 42 (2), which are concerned with the representation of living persons, that the agent or the resident person would be treated as the assessee for all the purposes of the Act,the other obligations of the person represented, apart from the obligation to be assessed to tax in a particular assessment proceeding would not be covered. The omission of the expression 'for all the purposes of this Act' from Section 24B(2) does not, in my view, lead to the conclusion that the income concerned is not to be treated as the income of the legal representative.
15. A further argument of Dr. Pal was that Section 24B(2) had itself denned and delimited what the Income-tax Officer could do to a legal representative in respect of the income of the deceased person and that all that it said was that he might proceed 'to assess the total income of the deceased person.' It was said that the power conferred on the Income-tax Officer was limited to the power of making an assessment, but it did not extend to the power of imposing a penalty. In my view, the argument is misconceived. Whether or not the Income-tax Officer would have jurisdiction to Institute proceedings for the imposition pf a penalty on an assessee in a particular case, is not to be found in the sections which provide for the making of assessments. No provision for imposing a penalty occurs in Section 24B(2), because it is not the concern of the section to make any provision in that behalf. I have only to call attention to the provisions of Section 23 which deals with assessment in normal case. No one will contend that if a person is called upon to make a return in respect of what is indisputably his income and he commits one of the faults or defaults mentioned in Section 28, proceedings for the imposition of a penalty cannot be instituted against him. But it will be found that neither Section 23 (1), nor Section 23(3), nor Section 23(4) all of which say that the Income-tax Officer shall 'assess the total income of the assessee' or shall 'make the assessment,' says anything at all with regard to the imposition of a penalty. Section 24B(2) also is concerned only with providing for the making of an assessment in cases where the assessee concerned is no longer available for being proceeded against being dead. It Is no more the concern of Section 24B(2) to provide for the imposition of a penalty than it is the concern of Section 23 (1) or Section 23(3) or Section 23(4). Whether or not proceedings for imposition of a penalty can be instituted in a given case must be ascertained from the terms of Section 28 itself. They are not to be sought in the sections providing for the making of assessments and, therefore, not to be sought either in Section 23 (1) or in Section 23 (3) or SECTION 23 (4) or Section 24B (2). The argument that, since Section 24B(2) says only that the Income-tax Officer may proceed to assess the total income of the deceased assessee, therefore, the power to institute proceedings under Section 28 and to impose a penalty is excluded is not in my view, a tenable argument at all.
16. The result of our examination of Section 24B(2) therefore is first, that not only must the legal representative be treated as if he were the assessee, but the income of the deceased per-son must also be treated as if it were his income --and, secondly, that whether or not the Income-tax Officer has really any power to institute proceedings for the imposition of a penalty against a legal representative, there is nothing in Section 24B(2) which excludes that power. For ascertaining whether the power exists in law, one must examine Section 28 itself to which I may now refer.
17. The whole argument with respect to Section 28(1) (c) was based on the expression 'his income'. If, as I have already held, the effect ofsection 248 (2) is to make the income of the deceased person the income of the legal representative for the purposes of assessment, the question whether such income is his income for the purposes of Section 28 is already answered. It is necessary to examine the provisions of the section only to see if they lend any further support to that conclusion in my view, they do.
18. Section 28(1) is not limited to Sub-clause (c) but has at least another sub-clause which is relevant, namely, Sub-clause (a). Sub-clause (a) of the section is to the effect that if the Income-tax Officer -- I am leaving out other authorities --is satisfied that any person 'has without reasonable cause failed to furnish the return of his total income which he was required to furnish by notice given under Sub-section (1) or Sub-section (2) of Section 22 or Section 34 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by such notice', the Income-tax Officer may require him to pay a penalty. It will be noticed that the default contemplated is a default to furnish a return in compliance with a notice given under Section 22(1) or Section 22(2). I am leaving out Section 34. That a notice under Section 22 (2) can be served on the legal representative of a deceased person appears from the express terms of Section 24B (2). There is no separate form of a notice under that section to be used in the case Of a legal representative. If one refers to the form of the notice under Section 22 (2) which is actually used, one will find that thereby, where the person addressed is an individual, he is required to prepare a true and correct statement of 'your total income.' The section itself says that the Income-tax Officer may require a person to furnish a return in the prescribed form setting forth 'his total income.' If a notice under Section 22 (2) can be served upon a legal representative and if by that notice he is required to set forth the particulars of 'his total income,' any default or misstalement he may commit or make with respect to furnishing the return must be a default or misstatement regarding what is treated as his income. Dr. Pal contended that 'his income' would mean the income of someone else assessed in his hands or in other words, his income as a representative and not his personal income. That answer, in my view, does not and cannot meet the point quite apart from what I have already said regarding the true effect of Section 24B (2), because, if for the purpose of a notice under Section 22(2), the income, though the Income of another person assessed In the hands of the legal representative, is treated and described as his income, in the notice, and default can be committed in regard to furnishing a return thereof, I cannot see why, even if the expression bears the same meaning in Section 28, the legal representative, committing a default, cannot be treated as haying committed it in respect of his income. Even if the meaning of the expression 'his income' in the vocabulary of Section 28 (1) be, as applied to the case of a legal representative, the income of another person assessed in his hands, it is, nevertheless, so far as the legal representative is concerned, his income, because unless it were so, there could not have been any default with respect to the notice served under Section 22(2), requiring the legal representative to furnish a return of 'your income.' We need not, however, try to arrive at that result from the language of the notice under Section 22(2), because, in my view, the effect of Section 24B (2) is decisive of the question.
19. For the reasons given above, the answerto the question referred must, in my opinion, bein the affirmative.
20. The Commissioner of Income-tax, Calcutta, will have his costs of this Reference.
21. I agree.