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Gobindlal Bangur Vs. Income-tax Officer, Central - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberMatter No. 391 of 1968
Judge
Reported in[1971]79ITR364(Cal)
ActsIncome Tax Act, 1961 - Sections 160 and 168
AppellantGobindlal Bangur
Respondentincome-tax Officer, Central
Appellant AdvocateD. Pal and R.N. Bajoria, Advs.
Respondent AdvocateD. Sen and ;A.K. Mitra, Advs.
Cases ReferredS. B. Adityan v. First Income
Excerpt:
- .....entitled to make the assessment either under section 168 or under section 160. if he proposes to make ah assessment on a wrong view of the provisions of the act would this court prohibit him from doing so until and unless he has actually made the assessment there is here no question of either. lack of jurisdiction or acting in excess of jurisdiction or without jurisdiction. the whole question is whether the income-tax officer was proposing to act in a manner not sanctioned by law and whether this court would prohibit him from doing so even though he has jurisdiction to make the assessment. dr. pal for the petitioner submitted that both the letter dated the 3rd may, 1968, and the averments made in the affidavit-in-opposition show clearly that the respondent no. 1 is determined to make.....
Judgment:

K.L. Roy, J.

1. One Ramkumar Bangur died some time in the year 1961 having made and published his will dated the 26th day of June, 1941. Under the said will he appointed his nephew, Gobind Lal Bangur, as the executor and the trustee and declared that as he was childless he had taken his another nephew, Gokul Chand Bangur, to be his adopted son. The testator directed his executor and trustee to pay all his debts outstanding at the time of his death and to pay his funeral and testamentary expenses including the amount necessary for his sradh. The movable properties already made over to the testator's wife were declared to be her personal property. The will further directed the executor and trustee to set apart and hold a sum of Rs. 4 lakhs out of certain amounts lying in the account of Ramnarayan Ramkumar and to enable the testator's wife to utilize the said sum for charity, for religious expenses, for making pilgrimages and for making gifts or otherwise to relations with certain limitations. The testator bequeathed the residue of his estate, both movable and immovable, to hisadopted son, Gokul Chand Bangur, absolutely. Up to the assessment year1963-64, for which the corresponding accounting year was the period 8thNovember, 1961, to 27th October, 1962, the assessment in respect of theestate of the deceased was made on Gobind Lal Bangur as the executor ofthe estate of Sri Ram Kumar Bangur, deceased. The said assessment wasmade on the 30th September, 1967. It is alleged in the petition and notdenied in the affidavit-in-opposition that the petitioner, Gobind Lal Bangur,has not yet made over the said sum of Rs. 4 lakhs to the widow of thetestator nor has he been able to obtain the probate of the will as the estateduty payable in respect of the estate of the deceased has not yet been paidthough such duty had been paid on a provisional assessment on the basis ofthe return filed. On the 3rd May, 1968, the respondent-Income-tax Officeraddressed a letter to the petitioner to be furnished with certain particularsand information's. The letter further states that from the will of thedeceased the respondent finds that the executor had been entrusted withmaking the following payments, viz., (a) the meeting of funeral andtestamentary expenses ; (b) payment of all debts outstanding at the time ofdeath ; (c) payment of Rs. 4 lakhs to the widow of the testator; and (d)handing over of the estate to Gokul Chand Bangur for his absolute benefit.The respondent went on to say that item No. (a) had already been paid andthere were no debts or liabilities outstanding as mentioned in item No. (b).According to the respondent, estate duty was not a debt outstanding at thetime of the death of the deceased and in any event it was payable by thepersons liable to pay the same under the Act. In any event as theprovisional duty as per the return had been paid and the estate hadadequate assets there was no reason why the amount of Rs. 4 lakhs due tothe widow had not yet been paid. The respondent further stated that, inthe circumstances, he considered that the execution of the will was alreadycomplete and that Gobind Lal Bangur was holding the assets not as anexecutor but as a trustee for the benefit of the widow to the extent of Rs. 4lakhs and to the extent of the remaining estate for the benefit of GokulChand Bangur. The respondent, therefore, proposed to complete theassessment for the years 1964-65 and 1965-66 under section 160 and notunder section 168 and further informed 1he petitioner that the incomewould be subjected to tax at the same rate and it would have suffered taxin the hands of the beneficiaries if directly assessed. By his letter datedthe 13th May, 1968, the petitioner objected to the course intended to betaken by the respondent and pointed out that as the estate duty payable had not yet been assessed it was not possible to make a provision for the amount of such duty. Unless the duty was paid probate of the will could not be obtained and the duty payable in respect of such probate proceedings had yet to be met out of the estate. Further, the legacy of Rs. 4 lakhs to the widow of the deceased had not yet been paid or assented to by the executor and, consequently, the administration of the estate is not yet complete and no assessment could be made of the income of the estate under Section 160 of the Income-tax Act, 1961. This rule was obtained on the 30th May, 3968, and an interim injunction restraining the respondents from proceeding with the threatened assessment was obtained.

2. In the affidavit-in-opposition affirmed on behalf of the respondent-Income-tax Officer it is stated that the non-completion of the administration of the said estate is due to the dilatory attitude of the petitioner. After various references to the records and the provisions of the Income-tax Act the respondent denied that it was in any way incumbent on him to make separate assessment under Section 168 of the Income-tax Act as claimed in the petition or that the decision of the respondent to complete the assessment for the aforesaid years under Section 160 of the Act was in any way illegal or void or of no effect.

3. One would have thought that on the averment made in paragraph 5 of the affidavit-in-opposition that the administration of the estate had not yet been completed due to the dilatory attitude of the petitioner, the intended action of the respondent in making the assessment under Section 160 would be entirely without the sanction of law.

4. The difficulty in this matter is whether at this stage the petitioner is entitled to ask the court to interfere. There is no dispute that the respondent-Income-tax Officer has jurisdiction to make the assessment on the petitioner and in exercising such jurisdiction he is entitled to make the assessment either under Section 168 or under Section 160. If he proposes to make ah assessment on a wrong view of the provisions of the Act would this court prohibit him from doing so until and unless he has actually made the assessment There is here no question of either. lack of jurisdiction or acting in excess of jurisdiction or without jurisdiction. The whole question is whether the Income-tax Officer was proposing to act in a manner not sanctioned by law and whether this court would prohibit him from doing so even though he has jurisdiction to make the assessment. Dr. Pal for the petitioner submitted that both the letter dated the 3rd May, 1968, and the averments made in the affidavit-in-opposition show clearly that the respondent No. 1 is determined to make the assessment in respect of the aforesaid two years under Section 160 and not under Section 168. As. admittedly, the administration of the estate is not yetcomplete, the petitioner is in possession of the estate as the executor under the will of the deceased and not as a trustee appointed by the will.

5. In order to appreciate the reason which has induced the respondent-Income-tax Officer to insist on making the assessment under Section 160 and not under Section 168 of the Income-tax Act, 1961, the provisions of these two sections should be set out: while Section 159 provides that on the death of an assessee his legal representative would be liable to pay any sum which the deceased would have been liable to pay if he had not died and for the assessment year during which the assessee had died the assessment could be made on such legal representative, Section 160, Sub-section (1), Clause (iv), provides that for the purposes of this Act ' representative assessee ' means in respect of income which a trustee appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise receives or is entitled to receive on behalf of or for the benefit of any person, such trustee or trustees. The assessment of such a representative assessee shall be deemed to be made upon him in his representative capacity only, and the tax shall, subject to the other provisions contained in this chapter, be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him. The material provisions of Section 168 are, for the purpose of this application, set out below :

'168. Executors.--Subject as hereinafter provided, the income of the estate of a deceased person shall be chargeable to tax in the hands of the executor,--

(a) if there is only one executor, then as if the executor were an individual; or

(b) if there are more executors than one, then, as if the executors were an association of persons;......

(2) The assessment of an executor under this section shall be made separately from any assessment that may be made on him in respect of his own income.

(3) Separate assessment shall be made under this section on the total income of each completed previous year or part thereof as is included in the period from the date of the death to the date of complete distribution to the beneficiaries of the estate according to their several interests. ....'

6. It would, therefore, appear that unless and until the legacies were paid and the distribution to the beneficiaries was completed, the assessment of the income of the estate of the deceased must be made on the executor. That this is the position in law is quite clear from the decision of Sinha J. (as he then was) in Suhashini Karuri v. Wealth-tax Officer, Calcutta, [1962] 46 I.T.R. 953 (Cal.). In that case a will creating a trust in express terms stated that the trustees were to hold the property in trust for the sons and grandsons of the donor. The estate was fully administered. On the question whether the trustees could be assessed as executors, the court held that as soon as debts and legacies were paid and legacies had been assented to, executors dropped their position as executors and assumed the duties of trustees. It was further held that in the case of a residuary bequest, executors become trustees when the residue was ascertained and the assent of the executors was either expressly given or inferred from conduct. When executors expended income on behalf of the beneficiaries their conduct would amount to assent. Therefore, the trustees could not be assessed as executors after the estate had been administered. This is also the principle embodied in Section 168(3), that is to say, until and unless the estate was completely administered and all debts and liabilities, testamentary and other expenses as well as the legacies and the gifts to the beneficiaries were made and the estate was fully administered, the executor continues to be in charge of the estate as executor and does not become a trustee in respect of the trust created under the will. It would, therefore, appear that the attitude taken up by the respondent-Income-tax Officer and the opinion formed by him do not seem to have been based on legal principles. However, the question still remained whether at this stage when the Income-tax Officer has not yet proceeded to make the assessments this court would not interfere and prohibit him from making the assessments in a particular way. Dr. Pal relied on a decision of the Supreme Court in East India Commercial Co. Ltd. v. Collector of Customs, : 1983(13)ELT1342(SC) for the proposition that even when the relevant officer had. notified the petitioner of his intention to proceed under certain provisions of the Customs Act on certain facts mentioned in the notice the court would prohibit the officer from proceeding with the execution of the notice if it was satisfied, assuming the statements in the notice to be true, that the proposed action under the said sections was not permissible. In that case certain goods were confiscated and later by consent of the parties sold under an order of the High Court and Rs. 4 lakhs 15 thousand were realised and kept in the custody of the court. Subsequently, the Collector of Customs called upon the petitioner by notice purported to be under Section 167(h) of the Sea Customs Act read with Section 3(2) of the Imports and Exports (Control) Act to show cause within seven days why the said sum of Rs. 4 lakhs 15 thousand should not be confiscated and also why penal action should not be taken against the petitioner. The Supreme Court observed :

' If on a reading of the said notice, it is manifest that on the assumption that the facts alleged or allegations made therein were true, none of the conditions laid down in the specified sections was contravened, the respondent would have no jurisdiction to initiate proceedings pursuant to that notice. To state it differently, if on a true construction of the provisions of the said two sections the respondent has no jurisdiction to initiate proceedings or make an enquiry under the said sections in respect of certain acts alleged to have been done by the appellants, the respondent can certainly be prohibited from proceeding with the same. We, therefore. reject this preliminary contention.'

7. I am afraid I cannot agree with Dr. Pal that the aforesaid proposition laid down by the Supreme Court is applicable to the facts of the present case. The Supreme Court observed that if on the true construction of the provisions of the sections the respondent had no jurisdiction then the court would certainly prohibit him from proceeding with the intended action. In the case before me there is no question of the respondent-Income-tax Officer acting in excess or without jurisdiction. The complaint is that he is proposing to act in a manner not sanctioned by law. Certainly, before he makes the assessment the respondent-Income-tax Officer is bound to give the petitioner an opportunity of being heard as to his objection to the manner in which the respondent proposes to make the assessments for the aforesaid years and if in spite of such objections by the petitioner the respondent-Income-tax Officer persists in making the assessment in a manner not permitted by law such an order can certainly be impugned and the court would certainly prevent the respondent or the department from proceeding any further with the execution of such an order. In view of the Supreme Court case discussed above it is possibly not necessary for me to deal with the decision of the Madras High Court in S. B. Adityan v. First Income-tax Officer, Madras, [1964] 52 I.T.R. 453 (Mad.) where it was observed that a writ of prohibition was an instrument of judicial control to prevent an excess or abuse of jurisdiction by inferior tribunals and where a tribunal assumed or threatened to assume a jurisdiction which it did not possess, prohibition might issue so long as proceedings are not complete. But it was also held in that case that a writ of prohibition as prayed for could not be issued as the Income-tax Officer was not attempting to assume any jurisdiction which he did not possess under the law. He had clear jurisdiction to proceed with the returns and decide whether the trust was entitled to the exemption.

8. Mr. Sen, for the department, submitted that the respondent's letter dated the 3rd May, 1968, was merely the expression of a tentative opinion which the respondent was entitled to change at the time of the making of the assessment if sufficient cause was shown. He further argued that the proposed course of action by the respondent-Income-tax Officer would not cause any prejudice to the petitioner. If any prejudice is caused to the beneficiaries they had not come before this court or have been made party to this application, Mr. Sen also referred to an old decision of this court in In re Keshardeo Chamaria, [1937] 5 I.T.R. 246 (Cal.). where it was held that it was for the Income-tax Officer to decide whether an assessee should be taxed as an owner under Section 9. There is no dispute that the respondent-Income-tax Officer has not only the jurisdiction to make the assessment in this case but he has also the jurisdiction in the course of such assessment to determine the status of the assessee. But if in making his decision he ignores or acts in contravention of well-established principles of law the order would certainly be amenable to the writ jurisdiction of this court.

9. In the view I have taken, this rule must be discharged and all interim orders must be vacated. Very recently, the Supreme Court has expressed the opinion that in applications under Article 226 of the Constitution, the High Court is entitled to give a declaration ; it is not necessary for the to give a declaration in this case, but I would direct the Income-tax Officer to act according to law in making the proposed assessments for the assessment years 1964-65 and 1965-66. The operation of this order would be stayed till a fortnight after the vacation.

10. There will be no order as to costs in this application.


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