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Ganashyamdas Jatia and ors. Vs. Income-tax Officer, Central and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberMatter No. 412 of 1970
Judge
Reported in[1973]87ITR683(Cal)
ActsIncome Tax Act, 1922 - Sections 22, 24B(2), 24B(3), 27 and 34(1A); ;Income Tax Act, 1961 - Sections 220, 225(3) and 225(4); ;Constitution of India - Articles 226 and 227
AppellantGanashyamdas Jatia and ors.
Respondentincome-tax Officer, Central and ors.
Cases ReferredHirday Narain v. Income
Excerpt:
- .....a total income of rs. 87,269 in respect of the assessment year 1945-46 under section 23(3) of the indian income-tax act, 1922. on the 29th march, 1956, notice under section 34(1a) of the indian income-tax act, 1922, was served on the said kanailall jatia for reopening the said assessment. the said service of the notice was effected by affixation. on the 12th july, 1956, notice under section 22(4) of the indian income-tax act, 192^ was served on kanailall jatia, since deceased. on the 19th january, 1958, kanailall jatia died leaving the petitioners, his heirs and legal representatives. on the 4th october, 1958, an ex parte order of assessment was made on kanailall jatia, since deceased, under section 34(1a) read with section 23(4) of the indian income-tax act, 1922, on a total income of.....
Judgment:

Sabyasachi Mukharji, J.

1. One Kanailall Jatia, since deceased, was assessed on a total income of Rs. 87,269 in respect of the assessment year 1945-46 under Section 23(3) of the Indian Income-tax Act, 1922. On the 29th March, 1956, notice under Section 34(1A) of the Indian Income-tax Act, 1922, was served on the said Kanailall Jatia for reopening the said assessment. The said service of the notice was effected by affixation. On the 12th July, 1956, notice under Section 22(4) of the Indian Income-tax Act, 192^ was served on Kanailall Jatia, since deceased. On the 19th January, 1958, Kanailall Jatia died leaving the petitioners, his heirs and legal representatives. On the 4th October, 1958, an ex parte order of assessment was made on Kanailall Jatia, since deceased, under Section 34(1A) read with Section 23(4) of the Indian Income-tax Act, 1922, on a total income of Rs. 22,00,135-46. On the 7th November, 1958, notice of demand under Section 29 of the Indian Income-tax Act, 1922, in the name of the said Kanailall Jatia was served on the petitioners as heirs and legal representatives. Thereafter, an appeal was preferred before the Appellate Assistant Commissioner against the said assessment order under Section 34(1A) of the Indian Income-tax Act, 1922. On 11th July, 1961, the said assessment under Section 34(1A) was set aside on the ground, that the ex parte assessment had been made on a dead person. On the 28th July, 1962, notice under Section 22(4) of the Indian Income-tax Act was served on the petitioners who were the heirs and legal representatives of Kanailall' Jatia, since deceased. In August, 1962, a fresh order of assessment under Section 34(1A) and Section 23(4) read with Sections 31(3) and 24B(2) of the. Indian Income-tax Act, 1922, was made on a total income of Rs. 22,46,546 and a sum of Rs. 19,92,358-34 was determined as tax payable. The said assessment was made on the basis that notice under Section 22(4) of the Indian Income-tax Act,. 1922, had not been complied with. Thereafter, the petitioners made an application under Section 27 of the 1922 Act for setting aside the ex parte assessment. On the 11th October, 1962, the petitioners also preferred an appeal against the said assessment before the Appellate Assistant Commissioner of Income-tax. On 7th July, 1963, respondent No. 1, the Income-tax Officer, rejected the application of the petitioners under Section 27 of the Indian Income-tax Act, 1922. The Appellate Assistant Commissioner, Range II, Central, Calcutta, rejected the quantum appeal against the said ex parte assessment on a technical ground, but allowed the appeal preferred against the order under Section 27 rejecting the application of the petitioner. The Appellate Assistant Commissioner set aside the said order under Section 27 of the Indian Income-tax Act, 1922, and cancelled the assessment and directed the respondent No. 1 to make a fresh assessment. The petitioners thereafter preferred an appeal before the Appellate Tribunal against the order of the Appellate Assistant Commissioner rejecting the quantum appeal against the order of the Income-tax Officer. On the 30th March, 1969, the Income-tax Appellate Tribunal allowed the appeal of the petitioners and restored the quantum appeal and directed the Appellate Assistant Commissioner to hear the said appeal on merits. The said appeal is still pending. The department also preferred an appeal before the Income-tax Appellate Tribunal against the order of the Appellate Assistant Commissioner cancelling the said assessment and allowing the appeal against the order passed by the respondent No. 1 under Section 27 of the Indian Income-tax Act, 1922. The said appeal is also still pending. It appears further that proceedings were taken for recovery by means of certificate of the dues from the petitioners as a result of the said assessment order. It was stated in the petition that the Certificate Officer was threatening to proceed with the said certificate. In this application under article 226 of the Constitution the petitioners challenge the assessment order and the demand notice as well as the proceedings for the recovery by the certificate proceedings in Certificate Case No. 820-ITC/64-65.

2. Mr. Dutta, appearing for the petitioners, urged, firstly, that the certificate proceedings in any event were liable to be quashed and could not proceed any further. From the facts stated hereinbefore it is clear that the assessment order had been set aside and the Income-tax Officer had been directed, as a result of the order, to proceed afresh and make a fresh assessment. In this context it is apparent, therefore, that the certificate proceedings cannot proceed against the petitioner. The question is, whether the certificate proceedings should be quashed or whether the income-tax department and the Certificate Officer should be restrained from further proceeding until an assessment order is passed again by virtue of the order made under Section 27 of the Indian Income-tax Act, 1922. Mr. Sen, learned counsel for the revenue, contended that under Sub-section (3) of Section 225 of the Income-tax Act, 1961, a certificate could be kept in abeyance and after an appropriate order of assessment was again passed the certificate could be amended or modified accordingly. I am, however, unable to accept that position. Under Section 220 of the Indian Income-tax Act, an assessee can only tie in default when he fails to pay the sum due from him after an appropriate notice of demand was given pursuant to a valid order of assessment. It is upon an assessee becoming an assessee in default that proceedings for certificate can be taken. If the proceedings had been taken and any sum was due, Sub-section (3) of Section 220 points out that in case of modification if the demand was reduced then the certificate could be modified. The provisions of Sub-section (3) and Sub-section (4) of Section 225 deal with a case where there is an order of assessment and some money is due but the same has been reduced in appeal. These provisions do not and cannot contemplate, in my opinion, a situation where the entire assessment has been set aside. Reference may be made in this connection to the decision of the Supreme Court in the case of Income-tax Officer v. Seghu Buchiah Setty, : [1964]52ITR538(SC) . In my opinion, it must be the position that, when the entire assessment has been set aside, the petitioners cannot be treated as assessee in default and as such cannot be proceeded again by certificate proceedings. In case an assessment is made and the petitioners made default in paying up the demand then and then only can a certificate be properly initiated. In that view of the matter the certificate proceedings under Certificate Case No. 20-ITC/64-65 and the recovery proceedings thereunder are liable to be quashed.

3. Mr. Dutta further urged that the assessment in this case could not be made against the petitioners without serving a fresh notice on the petitioners under Section 34(1A) of the Indian Income-tax Act, 1927, Mr. Dutta drew my attention to the provisions of Section 24B of the Indian Income-tax Act, 1922. It will be necessary to set out the said section.

' 24B. Tax of deceased person payable by representative.--(1) Where a person die s, his executor, administrator or other legal representative shall be liable to pay out of the estate of the deceased person to the extent to which the estate is capable of meeting the charge the tax assessed as payable by such person, or any tax which would have been payable by him under this Act if he had not died.

(2) 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 notice under Sub-section (2) of Section 22 or Section 34, as the case may be, his executor, administrator or other legal representative 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.

(3) Where a person dies, without having furnished a return which he has been required to furnish under the provisions of Section 22, or having furnished a return which the Income-tax Officer has reason to believe to be incorrect or incomplete, the Income-tax' Officer may make an assessment of the total income of such person and determine the tax payable by him on the basis of such assessment, and for this purpose may, by the issue of the appropriate notice which would have had to be served upon the deceased person had he survived, require from the executor, administrator or other legal representative of the deceased person any accounts, documents, or other evidence which he might under the provisions of Sections 22 and 23 have required from the deceased person.'

4. Mr. Dutta in this connection drew may attention to the provisions of Section 159 of the Income-tax Act, 1961, and, according to him, the difference in language between the two sections signified that, in case an assessee died after the service of the notice under Section 34(1A) of the Indian Income-tax Act, 1922, it was obligatory on the part of the department to serve on the heirs a fresh notice under Section 34(1 A) of the Indian Income-tax Act, 1922. Sub-section (2) of Section 159 of the Income-tax Act, 1961, provides as follows :

' (2) For the purpose of making an assessment (including an assessment, reassessment or recomputation under Section 147) of the income of the deceased and for the purpose of levying any sum in the hands of the legal representative in accordance with the provisions of Sub-section (1),--

(a) any proceeding taken against the deceased before his death shall, be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased;

(b) any proceeding which could have been taken against the deceased if he had survived, may be taken against the legal representative; and

(c) all the provisions of this Act shall apply accordingly.'

5. I am unable to accept the said contention of Mr. Dutta. Sub-section (2) of Section 243 of the 1922 Act deals with cases where a person dies before the publication of the notice under Section 22, or before the service of the notice under Section 22(2) or Section 34. In that case a fresh service on the heirs would be required. Sub-section (3) deals with cases where a person dies without having furnished a return which he had been required to furnish ' under the provisions of Section 22 '. Mr. Dutta contended that it did not deal with cases where a person died without having furnished a return under Section 34(1A) which was the case here. According to him in Sub-section (2) of Section 24B of the Act Section 34(1A) has been mentioned, but significantly in Sub-section (3) of Section 24B it has not been so mentioned. It was, therefore, contended that the legislature intended that there should be a fresh service under Section 34(1A) on the heirs and legal representatives if the person died after a notice had been served upon him under that section but he had not filed that return. Mr. Dutta further contended that his argument was strengthened by the language used in Sub-section (2) of Section 159 of the Income-tax Act, 1961, which specifically permitted the department to proceed on the heirs and legal representatives without serving a fresh notice under Section 148 of the Income-tax Act, 1961. As mentioned hereinbefore I am unable to accept his contention because by Sub-section (3) of Section 24B a situation is dealt with, where a person dies without furnishing a return which he is required to furnish under the provisions of Section 22. Section 34(1A) provides that notice might be served containing all or any of the requirements which may be included in Section 22 of the Income-tax Act, 1922. So under a notice under Section 34(1A) requirements of the provisions of Section 22 are included. It is true that the return under Section 34 is a return filed pursuant to a notice under Section 34. But, it is also true that it is the return which the assessee is required to file not under section 22, but ' under the provisions of Section 22'. The effect of the requirement of Section 22 in a notice under Section 34(1A) has been explained by the Supreme Court in the case of K. S. Rashid & Son v. Income-tax Officer, : [1964]6SCR826 . The Supreme Court observed that it was true that Section 34(1) used the clause 'as if the notice were a notice issued under that sub-section' and Section 34(1A) did not; but the two provisions were not inserted in the Act at the same time and it was quite likely that the draftsman who drafted Section 34(1A) took the view, that the last clause in question which occurred in Section 34(1) was really superfluous and that might account for its omission in Section 34(1A). It was further observed by the Supreme Court that it could not have been the intention of the legislature when it enacted under Section 34(1A) that the procedure prescribed by the relevant provisions of the Act beginning with Section 22 should not be applicable to the proceedings taken under Section 34(1A) and that the procedure to be followed in the said proceedings and the powers to be exercised by the Income-tax Officers dealing with them should be what was vaguely described as the inherent or incidental powers of such officers. Therefore, it was held by the Supreme Court that the challenge made to the validity of Section 34(1A) on the ground that the remedy by way of appeals or revisions which were available to the assessees against whom proceedings were taken under Section 34(1) was not available to the assessees who were covered by Section 34(1A) could not be accepted. In the aforesaid view of the matter I find it difficult to accept the contention of Mr. Dutta. It appears that in Sub-section (2) of Section 24B the legislature has used the expression ' under the provisions of Section 22 ' and not the expression ' in terms of Section 22 '. Therefore, after a notice under Section 34(1A) is served, a person is required to furnish a return under Section 22 and comply with further requisitions under subsequent sections if made by the Income-tax Officer. Therefore, Sub-section (3) of Section 24B of the Income-tax Act, 1922, would be applicable to the facts and circumstances of this case. It is true that in the 1961 Act Section 159 is more explicit and clear but in my opinion that is the legislative provision of what was the previous law in view of the decision of the Supreme Court mentioned hereinbefore. In the aforesaid view of the matter I am unable tp accept this contention of Mr. Dutta that without service of the fresh notice under Section 34(1A) of the Income-tax Act, 1922, the revenue was not competent to proceed to assess the heirs of Kanailall Jatia, since deceased. Mr. Dutta drew my attention to several decisions, namely, the decision of this court in Commissioner of Income-tax v. Moon Mills Ltd., [1962] 46 I.T.R. 771 (Cal.), the decision of the Bombay Court in the case of B. M. Desai v. Ramamurthy, Income-tax Officer, Bombay, [1958] 34 I.T.R. 409 (Bom.), the decision of the Supreme Court in the case of Commissioner of Income-tax v. Manilal Dhanji, [1962] 44 I.T.R. 876; [19621 Supp. 2 S.C.R.902 (S.C.), and the decision of the Bombay High Court in the case of Bai Hiradevi v. Official Assignee, Bombay, : AIR1955Bom122 , in support of the proposition that strict construction in a case like this should be made and such construction should be one which was favourable to the assessee. It is true that strict construction should be made but in the facts and circumstances of this case, in the view I have taken of the language used under Section 34(1A) of the Indian Income-tax Act, 1922, it is not necessary for me to discuss the aforesaid decisions in detail.

6. There is, however, another aspect of the matter. On the question of the assessment an appeal has been preferred, and the remedies by the Income-tax Act have been availed of by the petitioners. It further appears that the assessment was made on the heirs on the 4th October, 1958, in respect of the assessment year 1945-46. Therefore, if the point was taken at that time that no fresh assessment could be made without serving a notice under Section 34(1A) on the heirs, the department might have taken other course. No such point was taken at that point of time. On the other hand, the petitioners availed themselves of the alternative remedy and were actively pursuing the same. In those circumstances, I am of the opinion that the petitioner cannot seek any relief in an application under Article 226 of the Constitution on the question of assessment. In this connection reference may be made to the Special Bench decision of this court in the case of Sheo Nath Singh v. Appellate Assistant Commissioner of Income-tax, [1968] 67 I.T.R. 254 (Cal.). [F.B.]. In this connection reliance was placed on behalf of the petitioners on the decision of the Supreme Court in the case of Hirday Narain v. Income-tax Officer, Bareilly, : [1970]78ITR26(SC) . There the Supreme Court observed that once the court entertained an application under Article 226 of the Constitution and issued a rule nisi, it was not proper to reject such an application on the ground that alternative remedies were provided by the Income-tax Act. The facts and circumstances of the said case are entirely, different from the facts and circumstances of the instant case. In that case when the petitioner moved the court, the time to avail himself of the alternative remedy having not expired, he moved the court before the expiry of that time and the court entertained that application. Therefore, he did not pursue the alternative remedy. Thereafter, the Supreme Court observed that to refuse an application under Article 226 of the Constitution on the ground that he had an alternative remedy after having entertained that application was not proper. I think in the instant case before me the facts are different. Here the petitioners have availed themselves of the alternative remedy. Furthermore, the petitioners could have taken this point as early as 1958. Taking these factors together I am of the opinion that the petitioners in this case by their conduct have disentitled themselves to any relief under Article 226 of the Constitution on this aspect of the matter. In the aforesaid view of the matter Mr. Dutta's contention, so far as he challenges the assessment proceedings, cannot be accepted.

7. In the view I have taken, however, of the recovery proceedings I, therefore, quash the certificate proceedings in Certificate Case No. 820-I. T.C./64-65 and the proceedings thereunder. Let a writ in the nature of certiorari issue accordingly. The respondents are further restrained from proceeding with such certificate. Let a writ in the nature of mandamus issue accordingly. So far as the prayer for quashing the assessment proceedings is concerned, the same is refused. This order, however, will not prevent the respondents from initiating fresh certificate after a valid order of assessment has been made, in case the petitioners are in default. The rule is made absolute to the extent as indicated above.

8. There will be no order as to costs.


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