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Padampat Singhania And Others v. Controller Of Estate Duty, Kanpur.
Structured Summary of the Opinion (C.S.P. Singh, J.)
Factual and Procedural Background
The opinion arises from two questions referred by the Income-tax Appellate Tribunal, Allahabad Bench. The dispute concerns the estate of the deceased, Shyam Hari Singhania, who died on 3 December 1960. At death he owned separate self-acquired property and was a coparcener in a Hindu Undivided Family (HUF) the karta of which was Sir Padampat Singhania (the deceased's father). The deceased left a widow, Smt. Usha Devi, and his mother, Lady Ansuiya Devi; he had no issue.
Lady Ansuiya Devi filed a return on 1 August 1961 showing the net value of the estate. Smt. Usha Devi later filed a return on 16 August 1963 at the request of the department. Sir Padampat Singhania (the karta) did not file any return. On 14 August 1969 the Assistant Controller issued a notice under section 58(2) of the Estate Duty Act and completed assessment on 27 June 1972. Although no formal notice was given to Sir Padampat Singhania, the Assistant Controller treated him as one of the accountable persons in the assessment order.
An appeal against the Assistant Controller's assessment was filed by Sir Padampat Singhania (as karta of the HUF), Lady Ansuiya Devi and Smt. Usha Devi. The Appellate Controller remanded the matter inter alia because notice had not been given to Sir Padampat Singhania. All three appellants then appealed to the Tribunal, asserting (1) the assessments were time-barred under section 73A (no proceedings commenced within five years of death) and (2) the Appellate Controller erred in remanding for fresh proceedings against the karta after the five-year period. The Tribunal rejected both contentions and referred the two questions to this court for opinion.
Legal Issues Presented
- "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the estate duty proceedings had not become time-barred in this case in terms of the provisions contained in section 73A(a) of the Estate Duty Act?"
- "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in confirming the order of the Appellate Controller directing the Assistant Controller to re-do the assessment after providing full opportunity of hearing to the karta of the HUF also?"
Arguments of the Parties
Assessee's (Appellants') Arguments (as presented)
- Counsel for the assessee (Sri Vibhav Upadhya) argued that section 73A contemplates a positive act by statutory authorities to "commence proceedings" for levy of estate duty; therefore the filing of returns by accountable persons does not amount to commencement of proceedings for the purpose of s.73A.
- It was submitted that because the death occurred on 3 December 1960 and the Assistant Controller's first action in the file was only on 14 August 1969 (notice under s.58(2)), the five-year period in s.73A had expired and the assessments were time-barred.
- Regarding the second question, the assessee contended the Appellate Controller could not remand to start proceedings against Sir Padampat Singhania (the karta) after the five-year period because that would be starting proceedings against him beyond the s.73A limitation.
Department's Arguments (as presented)
- The department contended that the filing of a return by an accountable person does commence proceedings for levy of estate duty; since returns had been filed within five years of death, assessments were valid.
- It was also argued that Smt. Usha Devi's filing of a return on 16 August 1963 (at the department's request) saved the assessment from limitation.
- The department's counsel relied on authorities (cases under the Income Tax Act) to support the proposition that filing a return or related requisitions can constitute commencement of proceedings.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Assistant Collector of Central Excise v. National Tobacco Co of India Ltd., (1972) 2 SCC 560; AIR 1972 SC 2563 | The word "levy" embraces the process of assessment and also the imposition of tax. | The court used this interpretation to hold that a requisition under section 55 (to an accountable person to deliver particulars) is a requisition for assessing the value of the estate and thus, once made, proceedings for levying estate duty can be said to have been started by the Assistant Controller. |
| Modem Lal Lohia v. Assistant Controller, [1977] 108 ITR 627 | The Assistant Controller need not wait for all accountable persons to file accounts and may make a final order based on accounts submitted by any one accountable person; such an order binds other accountable persons who become liable limited to assets they received. | The court relied on this Supreme Court decision to hold (a) the Assistant Controller could make an assessment based on the accounts filed by the two women even though the karta had not filed an account, and (b) that on passing such an assessment Sir Padampat Singhania became liable to pay estate duty qua the share of the deceased in HUF assets. This precedent also justified the Appellate Controller's order to provide the karta an opportunity to be heard. |
| Ameen Pillai Rawther Hassan Kari Rawther v. Asst. CED, AIR 1966 Ker 100 | Held by the Kerala High Court that no liability for estate duty can be imposed on persons who have not been made parties to the proceedings. | The court stated that this decision, insofar as it lays down that proposition, does not represent the correct law in view of the Supreme Court's pronouncement in Modem Lal Lohia's case; the Kerala High Court's approach was therefore rejected. |
Court's Reasoning and Analysis
The court addressed the two referred questions seriatim and anchored its reasoning on statutory text (sections 53(3), 55 and 73A of the Estate Duty Act) and the precedents cited in the record.
On the first question (time-bar under s.73A): the court observed that it was unnecessary to decide the general question when proceedings for levy of estate duty commence under the Estate Duty Act because the facts disclosed an action by the department within five years. Specifically, Smt. Usha Devi filed a return on 16 August 1963 in response to a departmental request. Although the exact statutory provision under which the request was made was not stated in lower orders, the court found it apparent the request was under section 55, which empowers the Controller to ask an accountable person for particulars and accounts relating to estate property where the Controller considers estate duty leviable.
The court then relied on the Supreme Court's interpretation in Assistant Collector of Central Excise v. National Tobacco Co. (that "levy" includes assessment and imposition) and reasoned that a requisition under section 55 is one for assessing the value of the estate. Consequently, once such a requisition was made (and thus the departmental request to Smt. Usha Devi antecedent to her return), proceedings for levying estate duty could be said to have been commenced by the Assistant Controller well within five years of death. On that basis the court concluded the estate duty proceedings were not barred by limitation under s.73A.
On the second question (whether remand to give opportunity to the karta was correct): the court analysed the statutory scheme that proceedings for levy of estate duty constitute a single proceeding even if multiple accountable persons file separate accounts. Section 53(3) requires each accountable person to deliver accounts, but the Act does not contemplate separate, independent proceedings for each accountable person. The bar in s.73A applies only if proceedings for assessment have not commenced within five years of death; where proceedings have commenced within that period in respect of one accountable person, subsequent directions to other accountable persons within those proceedings are not barred.
The court further applied Modem Lal Lohia v. Assistant Controller: the Assistant Controller may make a final order based on an account submitted by any one accountable person, and such an order binds other accountable persons who thereby become liable (limited to assets they received). Thus, although Sir Padampat had not filed an account and had not been given notice originally, the Assistant Controller's assessment based on the valuations filed by the two women rendered Sir Padampat liable for the estate duty as regards the HUF share. Given that no opportunity had been given originally, the Appellate Controller's direction to afford Sir Padampat an opportunity to be heard was correct — even though the Supreme Court decision indicated such an opportunity need not be given, providing it was appropriate for fairness. The court rejected the contrary view of the Kerala High Court in Ameen Pillai to the extent that it held no liability can be imposed on persons not made parties.
Holding and Implications
Holding: The court answered both referred questions in the affirmative — in favour of the department and against the assessee.
Direct consequences on the parties:
- The estate duty proceedings were held not to be time-barred because a departmental requisition under section 55 (and the subsequent return filed by Smt. Usha Devi) established that proceedings had been commenced within five years of death.
- The Appellate Controller's directive to the Assistant Controller to re-do the assessment after providing full opportunity of hearing to Sir Padampat Singhania (the karta) was held to be correct; Sir Padampat was properly within the scope of the single estate-duty proceeding and could be required to account and be heard.
- The department was awarded costs assessed at Rs. 200 and counsel's fee was assessed at the same figure (Rs. 200).
Broader implications: the court applied existing Supreme Court authority (Modem Lal Lohia) and the National Tobacco decision on the meaning of "levy." The opinion does not purport to lay down a new rule departing from those authorities; the decision operates to confirm that a section 55 requisition and related actions can constitute commencement of estate-duty proceedings for limitation purposes and that assessments based on some accountable persons' accounts bind other accountable persons.
C.S.P Singh, J.:— The Income-tax Appellate Tribunal, Allahabad Bench, Allahabad, has referred the following questions for the opinion of this court:
“(1) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the estate duty proceedings had not become time-barred in this case in terms of the provisions contained in section 73A(a) of the Estate Duty Act?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in confirming the order of the Appellate Controller directing the Assistant Controller to re-do the assessment after providing full opportunity of hearing to the karta of the HUF also?”
2. The dispute relates to the estate of the deceased, Shyam Hari Singhania, who died on the 3rd December, 1960. At the time of his death he owned separate and self-acquired property, and was also a member of a HUF of of which Sir Padampat Singhania, his father, was the karta. Shyam Hari Singhania had no issue, and left behind him a widow, Smt. Usha Devi, and his mother, Lady Ansuiya Devi (class I heirs under the Hindu Succession Act). On the 1st August, 1961, Lady Ansuiya Devi filed a return showing the net value of the estate as Rs. 11,63,629. Later on, the widow, Smt. Usha Devi, also filed a return on 16th August, 1963, at the request of the department. Sir Padampat Singhania did not file any return at all in respect of the estate of the deceased. On the 14th August, 1969, a notice under s. 58(2) of the Estate Duty Act (hereinafter referred to as “the Act”) was issued by the Assistant Controller, and the assessment completed on the 27th June, 1972. Although no formal notice was given to Sir Padampat Singhania, who was the karta of the HUF of which the deceased was a coparcener, the Assistant Controller passed an assessment order treating him also as one of the accountable persons. As in the present case we are not concerned with the valuation of the estate or the estate duty imposed thereon, it is not necessary to state these facts.
3. An appeal was filed by Sir Padampat Singhania as karta of the HUF, Lady Ansuiya Devi and Smt. Usha Devi. The appellate authority remanded the matter to the Assistant Controller, inter alia, on the ground that the case could not be properly disposed of without notice to Sir Padampat Singhania, who was the karta of the HUF. All the three persons, who were appellants before the Assistant Commissioner, filed an appeal before the Tribunal. It was urged that the assessments were barred by time in view of s. 73A, inasmuch as no proceedings for the levy of estate duty had been commenced within five years of the death of the deceased. It was also contended that the AAC erred in sending back the case for starting proceedings against Sir Padampat Singhania as karta of the HUF as proceedings against him could not be started after the expiry of five years as set down in s. 73A. Both these contentions have been rejected by the Tribunal. We will deal with the questions seriatim.
4. It is necessary to extract s. 73A in order to answer the first question. This provision is couched in the following terms:
“No proceedings for the levy of any estate duty under this Act shall be commenced—
(a) in the case of a first assessment, after the expiration of five years from the date of death of the deceased in respect of whose property estate duty became payable; and
(b) in the case of a reassessment, after the expiration, of three years from the date of assessment of such property to estate duty under this Act.”
5. Sri Vibhav Upadhya appearing on behalf of the assessee has urged that s. 73A contemplates a positive act on the part of the statutory authorities for commencing proceedings for levy of estate duty, and inasmuch as in the present case the death had occurred on the 3rd December, 1960, and the first time when action taken by the Assistant Controller was on 14th August, 1969, when a notice under s. 58(2) was issued, the period for the levying of estate duty had run out. It was urged that the filing of a return by the accountable person did not commence the proceeding as contemplated by s. 73A, for that provision postulates action on the part of the Controller and not by the accountable person. Counsel for the department, on the other hand, contended that the filing of a return commences proceedings for levy of estate duty, and inasmuch as the returns had been filed within five years, the assessments were valid. It was also urged that, in any event, as Smt. Usha Devi had filed a return on 16th August, 1963, i.e, within five years of the death of Shyam Hari Singhania at the request of the department, the assessment was saved. In this context in support of the argument that the filing of a return commences proceedings for levy of tax he invited our attention to a number of cases decided by the various High Courts under the I.T Act.
6. In the present case, however, we think that it is not necessary to decide the question as to when proceedings for levy of estate duty commence under the E.D Act, for reasons to be stated hereafter. As noticed earlier, Smt. Usha Devi filed a return on 16th August, 1963, in response to a request made by the department. Although the provision under which the request was made to Smt. Usha Devi has not been stated in the order of the Tribunal or the Appellate Controller, it is apparent that such a request could be made only under s. 55, for, it is under this provision that the Controller can ask an accountable person, and certain other categories of persons to deliver a statement of particulars and accounts, etc., which may be required by the Controller relating to any property which in his opinion formed part of an estate in respect of which estate duty was leviable. As the return was filed on 16th August, 1963, the request to do so on behalf of the department must have been made earlier. Thus, the request on behalf of the department, which in the circumstances is referable to s. 55, was made much before the expiry of five years from the date of the death of Shyam Hari Singhania. Now, a requisition under s. 55 is made for purposes of valuing the estate of the deceased for purposes of levy of estate duty. (The word “levy” has been interpreted by the Supreme Court in the case of Assistant Collector of Central Excise v. National Tobacco Co of India Ltd., (1972) 2 SCC 560 : AIR 1972 SC 2563, as embracing within it the process of assessment and also the imposition of tax: The requisition made under s. 55 is one for assessing the value of the estate of the deceased. Once such a requisition has been made from an accountable person proceedings for levying estate duty can be said to have been started by the Assistant Controller. On this view the estate duty proceedings were not barred by limitation.
7. Coming now to the second question. The circumstances under which the Appellate Controller directed the Assistant Controller to pass a fresh assessment order after providing an opportunity to the karta of the HUF have already been detailed. Sri Vibhav Upadhya appearing on behalf of the assessee has, however, contended that inasmuch as no notice was given by the Assistant Controller to Sir Padampat Singhania who was the karta of the HUF when the assessment order was made, the appellate authority could not remand the matter for starting proceedings for assessment against Sir Padampat Singhania. It was urged that such an order would be hit by s. 73A, for it would amount to starting proceedings for assessment against the karta of the HUF after the expiry of five years from the date of death of Shyam Hari Singhania. This contention is misconceived. In the first, place, although s. 53(3) of the Act requires every person accountable for estate duty of the deceased to deliver to the Controller, an account in the prescribed manner of all the properties of the deceased, yet the proceedings for levy of estate duty on the estate of the deceased is a single proceeding. The Act does not contemplate separate proceedings for levy of estate duty in the event of separate accounts being filed by a number of persons, who may be accountable. The bar of limitation contained in s. 73A applies only in a case in which the proceedings for assessment have not commenced within five years of the date of death. Once they have commenced within five years of the date of death even in respect of one of the accountable persons, the bar of s. 73A will not operate in cases where during the course of these proceedings the Assistant Controller directs other accountable persons to file accounts. Sir Padampat Singhania being the karta of the HUF was an accountable person as he was one of the legal representatives of the deceased as contemplated by s. 2(12). Thus, in view of s. 53(3), he had to file an account of the estate of the deceased. But the mere fact that he had not filed the account earlier or that the, Appellate Controller directed the Assistant Controller to pass a fresh assessment order after giving an opportunity to be heard, would not attract the bar of s. 73A. In the case of Modem Lal Lohia v. Assistant Controller, [1977] 108 ITR 627, the Supreme Court has held that the Assistant Controller need not wait for all the accountable persons to file the accounts and can make a final order in respect of the amount payable as estate duty on the account submitted by any one of the accountable persons, and on such an order being passed not only the accountable person in respect of whom proceedings for assessment had been taken but also every other accountable person would be liable to pay the amount of estate duty limited to the assets of the deceased which each of the other accountable person has received. Thus, on the assessment order being passed by the Assistant Controller on the basis of the valuations given by the two ladies, Sir Padampat Singhania also became liable for payment of the estate duty qua the share of Shyam Hari Singhania in the assets of the HUF. This being the position and as no opportunity had been given by the Assistant Controller while making the final assessment, although in view of the pronouncement of the Supreme Court no such opportunity need have been given, the order passed by the Appellate Controller directing such an opportunity to be given was correct. The decision of the Kerala High Court in the case of Ameen Pillai Rawther Hassan Kari Rawther v. Asst. CED, AIR 1966 Ker 100, in so far as it lays down that no liability for estate duty can be imposed on persons who have not been made parties to the proceedings, does not, in view of the pronouncement of the Supreme Court in Madan Lal Lohia's case, [1977] 108 ITR 627, lay down the correct law.
8. We, accordingly, answer both the questions in the affirmative, in favour of the department and against the assessee. The department is entitled to its costs, which are assessed at Rs. 200. Counsel's fee is also assessed at the same figure.
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