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Controller Of Estate Duty, Meerut v. Smt. Manorama Devi.

Allahabad High Court

Oct 30, 1979

Judgment

Subsequent
References

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Structured Summary of the Court Opinion

Factual and Procedural Background

The Income-tax Appellate Tribunal, Allahabad Bench C, referred two questions to the court concerning estate duty proceedings in respect of the estate of Smt. Asarfi Devi (died 23 September 1959).

The accountable person failed to file the estate account within the six-month period prescribed by section 53(3) of the Estate Duty Act, 1953. On 18 February 1963 the Assistant Controller of Estate Duty (Asst. CED) issued a notice under section 55; this notice was served on the accountable person on 5 March 1963. In response, a return in Form ED-5 was filed on 1 April 1963, and the filers contended that the notice and proceedings were invalid.

After filing the return, the Asst. Controller issued a notice under section 58(2) (served 1 April 1963). The accountable person did not comply with the terms of that notice, and the Asst. Controller made a best judgment assessment under section 58(4). An appeal against that assessment to the Asst. Controller failed, and the accountable person appealed to the Tribunal.

The Tribunal allowed the appeal, holding that the best judgment assessment under section 58(4) was invalid for two principal reasons: (1) the account had been filed after the six-month period required by section 53(3), so the return was not an account under section 53 at all; and (2) the account filed was in Form ED-5 and not complete in all respects, so it was non est and could not support a notice under section 58(2). The Tribunal suggested that proceedings under section 59 were the proper course.

Legal Issues Presented

Whether, on the facts and in the circumstances of the case, the proceedings for levy of estate duty were commenced within the period prescribed under section 73A of the Estate Duty Act, 1953?
Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the best judgment assessment under section 58(4) of the Estate Duty Act, 1953, was invalid?

Arguments of the Parties

Accountable person / Assessee (as recorded in the opinion)

Asserted that the notice and ensuing proceedings were invalid.
Contended that the account filed beyond six months (i.e., after the period prescribed by s.53(3)) was not an account under s.53 and therefore could not support further action under s.58.
Argued that the account was filed in Form ED-5 and was not complete in all particulars required by s.53(3) (or by implication s.53), so the return was non est and could not give rise to a valid notice under s.58(2) or a best judgment assessment under s.58(4).
Suggested the proper procedure, according to the Tribunal's view, was to proceed under s.59 rather than under s.58(4).

The opinion records that at the hearing before this court no one appeared on behalf of the assessee; the document therefore does not record further oral submissions made before this Court.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Ranchhoddas Karsondas (CIT v. Ranchhoddas Karsondas) [1959] 36 ITR 569	The opinion cites this Supreme Court decision; the specific legal principle from this case is not set out in the provided text.	The court observed that, once the return was held to be a return under s.53(1), it was unnecessary to consider this decision for the present questions. The opinion does not elaborate the decision's content beyond noting it was one of the authorities that might otherwise be considered.
State of Assam v. D.C. Choudhuri [1970] 76 ITR 706	Recognised for the principle that proceedings were struck down where no statutory notice (s.19(2) of the Assam Agricultural Income-tax Act, 1939) had been issued before making a best judgment assessment under the corresponding provision (s.20(5)). The opinion notes s.19(2) is in pari materia with s.58(2) of the Estate Duty Act.	The court distinguished Choudhuri: in that case absence of a required notice rendered the assessment invalid; here, however, a notice under s.58(2) had been issued and not complied with, so Choudhuri did not invalidate the assessment under s.58(4) in the present facts.
Padampat Singhania v. CED, E.D.R. No. 11 of 1977, decided 26-9-1979 [1980] 122 ITR 162 (All.)	Holds that a notice under s.55 starts proceedings under the Estate Duty Act, and if issued before the expiry of five years from death the bar of limitation created by s.73A is saved.	The court applied this holding to the facts: since the notice under s.55 was served before the five-year limitation period expired, the proceedings for levy of estate duty were held to have been validly commenced within limitation.

Court's Reasoning and Analysis

The court's analysis focuses on the interaction between sections 53, 55, 56 and 58 of the Estate Duty Act, 1953.

Key statutory provisions extracted and relied upon in the opinion:

Section 53(1) — identifies who is accountable for estate duty upon death.
Section 53(3) — requires every person accountable to deliver an account in the prescribed form within six months of death, subject to the Controller's power to extend that period.
Section 55 — empowers the Controller to call upon persons to deliver a statement of particulars (i.e., authorises issuance of notices requesting accounts).
Section 56 — applies in cases where letters of representation are sought by executors (distinct from s.55).
Section 58(2) — empowers the Controller to serve a notice for production of evidence where he is not satisfied with an account delivered under s.53 or s.56.
Section 58(4) — permits the Controller to make a best judgment assessment where (a) no account has been delivered as required by s.53 or s.56, or (b) where the person accountable fails to comply with the terms of a notice under s.58(2).

The court reasoned as follows:

Section 58(4) contemplates two separate situations in which a best judgment assessment may be made: (i) absence of any account delivered under s.53 or s.56; and (ii) failure to comply with an issued notice under s.58(2). A notice under s.58(2) presupposes that an account has been delivered under s.53 or s.56.
Accounts are filed under s.53 or s.56; s.55 is an enabling provision that authorises the Controller to call for particulars. Where an accountable person receives a notice under s.55 and files a return in compliance with that notice, that return must be treated as a return under s.53(1) (s.56 is relevant only where letters of representation are sought by executors).
Therefore, an account filed in response to a s.55 notice (even if filed after the six-month period specified by s.53(3)) is nevertheless an account under s.53(1) for the purposes of the assessment procedure in s.58.
Given the above, the Asst. Controller was entitled to issue a notice under s.58(2) (which in the present case was in fact issued). The accountable persons did not comply with that notice, and hence the Controller could validly make a best judgment assessment under s.58(4) on the second ground (failure to comply with s.58(2)).
The Tribunal's conclusion that the late-filed return was not a return under s.53 and thus could not support a notice under s.58(2) was rejected. The court emphasised that construing a s.55 response as not being a s.53 account would nullify s.55's purpose and prevent the Controller from processing such responses because the assessment machinery is contained in s.58.
On the contention about form: the requirement that an account be in a prescribed form (e.g., ED-1, ED-4, ED-5) is associated with s.53(3) (the six-month filing obligation). Because the account filed in response to a s.55 notice is to be treated as one under s.53(1), strict compliance with the procedural/formal requirement of s.53(3) need not be insisted upon in this context; consequently filing in Form ED-5 did not render the return void for purposes of invoking s.58(2) and s.58(4).
On limitation: relying on Padampat Singhania v. CED the court held that a notice under s.55 commences proceedings under the Act and, if issued and served before the expiry of five years from death, preserves the bar of limitation under s.73A. In the present facts the s.55 notice was served before the five-year period expired, so the proceedings were within limitation.

Holding and Implications

Final Disposition:

The court answered the referred questions as follows:

First question (limitation): Answered in the affirmative — the proceedings for levy of estate duty were validly commenced within the period prescribed under section 73A because the notice under section 55 was served before the expiry of five years from death.
Second question (validity of best judgment assessment under s.58(4)): Answered in the negative — the Tribunal was not correct in holding the best judgment assessment invalid; the Asst. Controller lawfully issued a notice under s.58(2) after treating the return filed in response to s.55 as an account under s.53(1), and the failure to comply with that notice validated a s.58(4) best judgment assessment.

Implications:

The best judgment assessment made by the Asst. Controller under section 58(4) stands as valid on the facts recorded.
The court's decision interprets s.55 responses as capable of being treated as accounts under s.53(1) for the purpose of the assessment procedure in s.58, even if filed after the s.53(3) six-month period and even if in Form ED-5, so long as a s.58(2) notice is properly issued and not complied with.
No broader precedent beyond the legal conclusions in this case is asserted by the opinion beyond these statutory constructions; the opinion expressly noted it need not consider certain prior decisions once it reached its conclusions on the statutory interpretation issues. The immediate effect is to reverse the Tribunal's view and uphold the Controller's best judgment assessment; no costs were ordered because no one appeared on behalf of the assessee.

Order as to costs: Because no one appeared on behalf of the assessee before this court, there shall be no order as to costs.

Show all summary ...

C.S.P Singh, J.:— The Income-tax Appellate Tribunal, Allahabad Bench C, has referred the following two questions for opinion of this court:

“1. Whether, on the facts and in the circumstances of the case, the proceedings for levy of estate duty were commenced] within the period prescribed under section 73A of the Estate Duty Act, 1953?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the best judgment assessment under section 58(4) of the Estate Duty Act, 1953, was invalid?”

2. The dispute concerns the estate of Smt. Asarfi Devi, who died on the 23rd September, 1959. The accountable person did not file an account of the estate within the six months period granted under s. 53(3) of the Act. On the 18th of February, 1963, the Asst. CED issued a notice under s. 55 of the Act, which was served on the accountable person on the 5th of March, 1963, calling upon him to deliver the account of the estate of late Smt. Asarfi Devi. In response to this notice, Smt. Manorama Devi filed a return in Form ED-5 on April 1, 1963, and also took up the stand that the notice and the proceedings were invalid. It appears that after the return was filed in Form ED-5, a notice under s. 58(2) was issued, and served on the accountable person on April 1, 1963.

3. As the accountable person did not comply with the terms of the notice the Asst. Controller made a best judgment assessment under s. 58(4) of the act. The appeal filed against this order before the Asst. Controller failed. The matter was then taken up before the Tribunal, by the accountable person. The Tribunal has allowed the appeal, and held that the best judgment assessment made under s. 58(4) was invalid. The reasons for the Tribunal's holding to this effect may be indicated. It has taken the view that an account can be filed only within a period of six months from the date of the death, and inasmuch as in the present the account had been filed beyond the aforesaid period the return was invalid, and as such a best judgment assessment under s. 58(4) could not be made. It has also held that as the account delivered was in Form ED-5, and was not complete in all respects, the return filed was non est and as such no notice under s. 58(2) could be issued, and as a consequence no best judgment assessment could be made under s. 58(4). It indicated that the proper course to adopt was to take proceedings under s. 59. We propose to consider the second question first. In order to answer this question, it is necessary to extract relevant portions of sections 53 and 58 of the Act.

“53. (1) Where any property passes on the death of the deceased,—

(a) every legal representative to whom such property so passes for any beneficial interest in possession or in whom any interest in the property so passing is at any time vested,

(b) every trustee, guardian, committee or other person to whom any interest in the property so passing or the management thereof is at any time vested, and

(c) every person in whom any interest in the property so passing is vested in possession by alienation or other derivative title,

shall be accountable for the whole of the estate duty on the property passing on the death but shall not be liable for any duty in excess of the assets of the deceased which he actually received or which, but for his own neglect or default, he might have received:

Provided that nothing in this section shall render a person accountable for duty who acts merely as agent or bailiff for another person in the management of property……

(3) Every person accountable for estate duty under this section shall, within six months of the death of the deceased, deliver to the Controller an account in the prescribed form and verified in the prescribed manner of all the properties in respect of which estate duty is payable:

Provided that the Controller may extend the period of six months aforesaid on such terms which may include payment of interest as may be prescribed……”

“58. (1) If the Controller is satisfied without requiring the presence of the person accountable that an account delivered under section 53 or section 56 is correct and complete, he shall assess the principal value of the-estate of the deceased, and shall determine the amount payable as estate duty.

(2) If the Controller is not so satisfied, he shall serve a notice on the person accountable, either to attend in person at his office on a date to be specified in the notice, or to produce, or cause to be produced on that date, any evidence on which the person accountable may rely in support of his account.

(3) The Controller, after hearing such evidence as the person accountable may produce and such other evidence as he may require on any specified points, shall, by order in writing, assess the principal value of the estate of the deceased and determine the amount payable as estate duty.

(4) In any case where the account has been delivered as required by section 53 or section 56, or the person accountable fails to comply with the terms of the notice served under sub-section (2), the Controller shall make the assessment to the best of his judgment and determine the amount pay able as estate duty.”

4. Section 53(3) requires every person accountable for estate duty to file an account in the prescribed form, and verified in the prescribed manner within six months of the death of the deceased. The proviso gives power to the Controller to extend the period of six months fixed for filing the accounts. In the present case, the accountable persons had not filed the return within the period of six months, but the return was filed in response to a notice under s. 55. Further the return was in Form ED-5 and not in Form ED-1 or ED-4. The question is as to whether on account of the account not having been filed within a period of six months, and complete in all particulars as required by s. 53; the order made under s. 58(4) is invalid.

5. We do not think it is so. We have already extracted s. 58(4). Section 58(4) permits a best judgment assessment in two situations. One, where no account had been delivered as required by s. 53 or 56, and the other, where the accountable person fails to comply with the terms of a notice issued under s. 58(2). Now a notice Under s. 58(2) can be issued only in case an account had been delivered under s. 53 or s. 56. In the present case, the Asst. Controller had issued a notice under s. 58(2), but the Tribunal took the view that inasmuch as the return did not comply with the requirement of s. 53 both as respect to time and particulars there was no return under s. 53 at all, and as such the notice under s. 58(2) was invalid. It has been already noticed that the accounts were filed in response to a notice under s. 55, they were not filed voluntarily within the time prescribed under s. 53(3). The question is as to whether an account filed in response to a notice under s. 55, and beyond the period prescribed under s. 53(3) can be treated to be an account filed under s. 53. When one examines the Act one finds that ss. 53 and 56 are the only provisions under which the account of the deceased are filed. So far as s. 55 is concerned that is only an empowering provision, as all that it does is to authorise the Controller to call upon the persons mentioned in that provision to deliver a statement of particulars as mentioned in that provision and where the accountable person has received notice under s. 55, and in compliance thereof he files a return, the return would be one which would be under s. 53(1), for, section 56 applies only to cases where letters for representation are sought by the executors of the deceased. The fact that such an account is filed six months after the death of the deceased does not mean that it is not an account of the estate of the deceased as contemplated by s. 53(1). In our view all that s. 53(3) does is to impose a duty on every person accountable to file the accounts within six months of the death, but from this it does not follow that accounts filed by the accountable person either voluntarily after six months or in response to a notice under s. 55 would not be an account under s. 53(1) so as to attract the assessment procedure set out under s. 58. Section 53(1) when it uses in its substantive clause, the words “shall be accountable for the whole estate duty ……” in respect of the persons specified in s. 53(1), cls. (a), (b) and (c) impliedly cast a duty on such persons to file the accounts of the estate of the deceased. In case, one were to take the view that an account filed in response to a notice under s. 55 is an account filed under that provision the Asst. Controller would, in such cases, have no power to proceed any further, for that provision does not thereafter make any provision as to how the accounts and the particulars, etc., filed in response to a notice under s. 55 are to be processed. The assessment procedure, where accounts are filed, is contained in s. 58 alone in such cases. Thus, in order to give efficacy to s. 55, and to render the power conferred on the Controller meaningful, the accounts filed in response to a notice under s. 55 must be taken to be one which is filed under s. 53(1). In the present case, subsequent to the filing of the accounts a notice under s. 58(2) was actually issued to the accountable persons, and they did not comply with the terms thereof. This being so, a best judgment assessment could be made under s. 58(4). This view obviates the necessity of considering the decision of the Supreme Court in the cases of CIT v. Ranchhoddas Karsondas, [1959] 36 ITR 569 and the State of Assam v. D.C Choudhuri, [1970] 76 ITR 706. For, once it is held that the return filed by the accountable persons was a return under s. 53(1), the case would not be one where no account had been delivered so as to make it necessary to examine the provisions of the first part of s. 58(4) and s. 59. It may be mentioned that in Choudhuri's case, [1970] 76 ITR 706, the Supreme Court struck down the proceedings on the ground that no notice under s. 19(2) of the Assam Agrl. I.T Act, 1939, had been issued before making a best judgment assessment under s. 20(5), which is in pari materia with s. 58(4). Section 19(2) of the Assam Agrl. I.T Act, is in pari materia with s. 58(2) of the E.D Act. But here, since we have held that the return filed by the accountable person was a return under s. 53(1) and a notice under s. 58(2) had been issued to the accountable person, and he had failed to comply with its terms, the case clearly fell under s. 58(4).

6. Before disposing of the reference, in which unfortunately we did not have any assistance on behalf of the assessee as none has appeared on her behalf, it is necessary to consider one other contention raised on behalf of the accountable person before the Tribunal. The contention was that an account filed in Form ED-5 was not an account fulfilling the requirements of s. 53, and as such could not be treated as an account, filed under s. 53. The requirement of filing an account in the prescribed form, which is either ED-1 and ED-5, goes with an account filed under s. 53(3), and not with an account which is treated to be one under s. 53(1). In the present case, as we have held that the account filed in response to a notice under s. 55 is one which is under s. 53(1), the requirement of s. 53(3) need not be strictly complied with.

7. So far as the first question is concerned the deceased died on the 23rd of September, 1959, and a notice on the accountable person was served on the 5th of March, 1963. In E.D.R No. 11 of 1977, Padampat Singhania v. CED decided on 26-9-1979 [1980] 122 ITR 162 (All)) we have held that a notice under s. 55 starts proceedings under the Act, and if it has been done before the expiry of five years after the death, the bar of limitation created by s. 73A is saved. As the notice under s. 55 was given and served before the expiry of the period of five years, which in the present case was the 22nd September, 1964, the proceedings for levy of estate duty were validly commenced within limitation.

8. We, accordingly, answer the first question in the affirmative, and the second question in the negative. As none has appeared on behalf of the assessee, there shall be no order as to costs.