Gujarat High Court
Assistant vs Shrimant on 19 April, 2011
Author: Akil Kureshi
Bench: Akil Kureshi
Gujarat High Court Case Information System
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TAXAP/851/2009 7/ 7 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 851 of 2009
To
TAX
APPEAL No. 864 of 2009
=========================================================
ASSISTANT
COMMISSIONER OF INCOME TAX CIRCLE-5 BARODA - Appellant(s)
Versus
SHRIMANT
F P GAEKWAD THROUGH LEGAL HEIR MRINALINI DEVI - Opponent(s)
=========================================================
Appearance
:
MR KM PARIKH
for Appellant(s) : 1,
None
for Opponent(s) :
1,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE AKIL KURESHI
and
HONOURABLE
MS JUSTICE SONIA GOKANI
Date
: 11/04/2011
ORAL ORDER
(Per : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. Revenue is in appeal against the common judgment of the ITAT dated 20.6.2008 questioning the order of the Tribunal in so far as the Tribunal confirmed the view of the Appellate Commissioner of Wealth Tax and dismissed the appeals of the revenue. From the record, we find that the issue pertains to penalty imposable under section 18 of the Wealth Tax Act. We further find that though two questions, slight differently worded have been framed in these appeals, it is not in dispute that these very questions were considered by a Division Bench of this Court in a group of appeals in Tax Appeal No.598 of 2008 and connected appeals which also involved the same respondent-assessee.
2. The Court considered the following question in its judgment dated 2.9.2008 :-
"Whether the ITAT was right in law and on facts in upholding the order of the CWT(A) whereby deleting the penalty levied under Section 18(1)(c) of the Wealth Tax Act, without considering the provisions of Section 19(1) of the Wealth Tax Act?"
3. By the said judgment dated 2.9.2008, the Division Bench of this Court was pleased to reject the appeals of the revenue and confirm the view of the Tribunal on the question of penalty.
4. Finding that the revenue had carried the issue further in appeal before the Apex Court, on 18.1.2011, the Division Bench of this Court passed the following order :-
"1. The learned advocate for the appellants has submitted that the appeals in respect of other assessment years which are pending before the Supreme Court against the order made by this High Court in assessee's own case in Tax Appeal No.598 of 2008 are likely to come up for hearing in the month of March 2011. He, therefore, prays for a long adjournment.
2. In the circumstances, the matters are adjourned to 28th March, 2011.
3. Registry is directed to keep a copy of this order in each appeal."
5. Subsequently, the appeals were placed for further hearing from time to time. Lastly counsel for the revenue sought and was granted time to appraise the Court about the latest position of the appeals before the Apex Court. Consequently these appeals came up for further hearing today. Counsel for the revenue produced on record an order dated 26.11.2010 passed in Special Leave to Appeal (Civil) No. 21784 of 2009, wherein the Apex Court passed the following order "Delay condoned. Leave granted. Hearing expedited."
6. On the basis of the above order, counsel submitted that leave has been granted. Appeals, however, have not been placed for hearing. He obviously could not state when the appeals may be taken up for final hearing.
7. We find that the present group of Tax Appeals has been rotating on admission board since quite some time now. Division Bench of this Court under identical circumstances had considered similar question and ruled against the revenue. We are, therefore, of the opinion that the present group of appeals can also be disposed of on the same lines. The Bench in its detailed judgment considered the issue in the following manner:-
"23. Having heard learned Standing Counsel Mr.K.M.Parikh appearing for the Revenue and Mr.Manish J. Shah, learned advocate appearing for the respondent - assessee and having gone through the orders passed by the authorities below and further having considered the relevant statutory provisions contained in the Wealth Tax Act, 1957 as well as legal authorities referred to and relied upon by the parties before the Court, we are of the view that in absence of any contrary decision on the issue and that there is no scope for any other interpretation of Section 19(1) and 19(3) of the Act under which the legal representative is made liable to penalty under Section 18(1)(a), 18(1)(c) and 15B of the Act, no question of law, much less, any substantial question of law arises out of the order of the Tribunal and hence all these appeals filed by the Revenue deserve to be dismissed at the threshold.
24. Before we proceed to deal with the issue raised before us for our consideration, it is necessary to have a close look at the provisions contained in Section 19(1) and 19(3) of the Act. Section 19 falls in Chapter V of the Wealth Tax Act. This chapter deals with liability to assessment in special cases. Section 19 talks of tax of deceased person payable by legal representative. Sub Section (1) of Section 19 reads as under:-
"19(1) Where a person dies, 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 wealth-tax assessed as payable by such person, or any sum, which would have been payable by him under this Act if he had not died."
Under this Sub Section, the executor, administrator or other legal representative is liable to pay wealth-tax assessed as payable by the deceased, out of the estate of the deceased, after his death. The executor, administrator or other legal representative is also liable to pay any sum, which would have been payable by the deceased person under this Act, if he had not died. Either the wealth tax assessed or any other sum is payable by the executor, administrator or other legal representative, out of the estate of the deceased person. The pre-requisite of this Sub Section is that there should be an assessment and the liability to pay the wealth-tax or any other sum should arise during the life time of the deceased. It is an admitted position that during the life time of the deceased, the return of wealth for the respective assessment years were filed by the deceased and the wealth tax assessment were also completed. It is also an admitted position that notices for penalty under Sections 18(1)(a), 18(1)(c) and 15B of the Act were issued on the deceased assessee during his life time. However, no penalty order was passed during the life time of the deceased. To make the legal representative liable for penalty under Section 19(1), it is not enough that the penalty proceedings should be initiated during the life time of the deceased. It is also necessary that such penalty proceedings must result into penalty orders during his life time. No penalty orders have been passed during the life time of the deceased and hence it cannot be said that any sum of penalty would have been payable by the executor, administrator or other legal representative under this Act, on the death of the deceased, if he had not died.
25. Sub Section (3) of Section 19 reads as under:-
"19(3) The provisions of sections 14,15 and 17 shall apply to an executor, administrator or other legal representative as they apply to any person referred to in those sections."
The plain reading of this Sub Section makes it clear that the legislature have purposefully not included either Section 18 or Section 15B of the Act. It is also in consonance with the mandate of Sub Section (1) of Section 19. Under Sub Section 19(1) neither the penalty can be levied on the executor, administrator or other legal representative nor it can be recovered from him. There is no question of incorporating Section 18 or Section 15B of the Act under Sub Section (3) of Section 19 of the Act. We are, therefore, of the view that neither Section 19(1) nor Section 19(3) casts any obligation on the executor, administrator or other legal representative to pay the amount of penalty as they are not liable to face any such penalty proceedings for which they have ever committed any default. Default, if any, at all were committed, were committed by the deceased and the deceased assessee was not alive when the penalty proceedings were culminated into the penalty orders.
26. The view which we are taking is not only found support from the plain reading of the Section but it is also supported by not less than six High Courts. We have extensively reproduced the ratio laid down by the various High Courts dealing with this issue, in the preceding paragraphs. The gist of these decision is that,
(i) The legal representatives of the deceased are not liable for penalty for which default committed by the deceased assessee.
(ii) The liability of the legal representative is only to pay the tax assessed as payable or any other sum which would have been payable by the deceased, had he been alive, out of the estate of the deceased.
(iii) The words "any sum which would have been payable by him under the Act if he had not died" mentioned in Section 19(1) of the Act do not authorise the department to levy penalty on the legal representatives for the default committed by the deceased assessee.
(iv) In the absence of any provision similar to Sec.159(2)(b) of the I.T. Act, by which Parliament clearly intended to levy penalty in the hands of the legal representatives also in a case where the default had been committed by the deceased person, it is not possible to attribute to the Legislature the intention to penalise the legal representatives for the default, if any, committed by the deceased person under the W.T. Act.
(v) If an order creating liability to pay under the Act had not been passed till the date of death of the original assessee, Sub Section (1) of Section 19 does not authorise creation of liability to pay on the legal representative.
(vi) Section 19(1) of the Act does not provide for the continuation of penalty proceedings against the legal representative when the assessee dies before the proceedings are concluded.
(vii) The definition of an "assessee" in section 2(c) does not provide that the legal representative of an assessee would be deemed to be an assessee for all purposes under the Act, unlike Section 159(3) of the Income-tax Act which says that the legal representative of the deceased shall for the purposes of this Act, be deemed to be an assesee.
(viii) The omission of Section 18 in Sub Section (3) of Section 19 is quite significant, which clearly shows that intention of the legislature that in case where action would be taken under Sub Section (2) of Section 19 of the Act, the question of imposing any penalty on the legal representative cannot arise.
(ix) Sections 14, 15 and 17 contemplate and authorise initiation as well as continuance of proceedings for determining wealth-tax on the basis of the return as well as on the basis escapement of wealth against, inter alia, a legal representative. The provisions of section 18 therefore do not come within the ambit of Section 19.
27. The solitary decision of the Patna High Court in the case of Rani H.R.Laxmi (Estate) (Late) (Supra) on which heavy reliance was placed by the learned Standing Counsel for the Revenue has no application to the facts of the present case. Admittedly in the Patna case, the assessee is an executor of the estate of the late Rani H.R.Laxmi, who died on March 7, 1980. The return of wealth as on the valuation date, i.e., March 31, 1980 was due to be filed by July 30, 1980. The said Rani H.R.Laxmi died before the valuation date after executing a will and appointing the assessee as an executor under the will, who was required to file the return relating to the wealth of the deceased. The executor did not file the return by the aforesaid date but he filed it on July 12, 1982. As there was a delay of twenty three completed months in filing the return, a proceeding under Section 18(1)(a) of the Act was initiated against the executor for imposition of penalty. It is in this context, after referring to the provisions of Sections 14(1), 19A(1) and 18(1)(a) of the Act, the Court took the view that from a bare perusal of the provision of Section 14(1) of the Act, it would appear that under the said sub-section a person is assessable to payment of wealth-tax on his own net wealth. It further lays down that a person is liable to pay wealth-tax on the net wealth of any other person in respect of which he is assessable under this Act. So far as an executor is concerned, he is liable to pay wealth-tax in relation to the net wealth of the testator under sub-section (1) of section 19A of the Act. In this view of the matter, the Court had come to the conclusion that an executor is liable to pay wealth-tax in relation to the net wealth of the testator under section 14(1) of the Act read with Section 19A(1) of the Act. The Court further held that under Section 18(1)(a) penalty can be imposed against those persons who have failed to furnish the return which they are required to furnish under section 14(1) of the Act. The executor was required to furnish the return under Section 14(1) of the Act. Therefore, from the plain reading of section 18(1)(a) of the Act the Court held that the executor is liable to pay penalty under Section 18(1)(a) of the Act. The facts of this case are clearly distinguishable as in the case on hands, the returns were filed by the deceased assessee and there was no obligation on the legal representative to file the return of wealth. Pursuant to the returns of wealth filed by the deceased assessee, assessments were also completed and after issuance of penalty notice and during the pendency of penalty proceedings but before the penalty orders were passed, the deceased expired. Thus, the penalty orders passed on the legal representative are contrary to the provisions of law and he cannot be made liable to any penalty.
28. In the above view of the matter and considering the settled legal position, we are of the view that no question of law, much less, any substantial question of law arises out of the order of the Tribunal and hence all these appeals are accordingly dismissed."
8. Issue being common, parties also being common, following the decision of a coordinate Bench of this Court, the present group of Tax Appeals is also dismissed.
[Akil Kureshi, J.] [Ms. Sonia Gokani, J.] mrp Top