Bombay High Court
Chandabai Daga vs Income-Tax Appellate Tribunal And ... on 1 August, 1989
Equivalent citations: [1992]194ITR422(BOM)
Author: S.P. Bharucha
Bench: S.P. Bharucha
JUDGMENT S.P. Bharucha, J.
1. One Badridas Daga died on June 8, 1963, i.e., in the midst of the previous year (October 29, 1962 to October 17, 1963) relevant to the assessment year 1964-65. On September 4, 1964, his executors (the petitioner being the sole surviving executor) filed a return of net wealth of behalf of the estate for the assessment year 1964-65 pursuant to notices issued to them in this behalf. It is the petitioner's case that they did so because they entertained the mistaken belief that executors were liable for wealth-tax even if the person whose wealth was to be assessed had not been alive on the relevant valuation date. On November 6, 1965, the assessment order was made. The valuation date for the purposes of the assessment was, as stated therein, October 17, 1963. On December 4, 1964, an appeal was preferred against the assessment order. In the appeal, pending its disposal, an additional ground was taken that the executors were not liable to pay upon the value of the estate wealth-tax for the assessment year 1964-65. By order dated April 4, 1966, the appeal was dismissed. The matter was carried in second appeal to the Income-tax Appellate Tribunal. The Tribunal rejected the appeal, basing itself upon the judgment of this court in Jamnadas v. CWT [1965] 56 ITR 648.
2. On March 24, 1980, a Division Bench of this court decided the reference in CWT v. Keshub Mahindra [1983] 139 ITR 22 and the judgment was reported in January, 1983. The petitioner thereupon filed this petition averring that it became known to her only by reason of the reporting of the Keshub Mahindra judgment [1983] 139 ITR 22 (Bom) that no assessment could be made in law upon the executors of the estate of a deceased even for the assessment year relevant to the previous year in which the deceased had died. The petitioner claimed that the payment of wealth-tax pursuant to the assessment order dated November 6, 1965, had been made on the basis of a mistake of law. Such wealth-tax had been recovered without authority of law and the Union of India was bound to repay it.
3. In Jamnadas's case [1965] 56 ITR 648 (Bom), the main contention was that there was no provision in the Wealth-tax Act entitling the Revenue to charge, assess and recover wealth-tax in respect of the wealth left by a deceased from/after the financial year next to the financial year in which such person had died. The facts were that one Sodradevi died on October 5, 1959. The petitioners were the executors under her will. For the financial year expiring on October 31, 1959, i.e., the assessment year 1960-61, the executors were assessed to pay wealth-tax in respect of the estate left by the deceased and there was no dispute between the parties as regards that assessment. For the next financial year ending on October 31, 1960, i.e., the assessment year 1961-62, the Wealth-tax Officer served on the executors a notice requiring them to file a return in connection with the wealth-tax payable upon the estate of the deceased. The return was filed and an assessment order was made. A revision petition there against was rejected and writ petition was filed. The question was whether, under the charging section and other provisions of the Act, it was permissible for the Revenue to issue the demand notice against the executors to file a return in respect of the wealth-tax to be charged on the estate of the deceased for the financial year expiring on October 31, 1960, or the assessment year 1961-62. The Division Bench hearing the writ petition examined the provisions of the Act. It laid emphasis upon the judgment of the Supreme Court in CIT v. Amarchand N. Shroff . It came to the conclusion (at p. 656 of 56 ITR) "that there is no provision in the Wealth-tax Act for charging and assessing wealth-tax in respect of the net wealth of a deceased individual beyond the financial year in which such person dies. His executors, administrators and legal representatives are by legal fiction made liable to pay wealth-tax for that particular financial year in the next assessment year. There is not further liability to pay wealth-tax attached to the estate left by a deceased individual and continuing in the hands of the executors, administrators or other legal representatives".
4. In Keshub Mahindra's case [1983] 139 ITR 22, this court was hearing a reference in which one of the questions was "Whether, in computing the net wealth of the assessee, the value of the assets left by the assessee's father was to be included ?" This question was raised in relation to the assessment year 1964-65. The assessee's father died on October 31, 1963. The assessee, while submitting the return for the assessment year 1964-65, which was relevant thereto, stated that he had filed a separate was still to be administered and the final position could be ascertained only after completion of the administration of the estate. The Wealth-tax Officer declined to separately assess the estate of the father holding that the assessee, being the sole heir and the father having died intestate, took the entire estate with all the liabilities and, since the assessee had become the sole owner of the estate, he should have declared all the assets left by his father as his wealth. Consequently, he included the wealth of the estate as the wealth of the assessee in his personal assessment for the assessment year 1964-65. In the judgment, this court noted that the crucial question which had to be determined was whether the provisions of section 19 of the Act were attracted or whether the assessee was liable to be assessed to wealth-tax as the sole heir in whom the assets of his deceased father had vested with full ownership rights immediately upon his death. Analysing section 3, which is the charging section, the court found it clear that it referred to the net wealth of the individual and this individual had necessarily to be a living person. The point of time with reference to which the net wealth had to be ascertained was made clear by the use of the words "on the corresponding valuation date". Therefore, the net wealth of the individual had to be ascertained as belonging to him on the corresponding valuation date. The definition of net wealth in the Act showed that it consisted of the aggregate value, computed in accordance with the provisions of the Act, of all assets wherever located and those assets had to belong to the assessee on the valuation date. Only those assets could be included as a part of the net wealth belonging to the assessee on the valuation date. The court noted that it was well-known that inheritance was never in abeyance and it had taken effect the moment the assessee's father had died with the result that the estate immediately devolved on the assessee as the sole heir of his father. Counsel for the assessee relied upon the judgment in Jamnadas' case [1965] 56 ITR 648 (Bom). The court noted that the judgment in Jamnadas' case [1965] 56 ITR 648 (Bom), stated that there was no dispute between the parties as regards the assessment for the financial year during the course of which Sodradevi had died. Therefore, it was said, in Keshub Mahindra's case [1983] 139 ITR 22 (Bom), that the assessment for the assessment year corresponding to the financial year in which Sodradevi died was not in dispute. The real controversy in Jamnadas' case [1965] 56 ITR 648 (Bom) was with regard to the assessment for the subsequent assessment year. The court said that Jamnadas's [1965] 56 ITR 648 (Bom) could not, therefore, be taken to be an authority for the proposition that where an assessee died prior to the valuation date, the assessment had to be made against the heir as an administrator or a person administering the estate. The question had to be determined under the provision of the Act. The principal provision that required examination was section 19. Analysing it, the court held that it contemplated a case where a liability had accrued to the deceased person by virtue of the fact that he was liable on the valuation date but had died thereafter. The deceased might have filed a return or he might not have filed a return or the assessment might have been completed and he might not have paid tax. It was to cover cases like these that the provisions of section 19 had been enacted. The court had no doubt that section 19 dealt with a case where an assessee died after the relevant valuation date on which his liability to pay wealth-tax had accrued. It was that liability which had to be worked out via the provisions of section 19 and the tax which the deceased was liable to pay or any other sum which would have been payable by him if he had not died had to be paid by the executor, administrator or other legal representative, subject to the limitation contained in section 19 that it was to be paid out of the estate and to the extent that the estate was capable of meeting it. The court noted that the judgment in Jamnadas' case [1965] 56 ITR 648 (Bom) was influenced by the construction placed by the Supreme Court on the relevant provisions of the Income-tax Act in Amarchand N. Shroff's case . The court observed that the distinguished features between the provisions of the Income-tax Act and the Wealth-tax Act were overlooked when support was sought from the constructions set out in Amarchand N. Shroff' case . The two Acts were not in pari materia and the nature of the charge therein had no similarity. While under the Income-tax Act, the liability to pay income-tax accrued on the income earned throughout the accounting year, the liability to be assessed to wealth-tax arose only in respect of the net wealth held on the valuation date. Therefore, if a person was not liable on the valuation date and he had died before it, there was, under the provisions of the Wealth-tax Act, no question of that person being assessed to wealth-tax for any period prior to the valuation date. In the result, the court answered the question, to which I have adverted, in the affirmative and in favour of the Revenue. In other words, it held that the value of the assets left by the assessee's father had to be included in computing the net wealth of the assessee.
5. The assessment in respect of the financial year during the course of which the deceased had died was not in question in Jamnadas' case [1965] 56 ITR 648 (Bom). The question there related only to the financial year subsequently thereto. The assessment for the financial year during which the deceased died was in question in Keshub Mahindra's case [1983] 139 ITR 22 (Bom). Keshub Mahindra's case [1983] 139 ITR 22 (Bom) points out that it was not the issue in Jamnadas' case [1965] 56 ITR 648 (Bom) and, therefore, Jamnadas' case [1965] 56 ITR 648 (Bom) was not a precedent in that regard. Keshub Mahindra's case [1983] 139 ITR 22 (Bom) decides the question on the basis of the provisions of the Wealth-tax Act and it says that executors cannot be assessed to wealth-tax for the financial year during the course of which the deceased had died. The facts here are akin to those in Keshub Mahindra's case [1983] 139 ITR 22 (Bom) and that decision is the binding precedent. There can be no dispute that until then the position in law seemed to be that set down in Jamnadas' case [1965] 56 ITR 648 (Bom). It is not dispute that the petitioner came to know the true position in law only upon the reporting of the judgment in Keshub Mahindra's case [1983] 139 ITR 22 (Bom). The writ petition was filed very soon thereafter.
6. Upon the basis of the decision in Keshub Mahindra's case [1983] 139 ITR 22 (Bom), there can be no doubt that the assessment to wealth-tax made by the order of November 6, 1965, was without jurisdiction and that the wealth-tax which was recovered from the petitioner and her co-executors pursuant thereto was collected without authority of law.
7. The next question to be considered is whether in such circumstances the court should, in exercise of its powers under article 226, order the repayment of the amount that was collected without authority of law. I need only cite the decision of the Supreme Court in Salonah Tea Co Ltd. v. Superintendent of Taxes [1988] 173 ITR 42 (SC). Tax had been collected without authority of law. It had been paid, as here, pursuant to notices which were without jurisdiction. The Supreme Court held that where the assessment had been made without jurisdiction, it was manifest that the respondents had no authority to retain the money that had been collected and it was liable to be refunded. The question was whether, under article 226, the court should direct the refund. The court said (at p. 46), "Normally speaking, in a society governed by rule of law, taxes should be paid by citizens as soon as they are due in accordance with law. Equally, as a corollary of the said statement of law, it follows that taxes collected without the authority of law, as in this case, from a citizen should be refunded, because no State has the right to receive or to retain taxes or monies realised from citizens without the authority of law". After a review of earlier judgments, the Supreme Court held that normally, in a case where monies had been realised without the authority of law, the same had to be refunded and in an application under article 226, the court had the power to direct the refund unless there had been avoidable laches on the part of the petitioner. The refunding of the amount as a consequence of declaring the assessment to be bad and the recovery to be illegal would be in consonance with justice, equity and good conscience.
8. Now, it was submitted by Dr. Balasubramanian, learned counsel for the Revenue, thus : (i) In the light of the decision in Keshub Mahindra's case [1983] 139 ITR 22 (Bom) and in view of the definition of "valuation date" in section 2(q), the assessment on the executors for the assessment year 1964-65 was not without jurisdiction or erroneous because there are previous years ending before June 8, 1963, for which assets belonged to the deceased, while alive, like jewellery, immovable property, etc., for which the previous year would be the year ending March 31, 1963. The assessment order, therefore, cannot be quashed even if it could be modified. (ii) It would be inequitable to order a refund about 25 years after the tax had been collected. It would affect the distribution of the assets among the heirs. The deduction of wealth-tax in the estate duty assessment could not be taken back. Other assessees similarly placed would be in a worse position because they had not filed writ petitions. (iii) The amount of the tax (about Rs. 53,000) was too small an amount to be refunded. (iv) Settled things should not be reopened because the decision that was being relied upon was not in the assessee's own case but in someone else's (Keshub Mahindra's case [1983] 139 ITR 22 (Bom).
9. I repeatedly asked Dr. Balasubramanian how he could argue on the basis that the valuation date was some date other than October 17, 1963, which is written in the assessment order as the valuation date. I received no answer. In any event, the submission goes contrary to the record. The assessment order must be read as it stands. It is, having regard to the judgment in Keshub Mahindra's case [1983] 139 ITR 22 (Bom), without jurisdiction and the tax collected on the basis thereof is without authority of law. Being without authority of law, it would be contrary to justice, equity and good conscience not to order its refund. (See Salonah Tea Co. Ltd.'s case [1988] 173 ITR 42 (SC)). That 25 years have passed since the tax was collected is hardly a ground to refuse the refund. I have no doubt that the heirs of the deceased will not raise any objections to the refund and will manage its distribution amongst themselves. In regard to the deduction of wealth-tax in the estate duty assessment, it will be open to the Revenue to take such proceedings as are, in law, available to it. That other assessees similarly placed, if there be any, may not secure refunds is no reason to deny it in this petition. I do not think that Rs. 53,000 is so trifling an amount that I should not order its refunded. Lastly, whether or not the law has been laid down in the petitioner's case, the petitioner is entitled to the benefit of it.
10. In the result, the assessment order dated November 6, 1965 (exhibit-A to the petition) is quashed and set aside. The Union of India shall repay to the petitioner the amount of Rs. 53,322 (subject to verification) collected pursuant to the said assessment order, with interest thereon at the rate of 12% per annum from April 24, 1983 (when this writ petition was admitted) until payment or realisation.
11. No order as to costs.