Patna High Court
Controller Of Estate Duty vs S.K. Lahiri on 4 August, 1994
Equivalent citations: 1995(43)BLJR152, [1995]211ITR451(PATNA)
Author: B.P. Singh
Bench: K. Venkataswami, B.P. Singh
JUDGMENT B.P. Singh, J.
1. Pursuant to the order of this court requiring the Appellate Tribunal to state the case, referring two questions of law to this court for its opinion, under Section 64 of the Estate Duty Act, 1953, the following questions have been referred to this court :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in setting aside the order of rectification under Section 61 of the Estate Duty Act made by the Assistant Controller of Estate Duty charging interest of Rs. 16,385 at the rate of six per cent. for late filing of the return under Section 53(3) of the Estate Duty Act ?
2. Whether, on the facts and in the circumstances of the case, the mistake of not charging interest at the time of assessment was an error apparent from the record and whether the reasoning given by the Tribunal in setting aside the order of the Assistant Controller is perverse and contrary to facts and law ?"
2. The facts of the case, not in dispute, are that Sri K.C. Lahiri expired on July 1, 1960. The accountable person under the Act, namely, Sri Sudhir Kumar Lahiri, the respondent herein, after expiry of the statutory period prescribed for the purpose, submitted to the Controller of Estate Duty an account of the properties in respect of which the estate duty was paid, as required by Section 53 of the Act. It is also not in dispute that the accountable person had applied for extension of time for filing the return, which was allowed by the Controller. The return was filed on November 30, 1967, whereas the same should have been filed within six months of the death of the deceased, which took place on July 1, 1960. The assessment was completed by the Assistant Controller of Estate Duty on March 11, 1977, on which date he also issued a notice under Section 60(2) of the Act for late filing of the return. By order dated July 9, 1977, the Assistant Controller modified his order under Section 61 of the Act finding that though on the application of the accountable person extension of time was allowed for filing the return, no interest had been charged under Section 53(3) of the Act. It is also not in dispute that a notice was issued to the accountable person as to why the order be not rectified and interest be not imposed for late filing of the return, to which the assessee objected. Since the Assistant Controller was satisfied that the failure to charge interest, as mandatorily required by the Act, justified exercise of the power under Section 61 of the Act, and as the mistake was apparent from the record, he passed an order rectifying the earlier order and charged interest for late filing of the return.
3. Against the order of the Assistant Controller, an appeal was preferred to the Appellate Controller of Estate Duty. The appeal was rejected by the appellate authority holding that the Assistant Controller was bound to charge interest, except in cases where he waived or reduced the interest chargeable in accordance with the rules. In order to be able to exercise such discretion, it was necessary for the accountable person, or his representative, to file a petition praying for waiver or reduction of interest chargeable under the Act. As no such application had been preferred by the accountable person or his representative, there was no question of waiver or reduction of interest which was required to be charged mandatorily under the provisions of the Act and the Rules.
4. The matter was taken up in appeal to the Income-tax Appellate Tribunal. The Tribunal held that Section 53(3) of the Act read with Rule 42 of the Estate Duty Rules, 1953, provided that the period of six months for filing of the return may be extended by the Assistant Controller by charging interest, or by charging interest at a lower rate, or without charging any interest. Such a discretion could be exercised by the Appellate Controller. Though, in the instant case, the time for filing the return had been extended, no condition was put with regard to the payment of interest. The assessment having been completed, it was now only a matter of guess as to what was in the mind of the Assistant Controller when he extended the time. The question was whether such a discretion had been exercised by the Assistant Controller. In any case the question whether a discretion had been exercised, or had not been exercised, on the facts of a particular case, was always a debatable point, and it was not an obvious or glaring mistake. It was a mistake which could be discovered only by a process of elucidation, argument or debate. Such mistakes cannot be rectified under Section 61 of the Act, since only a mistake of law or fact which was obvious and plain could be rectified under the aforesaid section. It, therefore, held that the mistake sought to be rectified by the Assistant Controller was not an obvious, patent, glaring or plain mistake, and, therefore, the rectificatory order deserved to be set aside.
5. The Revenue preferred an application before the Tribunal for stating a case to the High Court for its opinion, but the said application was rejected by the Tribunal by its order dated February 27, 1981. The Revenue thereafter moved this court for a direction to the Tribunal requiring it to state a case before this court. That application was allowed and by order dated March 30, 1984, this court directed the Tribunal to state a case and refer two questions of law for the opinion of this court under Section 64 of the Act. Accordingly, the Tribunal has stated a case before this court framing two questions of law for its opinion, which have been reproduced earlier.
6. On behalf of the Revenue, it was urged that the failure on the part of the Assistant Controller to charge interest, which was mandatorily chargeable for delayed filing of the return, was a mistake apparent from the record and, therefore, the Assistant Controller was justified in acting under Section 61 of the Act rectifying the mistake, after notice to the accountable person. Reliance has been placed upon several decisions of the High Courts and a decision of the Supreme Court in support of the argument.
7. On behalf of the accountable person (respondent) none appeared to contest the matter.
8. Section 53(3) of the Estate Duty Act provides as follows :
"(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."
9. It is apparent from a bare perusal of the sub-section that the accountable person must 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. He is required to do so within six months of the death of the deceased. The proviso empowers the Controller to extend the period of six months aforesaid, on such terms which may include payment of interest, as may be prescribed. This takes us to the rules framed under the Act. Rule 42 of the Estate Duty Rules, 1953, provides as follows :
"42. Terms on which period referred to in Sub-section (3) of Section 53 may be extended.--The Controller may, if he considers that there are reasonable grounds for doing so, extend the period of six months referred to in Sub-section (3) of Section 53 on the following terms, namely :--
(a) the person accountable shall furnish to the Controller information as to the principal value of all the property passing on the death of the deceased, to the extent it is within his knowledge ;
(b) the person accountable shall pay the amount, or furnish security to the satisfaction of the Controller for the payment of the amount, which the Controller may, on the basis of the information furnished by the accountable person and all other information available to him, estimate to be the amount of estate duty payable ;
(c) the person accountable shall pay interest for the period by which the original period of six months has been extended, on the amount specified in Clause (e) or on such lower amount as the Controller may in his discretion decide ;
(d) the rate of interest shall be six per cent. per annum :
Provided that the Controller may, in any particular case, specify such reduced rate of interest as may be appropriate to that case in accordance with the general instructions issued by the Board in this behalf ;
(e) the amount referred to in Clause (c) shall be the excess, if any, of the duty determined under Section 58 or Section 69, as the case may be, over the amount, if any, actually paid under Clause (b) of this rule ;
(f) if the duty determined under Section 58 is reduced in appeal, the interest shall be recomputed with reference to the duty as so reduced and if the interest already paid exceeds the interest so recomputed, the excess shall be refunded."
10. The rule, therefore, prescribes the rate of interest at six per cent. per annum, but with a discretion to the Controller in any particular case to specify a reduced rate of interest, as may be appropriate to that case, in accordance with the general instructions issued by the Board in this behalf. In a case where the period for filing of return has been extended, the person accountable is liable to pay interest for the period by which the original period of six months had been extended. The liability to pay interest arises from the statutory provisions. The discretion of the Controller is limited to the quantum of interest that may be charged in any particular case, having regard to the general instructions issued by the Board. There is no provision for waiver of the interest chargeable. There is only provision for reduction of the rate of interest. The law, therefore, mandatorily requires the assessing authority to charge interest whenever the accountable person fails to file the return within the prescribed period or where time is extended for filing of the return on an application by the accountable person or his representative.
11. In the instant case, the Assistant Controller while completing the assessment failed to charge interest under Section 53(3) of the Act read with Rule 42 of the Rules. He was enjoined by law to charge such interest, and his failure to do so did furnish a sufficient reason for him to rectify the order under Section 61 of the Act. The error committed by him was an error apparent from the record. He failed to charge interest in ignorance of the mandatory provisions of the Act and the Rules. It is an admitted position that there was no application before him either for reducing the rate of interest or for waiving the interest altogether chargeable for delayed filing of the return.
12. In the case of CIT v. Ramjibhai Hirjibhai and Sons [1977] 110 ITR 411 (Guj), a similar question arose under the provisions of the Income-tax Act. In that case, it was found that under Clause (iii) of the proviso to Section 139(1)(b) of the Income-tax Act, there was an obligation on the Income-tax Officer to levy penal interest in the manner stated in Sub-clauses (a) and (b) of the clause, if the assessee failed to file return before the date as extended under Clause (i) or (ii) of the proviso. The assessee had not moved the Income-tax Officer to condone or waive penal interest under Section 139(8) of the Act read with Rule 117A of the Income-tax Rules. The court held that in these facts, the Income-tax Officer had the power to initiate rectification proceedings and levy penal interest, since the omission on his part at the time of the original assessment was an error apparent from the record, because the relevant provision of penal interest was a mandatory provision of law. Reliance was also placed upon the decision in the case of Golecha Properties (P.) Ltd. v. CIT [1988] 171 ITR 47 (Raj). That was again a case under the Income-tax Act. On a reading of the provisions of the Act, their Lordships of the Rajasthan High Court came to the conclusion that the liability for payment of interest under the Act and the Rules was incurred automatically in the event of default by the assessee specified therein. That being so, the question of giving any show cause notice prior to fixing the liability for payment of such interest by an order did not arise. The liability for interest was attracted automatically by operation of law without the further requirement of any order to that effect. The order merely quantified the amount of interest. Even if the Income-tax Officer had power to reduce, or even waive the interest, at the instance of the assessee, if good cause was shown for the same by the assessee, such reduction or waiver of interest could not be granted suo motu by the assessing authority. The reduction or waiver of interest could be granted only on good cause being shown by the assessee, and the facts constituting ground for waiver or reduction being within the special knowledge of the assessee, who had to disclose them, the power to reduce or waive interest could not be exercised by the assessing authority acting suo motu. The above decision emphasises the fact that even where the law vests a discretion in the assessing authority to reduce or waive interest, which is chargeable mandatorily under the law, the same can be done only if good cause is shown by the assessee for exercise of such discretion. Reduction or waiver cannot be granted suo motu by the assessing authority. This furnishes a complete answer to the argument urged by the accountable person before the authority under the Act, that non-charging of interest by the Assistant Controller amounted to waiver of interest by him. The argument ignores the provisions of the Act and the Rules which give a discretion to the Assistant Controller only to reduce the rate of interest and not to waive the same, and that too, on good cause being shown by the accountable person. It appears that the Tribunal also failed to notice this factual difference between the provisions of the Income-tax Act and the Estate Duty Act.
13. Lastly, the Revenue relied upon the decision of the Supreme Court in the case of Karamchand Premchand P. Ltd. v. CIT [1993] 200 ITR 268. In that case, the Tribunal had allowed an appeal preferred by the assessee allowing several claims. The Revenue filed an application bringing to the notice of the Tribunal that the Explanation appended to Rule 1 in the Second Schedule to the Act had been ignored by it, which clarified certain matters in relation to determination of reserves and provisions under the Act. The Tribunal found that in view of the Explanation which was brought to its notice, several items which were treated by it as reserves in its order should not have been treated as such, and that they ought to have been treated as provisions. The assessee was aggrieved by the order of the Tribunal rectifying the mistake. The Supreme Court answered the question against the assessee in the following words (at page 273) :
"So far as the first question is concerned, the fact that the Tribunal rendered its decision without taking note of the aforesaid Explanation to Rule 1 in Schedule II was undoubtedly a ground for rectification. The Tribunal's power to rectify its order under the Act flows from Section 13 of the Act. A mistake apparent from the record is made a ground for rectifying the order. The first question was, thus, rightly answered in favour of the Revenue and against the assessee."
14. These decisions, to my mind, fully support the view that I have taken. The failure of the Assistant Controller to pass an order for payment of interest mandatorily chargeable under Section 53 of the Act read with Rule 42 of the Rules, furnished adequate justification for him to exercise the power of rectification under Section 61 of the Act. His order disclosed a patent mistake, a mistake apparent from the record, as the failure to pass an order by the Assistant Controller was occasioned by his failure to notice the mandatory provisions of the Act and the Rules. I am, therefore, satisfied that the Assistant Controller was justified in exercising his power under Section 61 of the Act rectifying the order of assessment made by him, and including interest chargeable under Section 53 of the Act read with Rule 42 of the Rules. The appellate authority was, therefore, justified in dismissing the appeal. The view taken by the Tribunal is, therefore, clearly erroneous. The first question, therefore, must be answered in the negative, in favour of the Revenue and against the assessee. The second question must be answered in the affirmative, also in favour of the Revenue and against the assessee. The questions referred to this court are answered accordingly.
K. Venkataswami, C.J.
15. I agree.