Rajasthan High Court - Jaipur
Ceo vs Md Ajeet Singh And Ors. on 16 May, 2006
Equivalent citations: RLW2007(2)RAJ917
JUDGMENT Rajesh Balia, J.
1. Heard learned Counsel for the parties.
2. The aforesaid three cases arise out of the order of Income Tax Appellate Tribunal, Jaipur Bench, Jaipur dated 12.5.1997 related to the Estate Duty case of Late M.D. Ajit Singh, who expired on 19.4.1978.
3. The Income Tax Reference No. 88/98 is a reference submitted by the Tribunal alongwith statement of case referring the following question as question of law for the opinion of this Court while partly allowing the application of the assessee under Section 64(1) of the Estate Duty Act, 1953 since replealed:
(2)(a) whether where no time limit has been prescribed by the statute for completing the assessment the proceedings can be held to be barred by limitation of time if finalised after inordinate delay?
4. While submitting the statement of case and referring the above question, the Tribunal has rejected to make reference of other questions suggested by the assessee, which are as under:
(1)(a) Whether recording of reasons prior to issue of notice Under Section 59 of Estate Duty Act is a mandatory requirement and whether failure to record reasons prior to issue of notice can initiate a valid proceedings Under Section 59?
(b) Whether the report of Inspector can constitute reasons to believe as contemplated Under Section 59 of the Estate Duty Act and can initiate proceedings of Estate Duty?
(2)(b) Whether in the facts and circumstances of the assessee's case the inordinate delay of 13 years would render the proceedings barred by limitation of time?
(3)(a) Whether the vagueness of notice and vital corrections made in the notice Under Section 59 can justify the proceedings initiated Under Section 59?
(b) Whether under the facts and circumstances of the assessee's case the corrections made were vital corrections and cannot justify initiation of proceedings Under Section 59?
(4) Whether in view of the Wealth tax proceedings in which the assets were held to be belonging to the Joint Hindu Family. The same assets can be included in the Estate of the deceased for Estate Duty purposes or could also form a basis for reasons to believe that assets liable to Estate duty has escaped assessment?
(5) Whether the Assistant Controller of Estate Duty had violated the principles of natural justice in not supplying the material requested for by the Accountable Persons and in view of such law whether assessment can be quashed or annulled?
5. The Estate Duty Reference No. 1/1999 is preferred by the assessee under Section 64(3) of the Estate Duty Act, 1953 for calling upon the tribunal to refer the aforesaid question as also questions of law.
6. By order dated 14.2.2001, this Court after referring to the decision of Bombay High Court in Khandvala and Co. v. CIT 14 ITR 635 approved by the Hon'ble Supreme Court in Lakshmiratan v. CIT 73 ITR 634 has directed the reference application to be listed alongwith D.B.I.T. Reference No. 88/98 and he heard and decided at the time of hearing of that Reference.
7. Yet another application under Section 64(3) has been moved by the revenue which is Estate Duty Reference Application No. 16/98. As the application has been moved by the revenue for stating the case and referring following question as a question of law arising out of its appellate order but was also rejected by the Tribunal by separate order dated 21.5.1998, and the application arose out of the same order in respect of which the Tribunal has submitted a reference, this application has also been directed to be listed alongwith aforesaid two cases to be heard together.
Whether on the facts and in the circumstances of the case the ITAT is legally justified in giving the finding that no interest is chargeable under Section 53(3) of the E.D. Act where the accountable persons have neither sought extension of time nor any time has been granted for delivering account of all properties in respect of which Estate Duty is payable?
8. The facts which have led to filing of these three applications are that M.D. Ajeet Singh in respect of whose Estate, these proceedings have been taken, expired on 19.4.1978. In terms of Section 5 of the Act of 1953, in case of every person dying after the commencement of the Act of 1953, Duty there shall be levied and paid upon the principal value ascertained as provided under the statute on all property, settled or not settled, including agricultural land situated and specified in the First Schedule to the Act, which passes on the death of such person, a duty called "estate duty" at the rates fixed in accordance with Section 35.
9. Under Section 53(3) of the Act, every person accountable for Estate Duty is required to submit within six months from the death of deceased an account in the prescribed form and verified in the prescribed manner of all properties in respect of which estate duty is payable. Such period is extendable by the Controller on terms and conditions which may also include the condition of payment of interest. Such conditions are to be prescribed by the Rules.
10. Two sons Rajkumar Swaroop Singh and Rajkumar Sobhag Singh stated to be accountable persons on the demise of Late M.D. Ajit Singh did not file the statement of any properties in respect of which estate duty was payable within the time prescribed under Sub-section (3) of Section 53 nor any prayer for extension of time for submission of such statement was sought at any time.
11. A notice was served on both the Accountable persons on 1.2.1979 calling upon them to submit the statement of property in terms of Section 53(3) of the Act. When the Assistant Controller of the Estate Duty came to know about the demise of Late M.D. Ajit Singh on a report submitted by the Inspector on 2.1.1979 informing about the death of Late M.D. Ajit Singh approximately six months from the date of report i.e. in the year 1978 and also stating about the properties of the deceased as disclosed by him in his Wealth Tax returns submitted in the year 1971-72 exceeding Rs. 10 lacs. No return was submitted in response to the aforesaid notice. Next date that appears on the file appears to be in January, 1989 when the Assistant Controller of Estate Duty sent a letter to Shri Swaroop Singh and Shri Sobhag Singh to state whether any Estate Duty return in respect of Estate of Late M.D. Ajit Singh, who according to the department, died somewhere in the year 1977, furnished or not and its assessment order etc., if any. Another letter was addressed in the like manner on 25.1.1989. Reply was submitted by the Accountable persons on 14.2.1989 that no Estate Duty return was filed by them. It was also submitted in the said reply that M.D. Ajit Singh died on 19.4.1978 and the proceedings, therefore, have become barred by limitation.
12. In response to the aforesaid submission made by the Accountable persons, the Assistant Controller sent a photocopy of the notice issued to the Accountable persons under Section 59 bearing two dates, namely, 2.1.1978 and 2.1.1979. These copies were furnished on Accountable persons on 29.3.1989. The photocopies did not bear any initial or signatures of any official. The Accountable persons filed objections to the continuance of the proceedings. The assessee has demanded the order-sheet entry prepared by the Assistant Controller of Estate Duty, Jodhpur in which he might have recorded reasons for belief as contemplated Under Section 59, the register where such notice Under Section 59 are entered before handing over the same to the process server, and the report of process server, the name of the learned Assistant Controller of Estate Duty whose initials appear in the photocopy of said notice Under Section 59. The letter dated 2.3.1989 also refers to the notice issued under Rule 24 of the Estate Duty Rules and time was sought. However, no return was submitted. The assessee-Accountable persons persisted with the objections taken by them vide letter dated 29.3.1989. Until November, 1992 without submitting the details of property left by deceased Late M.D. Ajit Singh. Ultimately on 30.11.92 assessment order came to be passed by the Assistant Controller of Estate Duty assessing the principal value of the Estate of deceased at Rs. 30,11,138/- as on the date of his death i.e. 19.4.1978.
13. The assessment order discloses that Accountable persons have challenged the validity of notice under Section 59 issued on 2.1.1979 and duly served upon the Accountable persons on 21.2.1979 on the ground that the said notice bears date 2.1.1978 which has been subsequently corrected as 2.1.1979. The correction do not bear anybody's signature. On this premise, the notice was challenged to be invalid. The assessing officer recorded the finding that the notice was actually issued on 2.1.1979, apparently on 2.1.1978 Late M.D. Ajit Singh was alive and no estate duty proceedings could be initiated during the life time of the person.
14. On appeal Commissioner of Income Tax (Appeals), allowed the same, in the first instance on the ground that the assessment order is passed in a sketchy manner and no detailed reasoning is given about the basis of including the value of different assets as also whether they were liable to be considered in the estate of the deceased or not, and set-aside the assessment order and remitted the matter back to the Assistant Controller for fresh consideration.
15. The order of CIT (Appeals) was subjected to second appeal before the Tribunal as the matter relating to the assessment of value of the property in which deceased had his share and interest passed on to accountable persons had been remitted back to the Assistant Controller. Those grounds were not pressed before the Tribunal. However, the assessee has raised all the contentions, which are subject matter of the questions, which we have noticed above. The Tribunal has rejected all other grounds but one contention of the Accountable person i.e. to say about charging of interest for not filing of return, while upholding the validity of proceeding under Section 59 initiated against the Accountable persons vide notice issue on 2.1.1979 endorsement of which bears service of the notice on both the Accountable persons while it was personally served on Sobhagh Singh who was authorised agent of Swaroop Singh, both notices were served on 21.2.1979. The Tribunal found that the provisions of Estate Duty Act in the matter of providing machinery for levy and collection of Duty are not pari materia with provisions under the Income Tax Act and therefore, the provisions of the Income Tax regarding limitation within which assessment is to be completed, or recording of the reasons for initiating proceedings for assessment or reassessment by the Assistant Controller of Estate Duty cannot be imported in the proceedings under the Estate Duty Act. The assessee complainant has complained about the violation of principle of natural justice which was not accepted inter alia on the ground that despite having ample opportunity, the Accountable persons have not even cared to file the statement of properties of the deceased even under protest. The fact that there was only 10 days time to submit the statement of properties from the date of service of notice was held to be not maintainable on the facts and circumstances of the case. The assessee has not cared to file the statement of property at all for last so many years and even after calling upon to do so after search proceedings brought the matter to surface once again. However, considering the contention of the assessee Accountable persons that since they have not asked for any extension of time for submitting statement in terms of Section 59(3), no interest could be charged under proviso to Section 63(3) and there is no other provision for charging interest prior to the date of issuance of notice of demand.
16. We may first consider the question that has been referred to us by the Tribunal as it would be necessary to answer that question and since all other questions are of academic importance, we have negatived all other questions.
17. While that is not in dispute before us that Estate Duty Act provides for limitation for initiating proceedings of assessment under the Estate Duty Act, it provides no further limitation for completion of assessment proceedings. Once the proceedings are initiated either by submitting the statement of properties by the accountable persons under Section 59(3) on their own accord or they have been called upon to do so by the Assistant Controller of Estate Duty, however, it is contended by the learned Counsel for the Accountable persons that like any other power, when in the matter of estate duty no time limit is prescribed for exercise of such power by statutory authorities, such power has to be exercised within reasonable period, if the reasonable period from the date of initiation of proceedings, assuming it is to be on 2.1.1979, as to be considered action having not been taken for almost 10 years discloses that the assessing officer has not exercised the authority within reasonable time which he had obligation to do. Consequently, finalising the assessment order after 13 years of proceedings were initiated cannot be sustained.
18. Reliance was placed on the decision in Nawab Mir Barkat Ali Khan Bahadur v. ACED , Iswara Bhat v. Commr. of Agri. I.T. (1993) 2000 ITE 238 decision of Kerla High Court, another decision of Kerla High Court Krishna Bhatta v. Agri. ITO and Ors. (1981) 132 ITR 21 and Rajgiri Rubber & Produce Co. Ltd. v. CIT . The learned Counsel also placed reliance upon the general principle enunciated by the Hon'ble Supreme Court about exercise of authority within reasonable time in Government of India v. Citadel Fine Pharmaceuticals and Ors. and State of Gujarat v. P. Raghav .
19. On the other hand, learned Counsel for the revenue has urged that under the fiscal statute also the period of limitation was held to be not a period of prescribing repose and in absence of any period of limitation, the tax can be levied and collected any time so long as the tax imposed is not fully collected. He places reliance on the Supreme Court decision in S.C. Prashar and Anr. v. Vasantsen Dwarkadas and Ors. .
20. So far as decisions of Kerla High Court in Krishna Bhatta's case (1981) 132 ITR 21 (supra) and Iswara Bhat v. Comm. of Agri. I.T. (1993) 2000 ITR 238 (supra) and Rajgiri Rubber & Produce Co. Ltd. v. CIT are concerned, these cases related to assuming jurisdiction after inordinate delay and do not deal with the cases where jurisdiction has been assumed within time prescribed within reasonable time but there has been delay in adjudicating the matter. In Krishna Bhatta's case initiation of penalty proceeding after 16 years was held to be vitiated on the ground of proceedings having been taken after inordinate delay. Similarly, in Iswara Bhat's case, revisional power exercised by the Commissioner after 13 years of the initiation of the proceedings sought to be revised was held to be inordinate delay and in Rajgiri Rubber and Produce Co. Ltd. the Court also reiterated the principle that when no limitation prescribed by the statute for the revision, proceedings should be started within reasonable time.
21. We are not concerned here with a situation like this where the proceedings have not been initiated and where no time has been prescribed for such initiation. In the present case, the proceedings have been initiated without any delay. Hence considering exercise of power within reasonable time, once proceedings have been duly commenced, adjudication of such proceedings by the Assessing Officer is his statutory obligation. He does not make assessment orders in furtherance of enabling power but in discharge of statutory duty to levey and collect Duty. In case no period is prescribed for completing assessments as in the case of Income Tax or Wealth Tax, the making of assessment cannot be subject to scrutiny on the sale of exercise of power within reasonable time.
22. The decision of the Hon'ble Supreme Court in P. Raghav's case also relates to exercise of revisional power vested in the Board of Revenue under the Bombay Land Revenue Code for setting at naught already adjudicated matter long-time before. It was in this context relating to exercise of suo moto power of revising the order passed by the subordinate authority under the Bombay Land Revenue Code for which no limitation was prescribed and since the matter related to grant of permission for building construction, the Court held that reading of Section 211 and 65 of the Bombay Land Revenue Code together goes to show that the Commissioner must exercise his revisional powers within few months of the order of the Collector and in the circumstances where the permission for construction was obtained long before exercising power of revising the order of Commissioner, it was held to have been passed to late for commanding acceptance. However, it was made clear by the Hon'ble Supreme Court in P. Raghav's case as well as in Citadel Fine Pharmaceuticals and Ors. case (supra) as to what would be a reasonable period depends on facts of each case and no hard and first rule can be laid down in this regard.
23. The decision of Andhra Pradesh High Court in Nawab Mir Barkat Ali Khan Bahadur's case has arisen in own peculiar facts and circumstances of the case. The erst-while Late Nizam died on February 24, 1967. The petitioner before the Andhra Pradesh High Court, the Accountable person filed an account of the estate of the late Nizam declaring the net estate passing on the death of the said late Nizam in terms of Section 59 of the Act on February 20, 1973. The Assistant Controller of the Estate Duty determining the net principal value of the estate passed the assessment order which was subjected to appeal. During the pendency of the appeal, respondent the Assistant Controller of Estate Duty issued notice under Section 59 of the Act on the ground that the property chargeable to estate duty had escaped assessment. In response to the said notice, the petitioner filed representation and also demanded reasons for reopening the assessment. The respondent communicated the reasons namely failure to charge the value of the King Kothi palace in the estate duty assessment of the late Nizam. The claim of exemption of the King Kothi be excluded from the estate of the assessee was accepted during the first assessment, but later on according to the Assessment, but later on-according to the Assistant Controller it was noticed that exemption has wrongly been granted. This plea of revenue was accepted by the Assistant Controller of the Estate Duty and value of balance was included in the estate of the assessee. On further appeal by the petitioner to the Income Tax Appellate Tribunal, the exemption granted by the Assessing Authority was upheld by allowing the appeal and the said order was confirmed by the Hon'ble High Court on August 20, 1984. It was after confirmation of the order by the High Court that the respondent Assessing Officer issued a letter on 16.7.1986 stating that information furnished by the Accountable Persons on 28.2.1975 was incomplete and stated that the assessment was reopened on some other grounds one of them being that the exemption was wrongly granted in the original assessment in respect of heirloom jewellery and after six months another letter was issued asking the petitioner to file a return on or before 16.3.1987. It was in the aforesaid circumstances, when the original notice issued and reasons disclosed for such notice has failed for sustaining the addition made on that ground upto the High Court, thereafter old proceedings were sought to be restarted on new grounds. It is in the aforesaid circumstances considering the continuation of proceedings after decision of the High Court holding that the ground for which reassessment proceedings were initiated and on the basis of which valuation of property by the appellate authority was added but which additions failed in appeal that the assessing officer has sought to continue those proceeding under the very same notice. In these circumstances, the Andhra Pradesh High Court applied the principle of unduly long continuing with the proceeding in pursuance of the notice issued before the decision of Andhra Pradesh High Court, notwithstanding reason for which notice was issued was decided against the Revenue by the High Court.
24. It was clearly a case that Assessing Authority has abused his power to continue with the proceedings on the ground which was decided against Revenue by the High Court even after decision of High Court. Apparently, continuance of notice after decision of High Court which binds Revenue as well was impermissible as a judicial discipline. It was clearly an attempt by Assessing Officer to over reach and upset the verdict of High Court which it had no jurisdiction to do. He could not be permitted to resurrect the notice of reassessment issued prior to the decision of the appellate authority which has given effect to in pursuance of which notice was issued on 10.1.1975, but additions which were quashed by the Andhra Pradesh High Court.
25. We are of the opinion that the decision in Nawab Mir Barkat Ali Khan is not applicable to the facts of the present case nor any general proposition has been laid down by the Andhra Pradesh High Court free from the context in which the order has been passed, laying down that in all case where the assessment proceedings are not completed within reasonable period, the proceeding for assessment shall finally stand dropped.
26. On the other hand, the Hon'ble Supreme Court in S.C. Prashar and Anr. (supra) has considered the aspect of limitation in the context of enforcement of levy of tax through fiscal statutes. While referring to well known principle that subsequent changes in the period of limitation do not take away an immunity which has been reached under the law as it was previously. In this sense, statutes of limitation have been picturesquely described as "statutes of repose". But it is somewhat inapt to describe Section 34 with its many amendments and validating sections as a "section of repose". Under that section there is no repose till the tax is paid or the tax cannot be collected. What the law does by prescribing certain periods of time of action is to create a bar against its own officers administering the law. It tries to trim between recovery of tax and the possibility of harassment to an innocent person and fixes a duration for action from these two points of views. These periods are occasionally readjusted to cover some case which would otherwise be left out and hence these amendments. As assessment can be said to become final and conclusive if no action can touch it but where the language of the statute clearly reopens closed transactions, there can be no finality. These prescribed periods cannot be raised to the level of those periods of limitations which confer not only immunity but also give titles by the passage of time.
27. Further the Hon'ble Supreme Court while considering in Prashar's case (supra) the question of commencement and scope of limitation prescribed under the Indian Income Tax Act, 1922 for reopening the assessment, which have already been passed earlier and reassessment proceeding under the existing law have become barred by time and such existing proceeding which has become barred by time in accordance with the provisions sought to be reopened. But principle which clearly emerged from Prashar's case is that in the absence of limitation prescribed under the statute, there is no repose from levy and collection of tax until the levy is fully brought to light and that is the reason why the Court has described the period of limitation to be inaptly described as law of repose. In other words, in absence of other statutory provision governing concluded assessment, there is no repose until the full amount leviable under the law is levied and collected. If this principle is applied in the present case as per the finding of the Tribunal, the assessment proceedings were initiated well within time in January, 1979 and there being no limitation prescribed for completing assessment and they levy of collection of tax, it cannot be defeated if it is otherwise leviable.
28. Moreover, in the present case even the principle of inordinate delay cannot be extended on the facts of the present case. Unlike the case before the Andhra Pradesh High Court, the assessee has chosen not to file any return despite obligation to file the same under Section 59(3) inspite of having been served with such notice after search and survey taken place on the premises of assessee. The innocuous reply given at 10 years without proceeding was clearly to the benefit of the assessee. In the record of the proceedings of the assessee which we had summoned before the court in order to appreciate the contention of the learned Counsel for the assessee about interpolation and correction made in the notice issued on 2.1.1979. The record of proceeding clearly contained a copy of office memorandum dated 28.3.1989 under the signatures of the then Commissioner of income tax Jodhpur Range Jodhpur which reads as under:
No DC/JB 3183 Office of the Dy. Commissioner of Income Tax, Jodhpur Range, Jodhpur dated the 28th March, 1989 OFFICE MEMORANDUM The Estate Duty file relating to Late Maharaja Ajeet Singh, A.P. Rajkumar Swaroop Singh and Sobhag Singh, Ajeet Bhawan Jodhpur has been traced out today by Shri Sohansingh, LDC. The file contains following four pagers in original:
(i) Report of the then Inspector Shri A.V. Gurnani dated 2.1.1979.
(ii) Notice Under Section 59 of the E.D. Act dated 2.1.79 bearing No. A-71 and served on Shri Sobhag Singh on 21.2.1979.
(iii) Notice under Rule 24 of the E.D. Rules.
(iv) Postal acknowledgment in the above notice bearing registered No. RC 929 dated 5.7.80.
The original file is handed over to Shri S.C. Jain, ACED, Jodhpur in my presence.
Sd/-
Received the (S.K. Kundra)
above records Dy. Commissioner of
in original. Income Tax, Jodhpur
Range, Jodhpur.
Sd/- 28.3.89
(S.C. Jain)
ACED, Jodhpur.
29. Apparently, after the notice was served on the assessee Accountable person, another notice under Section 58(4) was issued somewhere in 1980 after which the file disappeared and as been resurfaced only after the inquiries were directed to assessee in January, 1989 whether he has submitted any return of the estate duty and whether any assessment order had been passed thereon. Apparently, the assessing officer was not aware of the fact that during the pendency of these proceedings the notice was issued in the matter earlier and not been complied with. Who is the person interested and beneficiary of loss of file, the answer is not far to seek. Only assessee could have been benefited by loss of file and proceedings going in hibernation.
30. We are of the opinion that even if the principle of concluding assessment proceeding within reasonable time after initiation of proceeding is accepted in the present case looking to the conduct of the assessee and the loss of record for considerable period from the office of the assessing officer, make out a case that when after the search and seizure the enquiry was directed to assessee to furnish information and file was relocated, thereafter, proceedings did not suffer from any latches. Delay if any was solely due to reticence shown by the accountable persons to discharge their minimum obligation to submit return atleast after service of notice in February, 1979. He cannot be benefited for his own lapses.
31. We therefore answer the question referred by the Tribunal in affirmative i.e. to say in favour of revenue and against the assessee by holding that the assessment order dated 30.11.1992 did not suffer from any infirmity merely because it was passed after about 13 years of issuance of notice in 1979 and after about 3 years of resurrection of the proceeding in March, 1989.
32. This brings to us the assessee's application for seeking reference on other questions also which has been refused to be referred by the Tribunal to this Court.
33. So far question No. 1(A) and 1(B) are concerned in our opinion, these questions are questions of law as no question of fact involved in answering those questions. These questions related to the alleged condition precedent related to the alleged condition precedent before initiating the proceeding under Section 59.
34. On the analysis of the provisions of the Income Tax Act, 1961 the assessee has contended that before issuing notice under Section 59 the assessing officer must have reason to believe that the estate has escaped basis to establish assessment and necessary reasons must be recorded prior to issuance of notice and ancillary issue has been raised on the basis of finding of the has been raised on the basis of finding of the Tribunal that whether the report of inspector constitute reasons to believe as contemplated under Section 59 of the Estate Duty Act.
35. We may notice that at the time when Act of 1953 was enacted, the Indian Income Tax Act, 1922 was already in force and parallel provisions for making escapement of income which has required recording of reasons before issuance of notice in Section 34 of the Act of 1922. Under the proviso to Sub-section 1A the provisions relating to recording reasons was brought into effect before issuing notice thereunder. Similarly, in the Act of 1861, vide Sub-section (2) of Section 148 it was envisaged that the Income Tax Officer shall before issuing any notice under Section 148 record the reasons for doing so. The same provisions have been maintained in new scheme under Section 147, 148 and 149. However, the statutory provision for recording reasons before issuance of notice to become condition precedent for assuming jurisdiction of issuing notice does not find place in the Estate Duty Act. In absence of any such condition before assuming jurisdiction it would be perilous to read certain provisions with reference to other fiscal statutes which are not pari materia in terms, such a course is impermissible for reading a statute.
36. Undoubtedly, the reason to believe that any property chargeable to Duty has escaped assessment must exist before initiating proceedings. But recording of reasons before, issuance of notice is not pre-condition. If existence of such belief is challenged that no reason exists to hold such belief reasons may be disclosed subsequently.
37. Undoubtedly, the reason to believe that any property chargeable to establish assessment for the reasons stated in Sub-section (A) of Section 9 is a condition precedent. Such reasons must exist before issuance of notice exist but there is no further reflection that how and in what manner the belief can be held by the assessing officer and whether reason for such belief has to be recorded before issuance of notice where the law provided before the assumption of jurisdiction. In absence of any statutory provision, the assumption of jurisdiction is subject to the satisfaction of the assessing officer about the existence of condition in Clause (a). If the existence of such reason to believe is held by the assessing officer it can be provided by the assessing officer like any other fact that what were the reasons for him to believe on existing material that was before him. With the reasons already recorded it can be a proof of state of mind existing at the time of issuance of notice. If the reasons have already been recorded, it can always provide a basis for assuming jurisdiction namely the belief that the property chargeable to Duty has escaped assessment was held bonafide on relevant consideration by the officer. Unless recording the reasons is mandated by the statute its not recording cannot invalidate assumption of jurisdiction and about state of mind before issuance of notice can be proved by any other mode which can set out the context on the basis of which subjective satisfaction can be held on the basis of existing material having some nexus with such satisfaction.
38. Somewhat similar question arose in the case of Swadeshi Cotton Mills Co. Ltd. v. State Industrial Tribunal U.P. and Ors. . It was a case in which order passed under Section 3 of the U.P. Industrial Disputes Act was challenged inter alia on the ground that condition necessary for issuing such order did not find place in the order itself. The contention was raised that since the order did not itself confirm the opinion, it was invalid. The State has relied on the general presumption about correctness of its orders. The Court did not accept both the extreme positions and said that the power to pass an order under Section 3 arises as son as the necessary opinion required thereunder is formed. This opinion is naturally formed before the order is made. If therefore such an opinion was formed and an order was passed thereafter, the subsequent order would be a valid exercise of the power conferred by the Section. The fact that in the notification reaching such satisfaction is not stated by itself will not invalidate the notification. If challenge is laid fact about formating of necessary satisfaction can be proved like an other fact to sustain the notification. The Court also rejected another extreme contention of Shri Aggarwala that the mere fact that the order has been passed is sufficient to raise the presumption that conditions precedent have been satisfied, even though there is no recital in the order to that effect. Such a presumption in our opinion can only be raised when there is a recital in the order to that effect. In the absence of such recital if the order is challenged on the ground that in fact there was no satisfaction, the authority passing the order will have to satisfy the court by other means that the conditions precedent were satisfied before the order was passed.
39. Apparently, in the present case the order was challenged before the assessing officer on the ground that condition precedent has not been satisfied. It cannot fail on the ground that the reasons have not been recorded in writing or disclosed in notice. Had the reasons been stated, the presumption about satisfaction of condition precedent that assessing officer has framed the required belief on the basis of material and that jurisdiction has been assumed properly. However, in absence of the same, the assessing officer can not rely on the presumption that at the time of issuing the notice, necessary belief was formed that the property is to be assessed in the hands of assessee has escaped assessment, but has to satisfy by cogent material that in fact such belief was honestly formed on relevant material. In the present case before issuing notice dated 2.1.1979 the assessing officer was reported that when the assessee had died, he was a wealth tax assessee about which he himself has submitted a return over Rs. 10 lacs as assessable net wealth, hence, he held estate which invited charge to Estate Duty on his death.
40. In these circumstances, before issuance of notice dated 2.1.1979, the assessing officer had in his possession, the relevant material on the basis of which he could form an opinion about the escapement of assessment from the estates of deceased.
41. From perusal of assessment order, we are of the opinion that the Tribunal was justified in not invalidating the initiation of proceeding merely because there was no recording of reasons before issuance of notice and holding the information in report of the inspector constituted the material on the basis of which necessary belief could be held that estate of Late M.D. Ajeet Singh has escaped assessment.
42. So far as question No. 2(a) is concerned, it is only an ancillary of question No. 2(b) which had been referred by the Tribunal for the opinion of this Court and is subject matter of Estate Duty Reference No. 88,98 which we have already answered while deciding the said reference.
43. Question No. 3 also in our opinion is question of fact and does not arise as question of law. So far as Question No. 3(a) is concerned, the notice was required only to be given for submitting the accounts of the property of the deceased in which he has disposable interest and its estimated value for the purpose of estate duty as per accountable persons. No further details are required to be given in the notice inviting accountable person to file return. Obviously, the answer to the question No. 3 is of academic value, and it cannot be a question which was liable to be referred.
44. Part (b) of question No. 3 also in our opinion is the question of fact, answer to which has been given by the Tribunal on the basis of material available on record. We have already answered while deciding the Reference No. 88/98 that the notice in connection with which the aforesaid issue is raised, was served on accountable persons on 21.2.1979. The finding given by the Tribunal that 2.1.1979 being the period of commencement of the new calendar year and writing of 2.1.1978 is possibly by mistake, therefore, the same was noticed and the correct date 2.1.1979 was written below it. Even in the circumstances, when the date of expiry of the person whose estate was liable to be subjected to the estate duty had expired only in April, 1978 and therefore, notice could not have been issued prior to that date. The notice has served on the accountable person on 21.2.1979 and there is no question of anti-dated and creating the document after 13 years as is suggested by the accountable person during the course of hearing before the Authorities under the Estate Duty Act as well as before us. We are therefore, satisfied that in declining to refer question No. 3(a) and 3(b), the Tribunal has not committed any error.
45. Question No. 4 can certainly be considered as a question of law, however, the answer is obvious that the Estate Duty is a Duty on the estate which is left by a dead person after his death in individual capacity. Whether the estate belong to the HUF or any other entity under the income tax and wealth tax Acts it does not affect the liability of the estate belonging to individual towards estate duty. The estate duty has to be assessed in respect of the entire estate of the deceased in which he has disposable interest at the time of his death. If the deceased was member of Joint Hindu Family, in that case, his interest in HUF is liable to be included in the estate of the deceased for the purpose of considering the proper value of his estate for levy of Duty on the estate of the deceased. Therefore, issuing notice to the individual cannot be faulted with on the ground that the assessee was stated to be living in Joint Hindu Family at the time of his death. That may only affect the computation of his interest in the properties belonging to the Joint Hindu Family. In the present case, no dispute has been raised about inclusion of the share of deceased in the estate of Late M.D. Ajeet Singh. The question whether the assessee is HUF or individual losses its significance and importance for the estate duty.
46. Question No. 5 also in our opinion is a question of fact and does not call for making a reference. Whether a person has been given fair opportunity by supplying material depends on the facts and circumstances of the each case. In the present case, the assessee was given first notice which he did not avail, another notice given under Rule 24 in July, 1980 that he did not avail, thereafter, he received a notice after search and served on him but the accountable person did not file any return of the estate left by the deceased Late MD Ajeet Singh. The accountable persons have not availed the opportunities made available to them and therefore, it cannot be considered that they have not been afforded adequate opportunity in the matter of making assessment of the deceased.
47. In these circumstances, the Tribunal has not rightly referred question No. 5.
48. As we have considered whatever questions arise and others which have not been referred to by the Tribunal and which were required to be referred through the aforesaid discussion, the application No. 1/99 stands accordingly disposed of.
49. This brings us to application of the revenue which has been moved requiring the Tribunal to refer the following question as a question of law for the opinion of this Court arising out of the order of Income Tax Appellate Tribunal, Jaipur Bench, Jaipur dated 12.5.1997.
Whether on the facts and in the circumstances of the case the ITAT is legally justified in giving the finding that no interest is chargeable Under Section 53(3) of the ED Act where the accountable persons have neither sought extension of time nor any time has been granted for delivering account of all properties in respect of which Estate Duty is payable?
50. We are of the opinion that the Tribunal was not justified apparently in rejecting the request of the revenue in referring the aforesaid question as a question of law.
51. We, therefore, propose to decide the aforesaid question of law and answer the same.
52. The revenue has levied interest on the demand created by the assessing officer as estate duty w.e.f. the date the assessee was required to file a return that is to say within six months from the date of death of the person whose estate is liable to be assessed under Estate Duty Act. The interest has been levied with reference to proviso to Section 53(3) of the Act of 1953, which reads as under:
53(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.
53. The Tribunal has allowed the contention of the assessee in this regard by holding that the interest has been envisaged under the aforesaid provision only as a condition of grant of extension of time as may be applied by the assessee for the purpose for filing return, however, in case no extension is sought, there is no provision of Estate Duty Act which enables the revenue to impose interest upon non filing of the return and unlike the provisions of the Income Tax Act, no such provision of Estate Duty Act required the same, and therefore, interest levied on the demand of the estate duty w.e.f. the date after expiry of six months from the date of death of Late M.D. Ajeet Singh was set aside.
54. On the plain reading of Sub-section (3) of Section 53 it is apparent that there is no automatic consequence of not filing the return within the time allowed. The consequence of not filing the return in time before passing of an assessment on the basis of material that may be collected by the Estate to the officer is there, but it cannot be saddled with consequence as in the case of consequence of not filing return under the Income Tax Act which has also been changed from time to time. Merely for not filing the return, no interest can be charged until the demand has been created/credited and the assessee has failed to fulfil the demand within the time specified in the demand notice. Interest for not filing return cannot also be sustained on general principle.
55. We are of the opinion, the question which revenue wants to raise must be answered in affirmative i.e. in favour of the assessee and against the revenue. Accordingly, Reference No. 16/98 is disposed of.