Commissioner of Income Tax vs Kahan Pal

N.K. Agrawal, J.—The following question of law has been referred by the Income Tax Appellate Tribunal (for short, "the Tribunal") to this court for opinion u/s 64(1) of the Estate Duty Act, 1953 (for short, "the Act") :

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that assessment proceedings were time barred u/s 73A of the Estate Duty Act as it was mandatory not only to issue the notice but also to serve the same within the period of limitation?"

One Chog Singh had died on February 18, 1969. Consequent upon a survey conducted by the Inspector of the Department, proceedings under the Act were initiated by the Assistant Controller of Estate Duty for levy of estate duty on the chargeable estate of the deceased. A notice by registered post A. D. was, therefore, issued on October 17, 1973, by the Assistant Controller of Estate Duty to the accountable persons, Rajpal Singh and Chachpal Singh, sons of the deceased, at their address, Village Dhani, Tehsil Loharu, District Bhiwani. Since none appeared, notices were again issued under Rule 24 of the Estate Duty Rules, 1953, on July 19, 1975, for producing the books of account or the documents relating to the chargeable estate of the deceased, Chog Singh. Notices were thereafter again issued on July 19/20, 1977. Kahan Pal Singh, an accountable person, attended. Thereafter, another accountable person, Rajpal Singh, also appeared. Proceedings were, however, finalized ex parte by the Assistant Controller because the accountable persons failed to appear on the adjourned date of hearing. The principal value of the chargeable estate of the deceased was determined at Rs. 1,18,000.

The accountable person went in appeal and the appellate authority cancelled the assessment on the ground that the assessment had been made beyond the period of limitation of five years. The Tribunal upheld the appellate order.

In the present reference, the Department is represented by Shri R.P. Sawhney, learned senior counsel for the petitioner, but no one has put in appearance on behalf of the accountable person, Kahan Pal, Village Dhani, District Bhiwani. Notice had been issued to him by registered post A. D. Shri Sawhney has argued that the Tribunal has not taken a correct view regarding the period of limitation as laid down in Section 73A of the Act. Under the said section, proceedings for the levy of estate duty are required to be commenced before the expiration of five years from the date of death of the deceased. Since Chog Singh had expired on February 18, 1969, and notice u/s 59 of the Act had been issued on October 17, 1973, the period of five years is said to have not expired.

Notice had been issued by the Assistant Controller u/s 59 of the Act on the ground that the property had escaped assessment. Chog Singh had died on February 18, 1969, and no account of the estate of the deceased had been submitted by the accountable person u/s 53 or Section 56 of the Act and the matter had been reported on survey by the Inspector of the Department, it was a case u/s 59 of the Act.

Section 59 of the Act reads as under :

"59. Property escaping assessment--If the Controller,--

(a) has reason to believe that by reason of the omission or failure on the part of the person accountable to submit an account of the estate of the deceased u/s 53 or Section 56 or to disclose fully and truly all material facts necessary for assessment, any property chargeable to estate duty has escaped assessment by reason of undervaluation of the property included in the account or of omission to include therein any property which ought to have been included or of assessment at too low a rate or otherwise, or

(b) has, in consequence of any information in his possession, reason to believe notwithstanding that there has not been such omission or failure as is referred to in Clause (a) that any property chargeable to estate duty has escaped assessment, whether by reason of under-valuation of the property included in the account or of omission to include therein any property which ought to have been included, or of assessment at too low a rate or otherwise.

he may, at any time, subject to the provisions of Section 73A, require the person accountable to submit an account as required u/s 53 and may proceed to assess or reassess such property as if the provisions of Section 58 applied thereto."

A plain reading of the aforesaid provision makes it clear that, where, on the death of a person, the accountable person fails or omits to submit an account of the estate or fails to disclose fully and truly all material facts necessary for assessment, the Controller of Estate Duty may require the accountable person to submit an account, as required u/s 53 of the Act. This power has to be exercised subject to the provisions of Section 73A of the Act.

Section 73A of the Act reads as under :

"73A. Limitation for commencing proceedings for assessment or reassessment--No proceedings for the levy of any estate duty under this Act shall be commenced-

(a) in the case of a first assessment, after the expiration of five years from the date of death of the deceased in respect of whose property estate duty became payable ; and

(b) in the case of a reassessment, after the expiration of three years from the date of assessment of such property to estate duty under this Act."

The above section provides for limitation for commencing proceedings for assessment and reassessment. It is self-explanatory. A provision in relation to limitation has to be construed strictly and it ought to receive such a construction as the plain meaning of the language employed in it imports. A proceeding provided under the Act for the levy of estate duty may be commenced before the expiry of five years from the date of death of the deceased. The crucial question which arises for determination is as to what is meant by the word "commenced".

The Tribunal has taken the view in its appellate order that the notice u/s 59 of the Act had not been served and, therefore, no proceedings had started on the issuance of the notice. Notices were subsequently issued under Rule 24 of the Estate Duty Rules on July 19, 1975, and, since the period of five years had expired on February 12, 1974, the notice was served after the expiry of the period of limitation and, therefore, proceedings were barred by limitation.

A question regarding the period of limitation u/s 149 of the Income Tax Act, 1961, came to be examined by a Full Bench of this court in Jai Hanuman Trading Co. Pvt. Ltd. Vs. The Commissioner of Income Tax, Patiala and Another, . That was a case where three notices u/s 148 read with Section 147(a) of the Income Tax Act had been issued for three assessment years on March 28, 1974, and were served on April 2, 1974. The assessee had filed the writ petitions challenging the said notices with the contention that the notices were barred by limitation. The assessee''s plea was that it was not enough that the notice was sent by the Income Tax Officer but it was necessary that it should have been served on the assessee before the expiration of the period of limitation. The court noticed that the word "issued" occurring in Section 149(1) cannot be given the meaning "served". The Full Bench dissented from the views expressed by the High Courts of Gujarat and Andhra Pradesh and also overruled the decision of this court in Tikka Khushwant Singh Vs. Commissioner of Income Tax and Another, .

The Allahabad High Court in Controller of Estate Duty Vs. Smt. Manorama Devi, , examined a similar question about the period of limitation. In that case, the deceased had died on September 23, 1959, and the notice on the accountable person was served on March 5, 1963. Following an earlier decision of the Allahabad High Court in Padampat Singhania and Others Vs. Controller of Estate Duty, , in that reference, it was observed that a notice u/s 55 starts proceedings under the Act and if it has been done before the expiry of five years after the death, the bar of limitation created by Section 73A is saved.

The Andhra Pradesh High Court has examined a question regarding the issuance of notice for the purpose of reassessment, in two cases, namely, V.S.L. Narasimha Rao and Another Vs. Assistant Controller of Esate Duty, Guntur and Another, and Merla Sitarama Prasad Vs. Assistant Controller of Estate Duty and Another, . In the first case, the question had arisen about the period of limitation under Clause (b) of Section 73A of the Act. It was noticed that the Assistant Controller had first issued a notice dated January 31, 1967, and, thereafter, a letter dated February 19, 1969. The accountable person had argued, in that case, that the letter issued by the Assistant Controller should be treated to be a notice u/s 59 of the Act but that argument was rejected and it was held that the notice dated January 31, 1967, was a notice u/s 59 of the Act. The period of limitation was counted from the date of the first assessment to the date of the notice. In the second case also, it was a matter of reas sessment and the legality of the notice had been challenged on the ground that it had been issued after the expiration of three years from the date of assessment and, therefore, it was barred by limitation u/s 73A(b) of the Act. It was held that no proceedings for the levy of estate duty could be commenced in the case of first assessment after five years from the date of the death of the deceased and in the case of reassessment, after three years from the date of first assessment. There also, the Depart ment had argued that limitation should start, under Clause (b) of Section 73A, from the date of the appellate order and not from the date of assess ment. The High Court took the view that, in a case of reassessment, the period of three years shall be computed from the date of first assessment to the date of notice.

From a plain reading of Section 73A of the Act and also in the light of the observations made by other High Courts, it is evident that the proceedings for the levy of estate duty can be said to have commenced from the date of notice. It has already been seen that the proceedings had been initiated after the survey report submitted by the Inspector of the Department. Notice u/s 59 of the Act had, therefore, been issued by registered post A. D. to the two sons of the deceased at the given address. The notice was, however, not served but that would not render the issuance of notice ineffective or of no consequence. Commencement of proceedings has relevance to the issuance of notice and not its service.

In the result, the question referred to this High Court is answered in the negative and in favour of the Department. It is held that the proceedings initiated u/s 59 of the Act were not barred by limitation u/s 73A(a) of the Act.