Controller of Estate Duty vs Smt. Daleshwari Devi

M. Srinivasan, C.J.—The question referred to this court reads as follows :

"Whether, on the facts and in the circumstances of the case, the reopening of the assessment by the Assistant Controller of Estate Duty was valid in law ?"

The husband of the accountable person died on April 12, 1977. An order of assessment was passed initially by the Assistant Controller of Estate Duty, which was set aside on appeal by the Controller on January 10, 1980. The matter was remanded to the Assistant Controller for fresh assessment. Three questions were directed to be considered. We are concerned only with one question, which was "whether half of the estate passed as contended by the appellant after the death of the deceased, the late Dewan Pritam Singh".

The Assistant Controller discussed the relevant facts and also relied upon the assessment of the deceased in the status of the Hindu undivided family both under the Income Tax and Wealth-tax Acts and proceeded to hold that only half of the estate passed on his death to the accountable person.

It appears that an objection was, raised by the internal audit to the view taken by the Assistant Controller. Thereupon, the Assistant Controller was not inclined to reopen the assessment, but a letter was sent by the Inspecting Assistant Commissioner of Income Tax, Audit, Patiala, on October 5, 1983, directing the Assistant Controller to reopen the assessment immediately and in time. It was practically a command by the Inspecting Assistant Commissioner of Income Tax and Audit, which was obeyed pursuant to which the assessment was reopened. The Assistant Controller of Estate Duty passed a fresh order holding that the entire estate passed on the death of the deceased to his wife and, therefore, she was liable to be assessed with regard to the entire estate. Aggrieved thereby, the accountable person filed an appeal before the Appellate Controller, which was dismissed on November 30, 1985. The accountable person took the matter to the Appellate Tribunal. The Tribunal while upholding the decision of the Appellate Controller on the merits held that the reopening of the assessment was not warranted. The reasoning of the Tribunal is found in the following passage :

"However, it is highly doubtful as to whether the reopening of the assessment in this case is valid in law. The Assistant Controller of Estate Duty had issued a notice u/s 59(b) the provisions whereof are the same as of Section 34(1)(b) of the Indian Income Tax Act, 1922, and Section 147(1)(b) of the Income Tax Act, 1961. The grounds for reopening the assessment were asked by the accountable person and the only ground taken was that the deceased was the sole surviving male coparcener of the Hindu undivided family governed by the Mitakshara school of Hindu law and, therefore, any alienation made could not be questioned by any female member of the Hindu undivided family, because on the death of such coparcener, the whole of the property including coparcenary property passed by intestate succession to his own heirs. According to the accountable person, the file did not show that any information was received by him before issuing a notice u/s 59(b) nor were any reasons recorded. Actually the reopening appears to be on the basis of some audit objection and the contention of the accountable person was that the audit objection did not constitute information, hence the case could not be reopened in view of the judgment of the Supreme Court in the case of Indian and Eastern Newspaper Society, New Delhi Vs. Commissioner of Income Tax, New Delhi, . In this behalf it was pointed out by the representative of the accountable person that before making the earlier assessment on the basis of the statement of account filed by the accountable person. In that provisional assessment, the status of the Hindu undivided family had been claimed and only 1/2 interest in the property was shown by the accountable person but the Assistant Controller was of the opinion that the deceased was the only surviving coparcener. Therefore, the whole of the property was liable to be assessed in his hands. In other words, this question was open to his mind even at the time of the provisional assessment and, therefore, was duly considered at the time of original assessment. Not only this, when the audit party brought this issue before the Assistant Controller, the reply of the Assistant Controller in the first instance vide his letter dated August 3, 1983, was that the first assessment u/s 58(3) made on May 31, 1979, had been set aside by the Appellate Controller of Estate Duty and the second assessment was made oh October 9, 1980. The audit objection had been raised to the second assessment. As per the provisions of the Estate Duty Act, the assessment could not be reopened after the expiry of three years from the date of the original assessment. If the time-limit was reckoned from the first assessment, the case had become time-barred. Further, the Assistant Controller of Estate Duty was actually not himself inclined to reopen the assessment which had been reopened because of the letter dated October 5, 1983, written by the Inspecting Assistant Commissioner of Income Tax, Audit, Patiala, the relevant part whereof reads as under :

"2. The orders of the worthy Commissioner are reproduced hereunder :

''Let the Income Tax Officer reopen the assessment immediately and in time.''

You are, therefore, directed to take immediate action as directed above. It is advised that reasons for reopening the assessment should be properly drafted after consultation with the Range Inspecting Assistant Commissioner, if considered necessary."

This would show that the assessment was not reopened by the Assistant Controller of Estate Duty of his own or because of any information supplied to him. It was more or less in pursuance of a direction by the Commissioner of Income Tax (Audit), Patiala. Now while such directions are permissible u/s 119 of the Income Tax Act, according to which every Income Tax Officer employed in the execution of this Act is to observe and follow such directions as may be issued to him for the guidance by the Director of Inspection or Commissioner or Inspecting Assistant Commissioner within whose jurisdiction he performs his functions, there is no corresponding provision in the Estate Duty Act. Apart from the fact that it is highly doubtful as to whether directions can be given in respect of judicial functions such as the reopening of the assessment. The corresponding provision in the Estate Duty Act is contained in Section 4 which deals with Controller of Estate Duty which word includes Deputy Controller and Assistant Controller. In other words, the Controller, the Deputy Controller and the Assistant Controller have concurrent jurisdiction. It is only the Central Board of Direct Taxes which can give instructions and directions to the officers and persons employed in the execution of this Act. Obviously, no directions have been given by the Board. In the normal circumstances, the Commissioner of Income Tax has the power to revise an order of the Income Tax Officer u/s 263 of the Income Tax Act but there appears to be no similar provision in the Estate Duty Act. However, the exercise of such power is also subject to several conditions such as notice to the assessee and passing of a judicial order against which an appeal lies to the Tribunal. It is rather difficult to hold that all this cumbersome procedure could be circumvented by the Inspecting Assistant Commissioner (Audit) conveying directions of the Commissioner to the Assistant Controller of Estate Duty. If these directions were not there, probably the Assistant Controller would not have reopened the assessment because although his order reopening the assessment does not contain any reference to the audit party''s report or the direction of the Commissioner there is apparently no reason for his reopening. The earlier decision was taken over a highly controversial matter of law and the reopening itself would amount to a change of opinion which is not permissible in view of the decision of the Supreme Court in the case of Indian and Eastern Newspaper Society, New Delhi Vs. Commissioner of Income Tax, New Delhi, . Consequently, we are of the opinion that the reopening in the present case is not valid. Accordingly, we accept the appeal and quash the reassessment."

We are entirely in agreement with the reasoning of the Tribunal that there was no fresh information to the Assistant Controller of Estate Duty, on the basis of which the assessment could have been reopened. Mr. Inder Singh, learned counsel for the petitioner, placed reliance on a judgment of the Kerala High Court in Aspinwall and Co. Ltd. Vs. Commissioner of Income Tax (No. 1), . A Division Bench of that court held that if the Income Tax Officer determines the effect and consequence of the law mentioned in the audit and tries to streamline the position in the light thereof, for curing the situation of escaped assessment, it would amount to information because the basis of the belief would be the position of law in regard to which the officer became aware. The Bench referred to the judgment of the Supreme Court in Indian and Indian and Eastern Newspaper Society, New Delhi Vs. Commissioner of Income Tax, New Delhi, , and observed that (page 614) : "having gone through the said decision as to what amounts to ''information'' declaring that if the Income Tax Officer determines as to what is the effect and consequence of the law mentioned in the audit and tries to streamline the position in the light thereof, for curing the situation of escaped assessment, it would amount to information because the basis of the belief would be the position of law in regard to which the officer became aware".

In Indian and Eastern Newspaper Society, New Delhi Vs. Commissioner of Income Tax, New Delhi, , the Supreme Court held that the opinion of an internal audit party of the Income Tax Department on a point of law cannot be regarded as "information" within the meaning of Section 147(b) of the Income Tax Act, 1961, for the purpose of reopening an assessment. The court said that though an audit party does not possess the power to pronounce on the law, it nevertheless may draw the attention of Income Tax Officer to it. If the distinction between the source of the law and the communication of the law is carefully maintained, the confusion, which often results in applying Section 147(b) may be avoided. The court, therefore, observed that in every case, a declaration or exposition to be law, must be a creation by a formal source, either legislative or judicial authority. A statement by a person or body not competent to create or define the law cannot be regarded as law. Ultimately, the court said that the opinion of the audit party on a point of law could not be regarded as information enabling the Income Tax Officer to initiate reopening of the assessment.

Turning to the facts of this case, we have already mentioned that the Assistant Controller of Estate Duty has taken a particular view on the relevant question of law and come to the conclusion on the basis of the facts and circumstances of the case that only one-half of the estate passed on the death of the husband of the accountable person. For that purpose, the Assistant Controller of Estate Duty relied upon the fact that the deceased was assessed as a Hindu undivided family, both under the Income Tax Act and the Wealth-tax Act. No further information of fact as such was given to the Assistant Controller of Estate Duty, so as to enable him to reopen the assessment. However, there was an objection of the audit. A direction was given to him by the audit to reopen the matter. In such circumstances, the Tribunal has rightly held that what was available to the Assistant Controller of Estate Duty was not an information within the meaning of the section and there was no power in him to reopen the assessment already made.

In such circumstances, we answer the question referred to us in the negative and hold that on the facts and circumstances of the case, the reopening of the assessment by the Assistant Controller of Estate Duty was not valid in law.