Rani Jagdamba Kumari Devi vs Commissioner of Income Tax

Sabyasachi Mukharji, J.—In this reference u/s 256(1) of the income tax Act, 1961 (hereinafter referred to as "the Act"), the following question has been referred to this Court: Whether, on the facts and in the circumstances of the case and on a correct interpretation of sections 159 and 168 of the income tax Act, 1961, the Appellate Tribunal was justified in holding that in respect of the income of the late ''Rana'', which accrued to or was received by him till the time of his death, the assessments could be made on the ''Rani'' who was his sole heir and legal representative?

This reference relates to the assessment years 1946-47 to 1951-52. The assessee was an individual and his name was Lt. Gen. Madan S.S.J.B. Rana of Nepal (hereinafter referred to as "Rana"). He died on or about 20-6-1953 intestate leaving behind him his widow Rani Jagadamba Kumari Devi (hereinafter referred to as "Rani"). Rani was residing beyond the jurisdiction of this High Court at Varanasi. This Court on the application of Shri Shantilal Mehta (who was the duly constituted attorney in India of Rani) appointed him as the administrator of the estate of the late "Rana" by an order dated 16-1-1954. It may be appropriate to refer to the order appointing the administrator. The said order, after stating the fact that Rana died and further fact that constituted attorney of the Rana had applied that he died intestate and further fact that the sole heir was the Rani, observed, inter alia, as follows:

For the use and benefit of the said Rani Jagadamba Kumari Devi and limited until she, the said Rani Jagadamba Kumari Devi, shall obtain from this Court Letters of Administration of the property of the deceased above-named, he, the said Shantilal Mehta, having undertaken to administer the said property.

In the course of the original assessments, Rana had made a declaration that the income received by him by various investments belonged to a trust of which he was only one of the 36 beneficiaries and the ITO, therefore, made the assessments on what according to the Rana was his share of the income of the trust. Later on, the ITO found that the trust was invalid and the declaration made by the Rana was false. He, therefore, reopened the assessments after obtaining the previous approval of the Board in order to assess the income which had escaped the assessments owing to the assessee''s omission or failure to disclose in the course of the assessment proceedings fully and truly all facts necessary for the assessments. The ITO, therefore, issued notices u/s 148 of the Act for reopening of the assessments and served these notices on the Rani, who was the legal heir of the late Rana. These supplementary assessments were completed by the ITO by adding to the total income already assessed, the income from investments which had escaped assessment.

Against these assessments the appeals were preferred before the AAC and the Appellate Tribunal. While upholding the reopening of the assessments u/s 147(a) of the Act and also the additions made on account of income which had escaped assessments, the Tribunal went into the question as to who was the legal heir of late Rana. In this connection, the Tribunal observed that identical assessments had also been made on Shri Shantilal Mehta, administrator appointed by the Hon''ble High Court, and obviously the same income could not be assessed twice. The Tribunal, therefore, set aside the orders of the AAC and restored the appeals to the file of the AAC for determination of the proper person on whom the assessments could be made. When the matter was considered by the AAC again in response to this direction of the Tribunal, the AAC held that Shri Shantilal Mehta, who was the administrator appointed by the Hon''ble High Court under the provisions of section 243 of the Indian Succession Act by order dated 16-1-1954 and remained as the administrator till he was discharged by another order of the Hon''ble High Court dated 21-3-1972, was the proper person on whom the assessments should have been made both for the income which accrued to or was received by the late Rana up to the date of his death, i.e., 20-6-1953, and on the income which accrued to or was received by the estate after the date of death of the deceased. He, therefore, cancelled the assessments.

It may not be inappropriate to refer to certain portions of the said order. The AAC referred to the relevant provisions of sections 211(1), 241 and 243 of the Indian Succession Act. It may not be inappropriate in view of the facts involved in this case to refer to section 211(1) of the said Act which reads as follows:

Character and property of executor or administrator as such. - (1) The executor or administrator, as the case may be, of a deceased person is his legal representative for all purposes, and all the property of the deceased person vests in him as such.

Section 241 deals with the grants for the use and benefit of others having right. The said section reads as follows:

Administration, with will annexed to attorney of absent executor. -When any executor is absent from the State in which application is made, and there is no executor within the State willing to act, letters of administration, with the will annexed, may be granted to the attorney or agent of the absent executor, for the use and benefit of his principal, limited until he shall obtain probate or letters of administration granted to himself.

Section 243 deals with a situation like the present one. The said section reads as follows:

Administration to attorney of absent person entitled to administer in case of intestacy. - When a person entitled to administration in case of intestacy is absent from the State, and no person equally entitled is willing to act, letters of administration may be granted to the attorney or agent of the absent person, limited as mentioned in section 241.

Therefore, in such a situation his position is similar to the position as in section 241. Section 220 deals with the effect of letters of administration. Section 220 reads as follows:

Effect of letters of administration. - Letters of administration entitle the administrator to all rights belonging to the intestate as effectually as if the administration had been granted at the moment after his death.

It stipulates in other words that the letters of administration entitles the administrator to all the rights belonging to the intestate as effectually as if the administration had been granted at the moment of his death. The AAC in the second order considered the effect of the above provisions and was of the opinion that when a person died intestate and when the person entitled to administration was absent from the province, letters of administration could be issued to the agent or attorney of the absent person and according to the AAC such an administrator was the legal representative of the deceased for all purposes and the property of the deceased person vested in him not as an owner but as an administrator, that is to say, for the purpose of administering the estate and for distributing the assets of the deceased in accordance with law relating to intestate succession. He was, therefore, of the opinion that an administrator was a person appointed by a competent authority in case of intestacy while an executor was a person appointed by the testator in his will. The administrator''s title vested only from the date of the grant. But in order to prevent injury being done to the estate of the deceased, the Legislature had adopted the doctrine of relation back, that upon the grant being made, the title of the administrator related back to the time of death of the intestate. Therefore, the AAC was of the view that the administrator appointed by the Court was the legal representative of the deceased for all purposes from the date of the death of the deceased till the time he ceased to be an administrator. Considering the said provisions in the light of sections 159 and 168 and the relevant authorities, the AAC cancelled the assessments and held that the assessments should have been made on the administrator.

There was a further appeal before the Tribunal. The Tribunal after considering the rival contentions and the facts, observed as follows:

We have considered the rival submissions. At the outset it will be necessary to point out that the issue before us is whether the assessments on Rani Jagdamba Kumari Debi as the legal representative of the late Rana were rightly made or not and we have to decide this issue which is before us on merits regardless of what has happened in the assessments of Shri Shantilal Mehta, administrator to the estate of the late Rana, It will also be not out of place to point out that the remedy will be open to the assessee to have the wrong assessments cancelled by keeping the issue alive by filing appeals or by moving the Commissioner u/s 264 and requesting for the condonation of the delay so that the wrong assessment is cancelled and the correct assessment stands. As reading of sections 159 and 168 clearly shows that while section 159 is meant to deal with the assessments of the income of the deceased which accrued to or was received by the deceased in his life time, section 168 is meant for assessment in respect of the income of the deceased which accrued to him after the death during the period the estate was vested in the executor, the administrator or other person administering the estate of the deceased. We have the authority of the Hon''ble High Court of Madras in the case of V. Ramanathan Vs. Commissioner of Income Tax, Madras, where their Lordships have laid down that the heir of the deceased is a legal representative, whether under the definition in the CPC or in its popular sense. It is not under dispute that Rani Jagadamba Kumari Debi was the sole heir of the late Rana. We are therefore of the view that Rani Jagadamba Kumari Debi was rightly treated as the legal representative of the late Rana and on that basis rightly assessed in respect of income of the late Rana which accrued to or was received by the Late Rana till the time of his death. This means that the assessments under consideration here, relating to the assessment years 1946-47 to 1951-52 which related to the income of the period when the late Rana was alive, were rightly made on Rani Jagadamba Kumari Debi as the legal representative of the late Rana. These assessments were, therefore, wrongly cancelled by the AAC. On this point, therefore, the orders of the AAC are reversed and the orders of the ITO are restored.

From the aforesaid order, the question as indicated above has been referred to this Court. The question, therefore, is whether in a case where the Rani was the sole heir of the late Rana and where there was an administrator appointed, could she be considered to be a legal representative in the light of section 159? Inasmuch as the Tribunal has held that "as reading of sections 159 and 168 clearly shows that while section 159 was meant to deal with the assessments of the income of the deceased which accrued to or was received by the deceased in his life time, section 168 was meant for the assessment in respect of the income of the deceased which accrued to the deceased after the death of the deceased during the period the estate was vested in the executor, administrator or the person administering the estate of the deceased", no exception can be taken. We may refer to the relevant provisions of the Act. We may incidentally mention that for the assessment years 1970-71 and 1971-72, the same question was referred to us in CIT v. Rani Jagadamba Kumari Devi (IT Reference No. 252 of 1976). In this case the assessee was dealing with the assessment in respect of the income which related to the period after the death of the late Rana which was under the administration of the administrator appointed by the Court in respect of the judgment delivered and an order passed on 6-7-1981. We have held that in view of the provisions of section 168, it was clear that the administrator appointed by this Court would admittedly come within the purview of section 168. The Tribunal was light in coming to the conclusion that question of assessment could only be made on the administrator. As we have mentioned before, this related to the income subsequent to the death of the deceased. We are concerned in the instant reference before us with the income which accrued to the deceased prior to his death. This position, in our opinion, appears to be governed by section 159. The said section provides as follows:

Legal representatives. - (1) Where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased.

(2) For the purpose of making an assessment (including an assessment, reassessment or recomputation u/s 147) of the income of the deceased and for the purpose of levying any sum in the hands of the legal representative in accordance with the provisions of sub-section (1), --

(a) any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased;

(b) any proceeding which could have been taken against the deceased if he had survived, may be taken against the legal representative; and

(c) all the provisions of this Act shall apply accordingly.

(3) The legal representative of the deceased shall, for the purposes of this Act, be deemed to be an assessee.

(4) Every legal representative shall be personally liable for any tax payable by him in his capacity as legal representative if, while his liability for tax remains undischarged, he creates a charge on or disposes of or parts with any assets of the estate of the deceased which are in, or may come into, his possession, but such liability shall be limited to the value of the asset so charged, disposed of, or parted with.

(5) The provisions of sub-section (2) of section 161, section 162 and section 167, shall, so far as may be and to the extent to which they are not inconsistent with the provisions of this section apply in relation to a legal representative.

(6) The liability of a legal representative under this section shall, subject to the provisions of sub-section (4) and sub-section (5), be limited to the extent to which the estate is capable of meeting the liability.

This section which is in Chapter V is under the heading of the group ''A'' dealing with legal representatives. There is another heading under the same Chapter dealing with "Representative assessee - General provisions". Section 160 provides who is the "representative assessee". It is not necessary for our present purposes to set out the provisions in details. It appears to us that the administrator appointed by the Court in the circumstances mentioned hereinbefore would not as such come within the meaning of section as "representative assessee" specially to the extent the assessee has been used in group ''C under the heading: "Representative assessee - Special cases" of the said Chapter. Group ''C also deals with the representative assessee in special cases. These are provided under sections 163 and 164. The present case would not also come within the purview of the said sections. Section 168 deals with executors and provides as follows:

Executors. - (1) Subject as hereinafter provided, the income of the estate of a deceased person shall be chargeable to tax in the hands of the executor, -

(a) if there is only one executor, then, as if the executor were an individual; or

(b) if there are more executors than one. then, as if the executors were an association of persons;

and for the purposes of this Act, the executor shall be deemed to be resident or non-resident according as the deceased person was a resident or non-resident during the previous year in which his death took place.

(2) The assessment of an executor under this section shall be made separately from any assessment that may be made on him in respect of his own income.

(3) Separate assessments shall be made under this section on the total income of each completed previous year or part thereof as is included in the period from the date of the death to the date of complete distribution to the beneficiaries of the estate according to their several interests.

(4) In computing the total income of any previous year under this section, any income of the estate of that previous year distributed to, or applied to the benefit of, any specific legatee of the estate during that previous year shall be excluded, but the income so excluded shall be included in the total income of the previous year of such specific legatee.

Explanation : In this section, ''executor'' includes an administrator or other person administering the estate of a deceased person.

This instant reassessment relates to income which is alleged to have been received by the deceased during his life time before his death as alleged to have escaped assessment. Therefore, it can certainly be said that his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died in the like manner and to the same extent as the deceased. Sub-section (2) of section 159 is the section which deals with the manner in which the said assessment for recovery could be made. Clause (a) of sub-section (2) enjoins any proceeding taken against the assessee before his death shall be deemed to have been taken against the legal representative and any proceeding which could have been taken against the deceased if he had survived, may be taken against the legal representative. As the deceased had died intestate in this case, the question is. though on intestacy the Rani is the legal heir of the deceased, is she also the legal representative for the purpose of reassessment or recovery in respect of income which was due to or received by the deceased. In our opinion, for the period concerned, the position is concluded by the provisions of section 159 which must be read in this case along with the order of the Court.

We may here mention that our attention was drawn to section 251 of the Indian Succession Act and we have to deal with this section. It must be remembered that in view of the provision of sub-section (2) of section 211, in case of a Hindu, as in the present case, sub-section (1) of section 211 would not apply to the extent provided in that sub-section and the right of the heir would depend not by the grant or order appointing the administrator but by survivorship or inheritance, as the case may be. This would be clear that if section 211 is read with section 212. Be that as it may (sic) as we have referred to the expression used in section 159, sub-section (1) of which enjoins that the legal representative shall be liable to pay any sum if the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased. This expression "legal representative" is defined in section 2(29) that the "legal representative" has the meaning assigned to it in clause (11) of section 2 of the Code of Civil Procedure, 1908. Clause (11) of the CPC indicates that a legal representative means a person who in law represents the estate of a deceased person, and includes any person who intermeddles with the estate of the deceased and where a party sues or is sued in a representative character the person on whom the estate devolves on the death of the party so suing or sued. Therefore, in order to consider whether on whom re-assessment should have been made, one has to find out who was the legal representative contemplated by sub-section (1) of section 159.

Our attention was drawn to the decision of the Rangoon High Court in the case of Administrator General of Burma v. C.R.V.V.S. Chettyar Firm AIR 1928 Rang. 83. There the respondent sued the widow on a promissory note alleged to have been executed by a non- Indian Christian in her capacity as legal representative of her deceased husband and obtained an ex parte decree where the deceased had made a will under which the executors other than the widow were appointed. It was held that the suit was prosecuted against the widow who had not the legal capacity to represent the estate of the deceased, the decree passed therein was invalid though this case has to be understood in the light of the language of sections 211 and 212 of the Indian Succession Act and the dispute was that the party concerned in that case was a non-Indian Christian and, therefore, she would be excluded by the operation portion of section 211 of the Indian Succession Act. So the ratio of the said decision would not have of much assistance to us in this case. This question was considered by the Madras High Court in the case of V. Ramanathan Vs. Commissioner of Income Tax, Madras, , where it was held that the heirs who succeeded to the estate, an executor or administrator in whom the estate vests virtute officii and even an intermeddler in possession of the estate, effectively represented the estate. At the death of one C, his properties devolved through his widow by surrender to his brother, V. V threw the properties into the hotchpot of a HUF consisting of himself and his two sons. On the death of V, the properties passed by survivorship to his sons. In respect of an alleged escape of income, in the assessment of C, the income tax Department proceeded u/s 34 of the 1922 Act against R, the son of V, as the legal representative of C. R contended that the estate of C had lost its individuality when it was merged in. the joint family assets held by V and that he was not the legal representative of C. It was held that the heir of the deceased in possession of the estate was a legal representative whether under the definition in the CPC or in its popular sense. Hence, R was the legal representative of C. There the Division Bench of the Madras High Court, as there was no definition of the legal representative u/s 24(B) of the 1922 Act, considered whether the expression "legal representative" in CPC would be relevant in that case and observed, inter alia, as follows:

Whether that definition can govern the construction of expression in the income tax Act or not. it can guide its proper interpretation. It is the representation of the estate of the deceased that invests a person with a representative character. Heirs who succeed to the estate, an executor or administrator in whom the estate vests virtute official and even an intermeddle in possession of the estate purporting to be a heir at law, though not in fact all alike, effectively represent the estate to the outside world. This is plain enough and is not controvertible. The heir of the deceased in possession of the estate is a legal representative whether under the definition in the CPC or in its popular sense." (p. 888)

In the case of Kamalesh Kumar Mehta Vs. Commissioner of Income Tax, , this Court had to deal with the question in different context where on the ground that at the time of the assessment by the ITO, the assessee was dead and no notice had been given to the assessee''s legal representatives before the assessment, the AAC set aside the order of assessment and directed the ITO to reframe the assessment after issuing notices to the legal representatives. In a second appeal by the legal representatives of the assessee before the Tribunal, it was contended that the assessment should have been annulled but the Tribunal rejected that contention and sustained the order of the AAC. It was held by the Calcutta High Court on a reference that section 159 did not provide for any annulment of assessment, reassessment or recomputation u/s 147. On the other hand, it expressly provided for continuance of the assessment, from the stage at which it stood at the date of the death of the assessee, against his legal representatives who, in terms of section 159(3), were deemed to be an assessee and liable to pay the tax which the deceased " would have been liable to pay if he had been alive. This present controversy was, however, not concerned in that case. There the question as to who could be considered to be the legal representative in respect of the debt due to deceased or dues of payment to be received prior to his death, was not considered.

Reliance was also placed on the decision of this Court in the case of Commissioner of Income Tax Vs. Shantilal C. Mehta (Administrator of the estate of late Madan Shum Sher Jung Bahadur Rana of Nepal), . Here the Court had to deal with the present assessee in respect of the same debt. There it was held by the Court that on the death of the assessee his estate remained liable for payment of taxes accruing both before and after the death. After the death of the assessee, the assessment proceedings could only continue in the name of his legal representatives. That case was concerned with the assessment years 1952-53 and] 953-54. The death of the present assessee in this case happened on 20-6-1953. This related to the dues or payments after death. One question involved was whether notice u/s 24B of the 1922 Act was valid and lawful and reassessment could be made on the legal representative on the basis of that notice. Therefore, that ratio of the said decision would also not be of much relevance but we may incidentally refer to the observations of Mr. Justice Sen at page 83 of the report:

On the facts before us, it appears that the question is concluded by section 24B of the Act. On the death of an assessee, the estate remains liable for payment of taxes accruing both before and after the death. After the death of the original assessee, the assessment proceedings can only continue in the name of the legal representatives. There is no restriction in section 34 for assessment of an estate of a deceased person nor does that section nor section 24B provide for any special form of notice of reassessment in such cases. In any event, there is no challenge as to the form of the notice. The only contention has been that the assessee as an administrator should not have been served with a notice u/s 34 in respect of income accruing during the lifetime of the owner of the estate.

Another decision of the Calcutta High Court was relied on. Our attention was drawn to the case of I.M. Thapar, Executor to the Estate of late Lala Karam Chand Thapar Vs. Commissioner of Income Tax, wherein probate of the will had not been obtained and administration of the estate was also not completed during the relevant year. It was held that executors having been appointed by the will, legally represented the estate. Their Lordships referred to the definition of the "legal representative" in the CPC and also referred to section 211 of the Indian Succession Act and they held that it was the executors who could represent the estate.

Reliance was also placed in the case of Commissioner of Income Tax, Bombay City-II Vs. Usha D. Shah, . The High Court held that section 168(1), which provided that the income of a deceased person shall be chargeable to tax in the hands of the executor, did not leave any discretion to the income tax authorities in respect of assessing the income of the estate of the deceased person to tax. We are not concerned with the same problem.

It appears to us that in view of the fact that section 159(1) makes it mandatory that legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, and clause (b) of sub-section (2) provides that any proceeding which could have been taken against the deceased if he had survived, may be taken against the legal representative. Read in conjunction with the definition of "legal representative" in clause (29) of section (2) and clause (11) of section 2 of the Code of Civil Procedure, the Tribunal was not right in holding in this case that though the estate was in the hands of the administrator appointed by the Court, Rani should have been assessed only as a legal representative during the relevant time. Whether Rani was legally entitled to get the estate and would have been liable to pay money out of her realisation was a different question. The assessment should have been made on the administrator as the legal representative. In view of the order of the Court appointing administrator, assessment should have been made on the legal representative, that is to say, in this case on the administrator. It is true that section 166 permitted certain proceedings could be taken against the person by whom the income was receivable but the question here is whether the assessment should have been made on Rani as legal representative in view of the special meaning given in groups A, B, C and D of the said Chapter. It appears to us that section 160 would not be applicable in the facts and circumstances of this case.

So far as the question is concerned, we must observe that the question proceeded on the assumption that Rani was the sole heir and legal representative. It is true that the assessment should have been made on the legal representative. In view of the appointment of the administrator. Rani was not the sole heir and legal representative at the relevant time. Therefore, the question is answered by saying that the assessment should be made on the legal representative when Rani was not the sole heir and legal representative at the relevant time. Learned counsel for the revenue makes an oral application for special leave to appeal to the Supreme Court. As we have proceeded on the provisions of the relevant section, in our opinion, no substantial question of law requiring consideration by the Supreme Court in this case arises. Hence, we rejected the oral application. Parties will pay and bear their costs.

Suhas Chandra Sen, J.

I agree.