TMI Blog1980 (11) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... ter alia, premises Nos. 95 and 96, Ultadanga Main Road, and the said premises had been acquired by acquisition proceedings by the Collector on the 27th September, 1957, that is to say, during the lifetime of the deceased. The compensation amounting to Rs. 5,76,119 awarded by the Collector had been received by the deceased during his lifetime and formed part of the balance in the bank account which was considered in the assessment proceedings under the E.D. Act. It is stated in the order of the Deputy Controller of Estate Duty dated 31st of July, 1962, that after completion of the assessment, information was received to the effect that certain further amounts forming part of the estate of the deceased which had been left out from the assessment, required to be included in the estate and charged to duty. A notice under s. 59 of the E.D. Act as amended by the E.D. (Amendment) Act, 1958, was accordingly issued on the 16th of December, 1961, calling upon the accountable person to deliver an account of all the properties including which the Deputy Controller described in his order, " further assets ascertained after completion of the original assessment ". The accountable person filed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... troller observed, could not be treated as the same property as the original compensation of Rs. 5,76,119. It was urged before the Deputy Controller on behalf of the accountable person that the sum of Rs. 5,76,119 related to the property of premises Nos. 95 and 96, Ultadanga Main Road. The Deputy Controller found the argument not to be tenable. The property, according to him, the premises Nos. 95 and 96, Ultadanga Main Road, did not form part of the estate of the deceased at the time of his death. It had already vested in the State Govt. Even apart from this if it was found that the value of a property was under-estimated in the original assessment, according to the Deputy Controller, s. 59 authorised the reopening of the assessment in order to include the proper value of the property and to subject the same to duty. Any further amount that was added to the value originally assessed in order to offset the under-valuation could not, therefore, according to the Deputy Controller, be obviously considered as the same property as the amount already assessed. Thereafter, therefore, the Deputy Controller after deducting certain interest and costs added to the estate a sum of Rs. 1,16,241. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal that the action taken under s. 59 was on the ground that after completion of the assessment information had been received and, therefore, the Tribunal felt that the provisions of s. 59(b) of the E.D. Act could be invoked. According to the advocate for the accountable person before the Tribunal all the material facts had been made available during the course of the original assessment proceedings and there was no information which came into the possession of the Deputy Controller subsequent to such assessment and the provisions of s. 59(b) were, therefore, not attracted. On behalf of the revenue, however, it was urged that the award of the President of the Improvement Tribunal, both in respect of premises Nos. 95 and 96, Ultadanga Main Road as well as No. 93, Ultadanga Main Road, with which we are not concerned came to the notice of the Deputy Controller subsequent to the completion of the original assessment and, therefore, there was information within the meaning of s. 59(b) of the E.D. Act for reopening the assessment. Thereafter, the Appellate Tribunal had set out the relevant facts and observed that the accountable person had declared even at the assessment stage t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound that the provisions of section 59 of the said Act (which came into force on 1st July, 1960) could not be invoked for reopening the estate duty assessment originally completed on 29th January, 1960 ? " In order to appreciate the contention, though we have referred to the relevant dates, it is necessary to refer to a few other dates, namely, 1st of July, 1960, when the E.D. (Amend.) Act came into force, though on the 19th of September, 1958, the E.D. (Amend.) Act, 1958, had received the assent of the President. As we have mentioned before, the original assessment under the E.D. Act was completed on the 20th of January, 1960. Appeal against the original assessment was pending at the time when the E.D. (Amend.) Act came into force on the 1st day of July, 1960. It has to be borne in mind that the question of principal value of the estate was the subject-matter of appeal and the subject-matter of appeal was not whether specifically the principal value of premises Nos. 95 and 96, Ultadanga Main Road, was to be enhanced or not. As a matter of fact, as a result of the decision of the CBR, the principal value of the estate which was determined at Rs. 20,11,076 was reduced, on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for our present purpose. Section 53 prescribes the duties and liabilities of the person accountable. Section 55 gives the Controller power to ask for statement, particulars, etc., and s. 56 provides for penalty. In the unamended provisions, the section was headed " Penalty for default ". In the amended provision penalty is dealt with in s. 60 which is headed " Penalty for default or concealment We need not consider in detail the conditions for the imposition of penalty as was stipulated under the unamended provisions of s. 56 or the amended s. 60 for our present purpose. Similarly, s. 57 of the unamended Act stipulated the duty of the executor to specify all chargeable property. Section 56 of the amended provision dealt with the circumstances for the grant of representation. The unamended provision of s. 58 provided that estate duty, penalty or interest or any other sum chargeable under this Act had been determined in consequence of any order passed or in pursuance of the Act that the Controller should serve a notice of demand in the prescribed form specifying the sum so payable and the time within which and the place at which it was payable. Section 58 of the unamended provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) determine the additional duty payable on the property: Provided that where the person accountable had fraudulently underestimated the value of any property or omitted any property, the period shall be six years: Provided further that no order shall be made under this sub-section unless the person accountable has been given an opportunity of being heard. (2) Nothing contained in sub-section (1) shall render any person accountable to whom a certificate that the estate duty has been paid is granted liable for any additional duty in excess of the assets of the deceased which are still in his possession, unless the person accountable had fraudulently attempted to evade any part of the estate duty in the first instance. " Section 61 of the Act after its amendment by the Act of 1958 deals with the rectification of mistakes and is in the following terms: " 61. Rectification of mistakes.-At any time within five years from the date of any order passed by him or it, the Controller, the Appellate Controller or the Appellate Tribunal may, on his or its own motion, rectify any mistake apparent from the record and shall, within a like period, rectify any such mistake which ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose that reliance had been placed on certain decisions of this court where these provisions of the appeal had been considered. According to the learned advocate for the revenue a reading of ss. 5, 34 and 58 would show that all property passing on death should be aggregated so as to form one estate and thereafter the duty should be levied. No duty could be levied without having an account delivered by the accountable person or prepared by the Controller. He further urged that under s. 55 of the unamended Act the Controller was to ask for a statement of account where the proceeding had been initiated by the Controller. Section 21 of the E.D. (Amend.) Act, 1958, according to learned advocate for the revenue, had brought about changes by substituting, inter alia, new sections for ss. 56 to 65 of the unamended Act. According to learned advocate for the revenue, it would be evident from the analysis of the aforesaid ss. 56 to 65 of the unamended Act with the corresponding provisions of ss. 56 to 63 and 73A of the Amendment Act that s. 57 introduced by the Amendment Act of 1958 incorporated, according to him, the provisions of the old sub-s. (1) of s. 58 and s. 60. He further subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld invoke the provisions of s. 62. He, therefore, urged that it should be noted that s. 62 of the old Act enabled an assessment to be modified both for and against, an accountable person under s. 62. It corresponds to both ss. 34 and 35 of the Indian I.T. Act, 1922. Mistakes apparent from the records were rectifiable under s. 62. Similarly, any underassessment owing to the omission of any property was also rectifiable under s. 62. The only limitation was that an assessment could not be reopened except with the previous permission of the CBR. It should be noted, according to learned advocate for the revenue, that the period of limitation of three years or six years prescribed by s. 63 was in respect of the completion of the proceedings and not in respect of the initiation of the proceedings. He further submitted that even when an estate duty assessment had been completed in the first instance on the 31st March, 1954, the additional assessment proceedings should be completed by 31st March, 1957. It was not sufficient if the additional assessment proceedings were initiated within the three years' period. That should be completed within that period. It was, therefore, urged by him tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue that there was no question of any vested right in the assessee of not being subjected to the procedure of reassessment when the assessment was completed. If, on the other hand, the new s. 59 was not the variant of the powers of rectification embedded in old s. 62 read with the Rules and other provisions of the Act, then, the question would arise whether the assessee has any vested right in any assessment proceeding not to be subjected to the procedure of reassessment even though his property might have been under-assessed or escaped assessment. Incidentally, two other questions arise and would require adjudication, viz., whether the assessment proceedings had been taken in respect of a property which had been subjected to tax or in respect of a property right or value of that property which was underestimated due to the knowledge that has come subsequently into the hands of the revenue, because on this will depend whether reassessment even under the new Act could at all be done or not. This question arose, as would be clear from the pronouncement of the Supreme Court in a recent decision which we shall first deal with. Two other aspects require consideration in this case, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue contended before us that the assessment in this case was reopened under s. 59(b) as there was omission with regard to the properties at Nos. 95 and 96, Ultadanga Main Road, Calcutta. In this connection, he referred to para. 9 at . 52 of the Tribunal's order. There the Tribunal observed that inasmuch as in respect of the properties at Nos. 95 and 96, Ultadanga Main Road, the Tribunal had held that there was information to warrant the reopening of the assessment (if the provisions of s. 59(b) were otherwise applicable), the Tribunal would have to uphold the reopening of the assessment. And, accordingly, because of the omission of any property as contemplated under s. 62 of the unamended Act, the said provision could have been invoked. Our attention was drawn to the decision of the Supreme Court in the case of Mrs. Khorshed Shapoor Chenai v. Asst. CED [1980] 122 ITR 21 There it was held by the Supreme Court that lands which were compulsorily acquired by the Government during the lifetime of the deceased could not form part of his estate but the right to receive compensation therefor at market value on the date of the notification for acquisition which would accrue to the deceas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equal to the tall claim made by the claimant in the reference nor equal to the claim actually awarded by the civil court. Before the Supreme Court it was challenged that the accountable person had only a right to get an extra compensation, which was an inchoate right which could not be called " property ", and whether that claim amounted to a right to property capable of sale in the open market was highly debatable question, and a mistake which had to be discovered after a lengthy discussion and debate could not be said to be a mistake apparent on the record. It was, secondly, urged that land acquisition proceedings and land references in the civil court not being part of the assessment record a mistake discovered by reference to such other record was not a mistake apparent from the record of the case. It was then urged that the extra compensation received by the legal heirs of the deceased belonged to them and not to the deceased and hence it was not property that passed on the death of the deceased, and no property escaped assessment. In other words, under the guise of rectification, the enhanced compensation could not be taken into account and, therefore, the impugned notice wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that he had received for the right he had stated in the original return and the original assessment was made on that basis. The subsequent information upon which the opening was made in this case was not in respect of a separate property, but in respect of the same right which gave a wrong figure or under-estimated the figure of the right that the deceased had, namely, the amount which had been awarded in the first instance which the deceased had disclosed, but the proper value of that amount was determined by the President of the Improvement Tribunal to be enhanced by the amount of Rs. 1,16,000 odd which had been included in the reassessment. Therefore, in this case it was not a question of two properties being the subject-matter in respect of premises Nos. 95 and 96, Ultadanga Main Road. It was a right to receive compensation the value of which had been included by the deceased, but the proper value had not been included because of the circumstances involved. In those circumstances, in our opinion, it could certainly be said that there was information, otherwise the reopening was not permissible, and that there was certainly undervaluation of the property of the deceased. So, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the premises Nos. 95 and 96, Ultadanga Main Road, was not the subject-matter of the appeal before the CBDT and it is well settled that in fiscal legislations unlike civil courts the powers of the appellate authorities are circumscribed by the subject-matter of the appeal. As the question of the under-valuation of the property was not the subject-matter of the appeal or whether the assessment could be reopened or not on this ground was not the subject-matter of the appeal, in our opinion, the fact that an appeal was pending does not affect the finality of the assessment so as to confer upon the revenue an additional right of reopening a completed assessment on the point which was not the subject-matter of the appeal. Therefore, the main question that calls for consideration is whether in view of the introduction of s. 59 which became effective on and from 1st of July, 1960, the proceeding which was initiated by the notice of 16th December, 1961, was valid. Now, that depends on three questions, as we have mentioned before, viz., whether the new power under s. 59 was only a variant of the old power under s. 62 of the amended Act. We have set out the terms of the section. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amendment and only the conditions for the exercise of the power were altered. But in the instant case there was no power of reassessment or reopening a completed assessment in its entirety but only a power of rectification of mistakes if certain conditions were there one of the conditions being under-valuation of the property. But rectification of a completed assessment without reopening the assessment is a different thing from reopening the entire assessment subjecting the assessee to a process of new assessment. To that extent we respectfully agree that the Calcutta Discount Co.'s case [1953] 23 ITR 471, proceeded entirely on a different basis and the Division Bench of the Bombay High Court held that as the assessment had become final, when the new amended provision came into effect, resort to s. 59 could not be made, We are in respectful agreement with the observation of the Division Bench of the Bombay High Court. In this connection reference may also be made to another decision of the Gujarat High Court in the case of CED v. N. A. Merchant [1975] 101 ITR 270, where the Division Bench of the Gujarat High Court had to deal with the same problem. The Gujarat High Court observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 23 ITR 471 (Cal), which we have referred to and observed that that case was distinguishable because Chief justice Chakravartti had proceeded on the basis that the power, which he had to construe, under the amendment in s. 34 of the Indian I.T. Act, 1922, was a variant of the old power, which was not the position in that case before the Gujarat High Court. We are in respectful agreement with the aforesaid distinction made by Chief justice Divan in the aforesaid decision. The Division Bench of the Gujarat High Court also relied on the Division Bench of the Bombay High Court in the case of Arvind N. Mafatlal [1968] 67 ITR 449 which we have referred to hereinbefore. While on this aspect it may be appropriate to refer to the observation of the Supreme Court in the case of Banarsi Debi v. ITO [1964] 53 ITR 100, where at p. 105, the Supreme Court put the proposition as follows: " To the present case a general rule, of construction of the fiscal Acts would apply, and not the exception engrafted on that rule; for section 4 of the Amendment Act (their Lordships were dealing with section 4 of the Indian Income-tax Act, 1922, which amended section 34(1) of the Indian Income-tax Act, 1922 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment or reassessment could not be issued against person deemed to be an agent of a non-resident under s. 43, after the expiry of one year from the end of the year of assessment. The section was amended by s. 18 of the Finance Act, 1956, extending this period of limitation to two years from the end of the assessment year. The amendment was given retrospective effect from April 1, 1956. On March 12, 1957, the ITO issued a notice calling upon the assessee to show cause why in respect of the assessment year 1954-55, the assessee should not be treated as an agent under s. 43 in respect of certain non-residents. The assessee, inter alia, contended that the proposed action was barred by limitation. On March 27, 1957, the officer issued a notice under s. 34 and assessed the assessee as the agent of the non-resident relying upon the third proviso to s. 34(1) as amended in 1956, on an estimate of the income of the non-resident. It was held that the right to commence a proceeding for assessment against the assessee as the agent of a non-resident for the assessment year 1954-55 ended on March 31, 1956, under the Act before it was amended in 1956. Although authority was conferred upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that, the retrospective effect could not be given effect. The Supreme Court was unable to accept this argument and in this connection referred to the observations of Chief justice Chakravartti. The Supreme Court noted that the right for commencing proceedings for assessment against the assessee as an agent of a non-resident party under the I.T. Act before it was amended ended on March 31, 1956. It was true that under the Amending Act, by s. 18 of the Finance Act, 1956, an authority was conferred upon the ITO, to assess a person as an agent of a foreign party under s. 43 within two years from the notice of the order of assessment. But the authority of the ITO under the Act, before it was amended by the Finance Act, 1956, had already expired, and the amending provision would not assist him to commence proceeding even though at the date when the notice was issued it was within the period provided by that amending Act. This would be so notwithstanding the fact that there had been no determinable point of time between the expiry of the time provided under the old Act and commencement of the Amending Act. The Legislature had given to s. 18 of the Finance Act, 1956, only a limited retro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section which permitted the reassessment dealt entirely with a different situation, then, in our opinion, the ratio of the said decision cannot be of any assistance to the parties in this case. In this connection reference has also been made to the observations of this court in the case of Bhubaneswar v. Union of India [1965] 158 ITR 1 (ED). There, the learned single judge of this court had to deal with a different situation. There, what had happened was that for probate of the will of N, in pursuance of a provisional assessment, probate duty of Rs. 9,897.50 was paid in the shape of court fees on July 12, 1956. Subsequently, the Assistant Controller valued the estate and assessed the estate duty on July 31, 1957, at Rs. 29,719 from which after deducting the probate duty of Rs. 9,897.50 under s. 50 of the E.D. Act, 1953, the estate duty payable was determined by him at Rs. 19,822.50. On appeal, the Appellate Controller reduced the valuation of the estate duty and the estate duty was consequently reduced to Rs. 29,252.50 out of which he allowed a deduction of Rs. 9,897.90 for probate duty paid and the estate duty payable became Rs. 19,254.90. On the final assessment of probate duty, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itution of the new s. 34, with effect from 30th March, 1948, by the Income-tax and Business Profits Tax (Amend.) Act, 1948. Mr. Justice Bose, before whom the writ application first came up for consideration, held that the power to reopen the assessment was there in view of the existing provision of s. 34 of the I.T. Act, 1961. On a consideration of the argument before it, the Division Bench was unable to agree with the views expressed by Mr. Justice Bose. Before dealing with the argument the Division Bench had set out the relevant portion of s. 34, as it stood before and after the amendment, and it is necessary to refer to the relevant portions. Section 34, before the amendment, was as follows : " 34. (1) If in consequence of definite information which has come into his possession, the Income-tax Officer discovers that income, profits or gains chargeable to income-tax have escaped assessment in any year, or have been under-assessed, or have been assessed at too low a rate, or have been the subject of excessive relief under this Act, the Income-tax Officer may, in any case in which he has reason to believe that the assessee has concealed the particulars of his income or deliberate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation allowance ; and the provisions of this Act, shall, so far as may be, apply accordingly as if the notice were notice issued under that sub-section Provided that . ...... (ii) the tax shall be chargeable at the rate at which it would have been charged had the income, profits or gains not escaped assessment or full assessment, as the case may be; (3) No order of assessment under section 23 to which clause (c) of subsection (1) of section 28 applies or of assessment or reassessment in cases falling within clause (a) of sub-section (1) of this section shall be made after the expiry of eight years, and no order of assessment or reassessment in any other case shall be made after the expiry of four years, from the end of the year in which the income, profits or gains were first assessable. Provided that where a notice under sub-section (1) has been issued within the time therein limited, the assessment or reassessment to be made in pursuance of such notice may be made before the expiry of one year from the date of the service of the notice, even if such period exceeds the period of eight years or four years, as the case may be." There was a deeming provision in sub-s. (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had to be a discovery on the basis of a definite information, whereas under the new section it was sufficient if there was reason to believe in existence. This difference, however, was to a certain extent neutralised because, according to Chief justice Chakravartti, in providing as, to when the ITO could start proceedings within 8 years, the old section provided that he could do so when, according to him, the assessee had concealed the particulars of his income or deliberately furnished inaccurate particulars thereof, while the new section said that he could do so when, according to him, the escape or under assessment was due to the omission or failure of the assessee to disclose fully and truly all material facts necessary for its assessment which seemed to be practically the same in both the sections and both the sections used the expression " had reason to believe ". The only real difference, according to the learned Chief justice, was whereas while the old section allowed the same time for the initiation or the completion of the proceedings, the new section allowed one further year for its completion. Read in that context, the learned Chief justice was of the view that the new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment had always been there in the I.T. Act and in that light his Lordship had approved the observations of the Calcutta High Court, referred to hereinbefore. This question was again considered in the decision of the Supreme Court in the case of S. S. Gadgil v. Lal and Co. [1964] 53 ITR 231. There, the question was whether as a result of the amendment of s. 34, an agent of a non-resident could be assessed under s. 43 after the expiry of one year from the end of the year of assessment. In that context, at p. 239 of the report, the Supreme Court referred to the decision of Chakravartti C.J. in the case of ITO v. Calcutta Discount Co. Ltd. [1953] 23 ITR 471 (Cal) and at p. 240 (of 53 ITR) observed as, follows: " But it may be recalled that the amending Act of 1948, with which the court was concerned in Calcutta Discount Company's case [1953] 23 ITR 471 (Cal), came into force on September 8, 1948, but section 1(2) prescribed that the amendment in section 34 of the Indian Income-tax Act, 1922, shall be deemed to have come into force on March 30, 1948, and the period under the unamended section within which notice could be issued under section 34(3) against the assessee company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 270 (Guj). We are also in respectful agreement with the learned Chief justice of the Gujarat High Court on the construction and the ambit of the power under s. 59 of the new Act after the amendment and under s. 62 of the old Act before the amendment. In that light, we are of the opinion that a claim or a right which had become barred cannot exist, except by express language or by necessary implication. Our attention was drawn to some of the decisions on the question as to how a statute of this nature should be read. Reliance was placed on the decision of the Supreme Court in the case of Sree Bank Ltd. v. Sarkar Dutt Roy and Co. [1965] 35 Comp Cas 881; AIR 1966 SC 1953. There, in the context of the provisions of the Act, the Supreme Court observed that they found in the scheme, which they had set out in para. 6 of the judgment at p. 1956 to 1957, that the provision with which their Lordships were concerned were retrospective in operation. The Supreme Court observed that it was firmly established that retrospective operation was not to be given to a statute so as to impair an existing right or obligation, except as regards matters of procedure unless that effect could not be avo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re there, but whether that view of the Legislature had been correctly expressed in the old provisions is a matter for the construction of the statute by the court. In that view of the matter, we are of the opinion that the observations made in the case of Sree Bank Ltd. [1965] 35 Comp Cas 881 (SC) cannot be of any assistance to the revenue in the instant case. Reliance was also placed on the decision of the Supreme Court in the case of Sukhram Singh v. Smt. Harbheji, AIR 1969 SC 1114. There, the Supreme Court reiterated the well-known principles and one of the principles reiterated was the one that declaratory statutes were to be considered to be retrospective. But whether a particular statute is actually declaratory or not depends on the language of the statute. Hidayatullah C.J. observed at p. 1117 of the report that sometimes statutes had retrospective effect when the declared intention was clearly and unequivocally manifest from the language employed in the particular law or in the context of connected provisions. As we have held hereinbefore we are in respectful agreement with the Bombay High Court and the Gujarat High Court. We are of the opinion, applying the principles en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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