MADAN LAL LOHIA Vs. ASSISTANT COLLECTOR

JUDGEMENT

(1.) This appeal by special leave raises a short question of law as to the scope of garnishee proceeding under S. 73. sub-s. (5) of the Estate Duty Act, 1953 read with Section 46 (5A) of the Indian Income- tax Act, 1922. A brief narration of the facts giving rise to the appeal would be sufficient to explain the background against which the question arises for determination in the appeal.

(2.) One Rai Bhupati Nath Deb Bahadur died on 23rd September, 1959 leaving considerable movable and immovable properties which included inter alia a building situated at No. 13. India Exchange Place, Calcutta. Respondents Nos. 3 and 4 claiming respectively to be the son and daughter of the deceased delivered to the Assistant Controller of Estate Duty an account in form ED-1 of the properties in respect of which, according to them, estate duty was payable on the death of the deceased. The account was filed by respondents Nos. 3 and 4 in their capacity as executors of the Will D/- 20-12-1957 said to have been made by the deceased prior to his death. The Assistant Controller issued notice under Section 58, sub-section (2) to respondents Nos. 3 and 4 as accountable persons and after hearing them, made an order dated 23rd September 1960 assessing the principal value of the estate of the deceased and determining a sum of Rs. 1,40,090.20 as the amount payable as estate duty. It appears that the Assistant Controller was not able to recover the amount of estate duty from respondents Nos. 3 and 4, since most of the estate of the deceased consisted of immovable properties which were let out to different tenants and according to respondents Nos. 3 and 4, rent was not being paid to them by the tenants. One of the immovable properties left by the deceased, namely, the building situate at No. 13. India Exchange Place, Calcutta was in the possession of the appellant. According to the appellant it had been let out to him by nine persons who were the nephews and nices of the deceased and who claimed to be the heirs of the deceased on the basis that the deceased died without making any Will and did not leave any widow or son or daughter surviving him. The lease given to the appellant by these nine persons, who may for the sake of convenience be hereinafter referred to as the lessors was under a registered deed dated 5th March, 1960 and it was a lease for a period of thirtyone years with effect from 1st March, 1960 carrying rent at the rate of Rs. 1,400/- per month. Since the leased premises - that is how we propose to describe the building leased to the appellant by the lessors - admittedly belonged to the estate of the deceased, the rent payable by the appellant was a fortiori an amount which in law belonged to the estate and hence the Assistant Controller issued a notice dated 9th January, 1962, to the appellant under Section 73, sub-section (5) of the Estate Duty Act, 1953 read with Section 46, sub-section (5A) of the Indian Income Tax Act, 1922 (hereinafter referred to as the Act of 1922) pointing out that "a sum of Rupees 1,40,090.20 is due from Shri Tulsi Charan Deb and others on account of estate duty as accountable persons to the estate of late Rai Bhupati Nath Deb" and requiring him to pay forth-with "any amount due from you to or held by you, for, or on account of the said estate of Bhupati Nath Deb Bahadur" upto the amount of Rs. 1,40,090.20 as also "to pay money which may subsequently become due from you to them or which you may subsequently hold for or on account of them upto the amount of arrears still remaining unpaid, forthwith on the money becoming due or being held by you as aforesaid, as such payment is required to meet the amount due by the accountable person in respect of arrears of estate duty". It was stated in the notice that any payment made by the appellant in compliance with the request contained in the notice would in law be "deemed to have been made under the authority of the accountable person" and the receipt of the Assistant Controller "will constitute a good and sufficient discharge of his liability to the person to the extent of the amount referred to in the receipt". The appellant, on receipt of the notice, paid the rent for the months of December, 1961 and January 1962 aggregating to Rupees 2,800/- to the Assistant Controller and informed the lessors about the same. The lessors, by their attorney's letter dated 24th February, 1962, however, contended that the notice issued by the Assistant Controller against the appellant was ineffectual, since the lessors had not been assessed to estate duty by the Assistant Controller as accountable persons and the Assistant Controller was, therefore, not competent to require the appellant to pay to him the amount of rent which was due from the appellant to the lessors and moreover, the notice required the appellant to pay only such amount as was due from the appellant to respondents Nos. 3 and 4 as accountable persons and since the amount of rent was due from the appellant to the lessors and not to respondents Nos. 3 and 4, the appellant was not liable to pay the amount of rent in respect of the leased premises to the Assistant Controller. The appellant acting on this letter of the lessor's attorneys did not pay any further rent to the Assistant Controller but paid rent for the months from February to May 1962 to the lessors. No further payment of rent was thereafter made by the appellant either to the Assistant Controller or to the lessors. Since the appellant did not pay any rent to the Assistant Controller for the period subsequent to January 1962 in defiance of the notice dated 9th January, 1962 the Assistant Controller issued a notice dated 5th March, 1964 to the appellant requiring him to show cause why penalty in the sum of Rupees 10,000/- should not be levied for the default committed by him. The appellant addressed a letter dated 13th March ,1964 pointing our that the accountable persons mentioned in the notice dated 9th January, 1962 were "Shri Tulsi Chandra and others", that is, respondents Nos. 3 and 4 and the appellant had no concern or connection with these accountable persons nor was any amount due from him to them and hence the notice dated 9th January, 1962 was misconceived. The appellant also called upon the Assistant Controller to refund the sum of Rs. 2,800/- paid by him in respect of rent for the months of December 1961 and January 1962 on the ground that this payment had been made by him under a bona fide mistake of law. This explanation furnished by the appellant was found unacceptable and the Assistant Controller passed an order dated 25th March, 1964 holding that rent for the months commencing from March 1962 and ending with March 1964 aggregating to Rs. 35,000/- had been paid by the appellant to the lessors in contravention of the notice dated 9th January, 1962 issued against him and imposing a penalty of Rs.3,000/- under S. 73, sub-sec. (5) of the Estate Duty Act, 1953 read with S. 46 (1) of the Act of 1922 and requiring the appellant to pay up the amounts of Rs. 35,000/- and Rs. 3,000/- on or before 6th April, 1964. The appellant thereupon filed a writ petition in the High Court challenging the validity of the proceedings adopted by the Assistant Controller under Section 73 (5) of the Estate Duty Act, 1953 read with Section 46 (5A) of the Act of 1922 for recovery of the amount of estate duty from the appellant as also the legality of the Order dated 25th March, 1964 imposing penalty of Rs. 3,000/- on the appellant. The High Court, by a judgment dated 1st December, 1969, rejected the writ petition and hence the present appeal by special leave obtained from this Court.

(3.) There are two questions which arise for determination in this appeal:first, whether the notice dated 9-1-1962 issued by the Assistant controller to the appellant was a valid notice under which the appellant was bound to pay the amount of rent in respect of the leased premises to the Assistant Controller, and secondly, even if the notice dated 9th January, 1962 was a valid notice and it obligated the appellant to pay the amount of rent to the Assistant Controller, whether any penalty could be levied on the appellant for contravention of the terms of the notice. The first question is not free from difficulty but the second is relatively simple and hence it would be convenient to begin first with a discussion of the second question. Now, at the date when the notice dated 9th January, 1962 was issued by the Assistant Controller the Act of 1922 was in force and hence the notice was issued under Section 73, sub-section (5) of the Estate Duty Act, 1953 read with Section 46 (5A) of the Act of 1922. Section 73, sub-section (5) of the Estate Duty Act, 1953 provides inter alia that the provisions of sub-sections (1), (1A), (2), (3), (4), (5A), (6) and 7 of Section 46 of the Act of 1922 shall apply as if the said provisions were provisions of Estate Duty Act, 1953 and referred to estate duty and sums imposed by way of penalty or interest under the Estate Duty Act, 1953 instead of to income-tax and sums imposed by way of penalty or interest under the Act of 1922 and the Controller of Estate Duty instead of the Income-tax Officer. Section 46 of the Act of 1922 lays down the mode and time of recovery of income-tax and two sub-sections of this section are material, namely, sub-sections (1) and (5A) which read as follows: