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PETITIONER: THE ADDITIONAL INCOME-TAX OFFICER,SALEM

       Vs.

RESPONDENT: E. ALFRED

DATE OF JUDGMENT: 20/10/1961

BENCH: HIDAYATULLAH, M. BENCH: HIDAYATULLAH, M. DAS, S.K. KAPUR, J.L.

CITATION:  1962 AIR  663            1962 SCR  Supl. (1) 143  CITATOR INFO :  RF         1963 SC1448  (5)  D          1965 SC1358  (19)

ACT:      Income Tax -Tax of deceased person payable by representative-Legal  representative  assessee  by fiction - Failure to pay assessed tax -Penalty, if could be  imposed   Income-tax  Act,  1922  (1  of 1922), ss.22,(2),(23),24B (2), 29, 30, 46(1).

HEADNOTE:      One died intestate during his year of account Leaving g  behind him his son A the respondent and eight daughters.  After notice  under s. 22 (2) of the Income  Tax Act  was issued,  A  was  assessed under s.  24 (2)  of the  Act and notice of demand was issued under s. 29. The respondent appealed to the Appellate  Assistant Commissioner,  but during the pendency  of the  appeal a penalty was imposed upon him under s. 46 (1) of the Act by the Income- tax officer  as the  respondent had  defaulted  in payment of  tax on  the due date. After the appeal was disposed  of a  notice  of  demand  was  again issued to  the  respondent  to  pay  the  tax.  On respondent’s default, a second penalty was imposed upon him.  Respondent  challenged  this  order  by writ. The  High Court quashed the order inter alia holding that  s. 46  (1) did  not apply to a legal representative as  he was  assessed as an assessee under a  fiction in  s. 24B  (2) and  that fiction came to  an end  when the assessment was made, for the fiction was created for the limited purpose of assessment, and  since  that  subsection  was  not concerned with  collection, the  fiction could not be carried,  beyond assessment  resulting  in  the determination of tax.      The question  was whether the fiction came to an end  after the  assessment, so  that the  Legal representative  remained  a  mere  debtor  to  the department or  could he  be ordered to pay penalty under s. 46 (1) of the Act.

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^      Held, that the fiction made the respondent an assessee for  the purpose  of assessing  the total income of  E. That  fiction did not come to an end after the assessment. When a thing is deemed to be something else,  it is  to be  treated as if it is that thing, though, in fact it is not E being dead before the  notice, either  general or special, to his, could  not be treated as an assessee, and the process  of   the  Act,   was,  by  fiction,  made available against the legal representative who was the assessee for purpose of assessment which meant the entire  process of  computation and law of the tax and  the fiction  had to  be worked out to its logical conclusion. The definition of 144 the word  assessee being  defined in  the Act as a person by  whom income-tax  is payable,  the legal representative came within  the definition and his assessment being  made under  s. 23, he had also a right of appeal under s. 30 since he did not cease to be  an assessee  after the determination of the tax at  least for  the purpose of sub-s. (2) of s. 24  B,   and  s.   29   applied   to   the   legal representative in his position as the assessee.      Commissioner of  Income-tax  v.  Teja  Singh, [1959] Supp.  1 S.C.R.  394 and East End Dwellings Co. Ltd.  v. Finsbury  Borough Council,[1952] A.C. 109, referred to.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION:  Civil  Appeal No. 282 of 1960.      Appeal from  the  judgment  and  order  dated February 15,  1956, of  the Madras  High Court  in Writ Petition No. 404 of 1952.      K. N. Rajagopala Sastri and  P. D. Menon, for the appellant.      R. Gopalakrishnan, for the respondent.      1961. October  20. The  Judgment of the Court was delivered by      HIDAYATULLAH,   J.-    Whether   the    legal representative  of   a  deceased  person,  who  is assessed in  respect of  the total  income of  the latter person,  as if he were the assessee, can be ordered to  pay a  penalty under  s. 46(1)  of the India Income-tax  Act, is  the short question that arises in this appeal.      One Ebenezer  died intestate on November, 22, 1945, during  his year  of account  which ended on March 31, 1946. He left behind him the respondent, E. Alfred,  his son,  and eight daughters. For the assessment  year,   1946-47,  the  respondent  was assessed under  s. 24B(2)  of the  Income-tax Act, after a  notice was  issued to  him under s.22(2), ibid. The  assessment was  completed on  March 26, 1951, and  a notice  of demand was issued under s. 29 of the Act. The respondent appealed against the order of  assessment to  the  Appellate  Assistant Commissioner,  but  during  the  pendency  of  the appeal, a penalty of Rs. 250/- was imposed upon 145 him under  s 46(1)  of the  Act by  the Income-tax

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officer, as  he had defaulted in payment of tax on the due  date. After  the appeal  was disposed  of with very  minor modifications, a notice of demand was again  issued to  him to  pay the  tax  on  or before December 15, 1951. On his default, a second penalty of  Rs. 10,000/-  was imposed  upon him on March  8,   1952.  The  respondent  then  filed  a petition under Art. 226 of the Constitution in the High Court  of Madras  challenging the  imposition and levy  of penalty  imposed upon  him. The  High Court held  in his  favour, and  quashed the,  two orders imposing  penalty but granted a certificate of fitness  to appeal  to this  Court. This appeal was then filed.      In reaching  the conclusion  that s. 46(1) of the Act  did not  apply to a legal representative, the learned  Judges of  the High Court held that a legal representative  could  not  be  said  to  be included within  the words  of that section. "when an assessee  is in  default in making a payment of Income tax"  because of  the scheme  of  the  Act, particularly B.  29, where  a distinction  is made between  "an   assessee"   and   "other   person". According  to   the  learned   Judges,   a   legal representative is  assessed as an assessee under a fiction in s. 24B(2), and that fiction comes to an end when  the computation  of the tax Or, in other words, the  assessment is made. The learned Judges drew distinction  between the three subsections of 8. 24B,  and pointed  out  that  sub-s.  (1)  only created a  liability on  the legal  representative for collection of tax but did not refer to him for that purpose  as an  assessee and  sub-s.(3) which did not  concern itself  with collection,  did not refer to  the legal representative as an assessee, and held  that  the  fiction  in  sub-s.  (2)  was created for the limited purpose of assessment, and since that  subsection also did not concern itself with collection,  the fiction could not be carried beyond assessment  resulting in  the determination of the tax. 146 Thereafter, according to the High Court, the legal representative  is  not  an  assessee  within  the meaning   of s.  29, but can only be brought under tho words  "other person",  and inasmuch as ss. 45 and 46  refer to  "an assessee  in  default",  the legal 3.  representative cannot be treated as such and no  penalty can  either be imposed upon him or recovered.      We  are  concerned  with  the  definition  of "assessee" before  its  amendment  in  1953.  That definition read as follows:      "assessee" means  a person by whom income-tax is payable"      The  generality   of   this   definition   is sufficient to  include even a legal representative who is to pay the tax, though out of the assets of the deceased  person. Section  24B, which makes it legal representative liable, is as follows:           24B.  (1)   Where  a  person  dies,  his      executor,  administrator,   or  other   legal      representative shall  be liable to pay out of      the estate  of the  deceased  person  to  the      extent to  which the  estate  is  capable  of

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    meeting  the   charge  the  tax  assessed  as      payable by  such person,  or  any  tax  which      would have been payable by him under this Act      if he had not died.           (2)  where  a  person  dies  before  the      publication of  the  notice  referred  to  in      subsection (1)  of section 22 or before he is      served with a notice under sub-section (2) of      section 22 or section 34, as the case may be,      his executor,  administrator or  other  legal      representative shall,  on the  serving of the      notice under  subsection (2) of section 22 or      under section  34, as  the case may be comply      therewith, and  the  Income-tax  officer  may      proceed to  assess the  total income  of  the      deceased  person   as   if   such   executor,      administrator or  other legal  representative      were the assessee. 147           (3) where  a person dies, without having      furnished a return which he has been required      to furnish  under the  provisions of  section      22, or  having furnished  a return  which the      income-tax officer  has reason  to believe to      be incorrect,  or incomplete,  the Income tax      officer may  make an  assessment of the total      income of  such person  and determine the tax      payable  by   him  on   the  basis   of  such      assessment and  for this  purpose may, by the      issue, of  the appropriate notice which would      have had  to  be  served  upon  the  deceased      person had  he  survived,  require  from  the      executor,  administrator   or   other   legal      representative of  the  deceased  person  any      accounts, documents  or other  evidence which      he might  under the provisions of sections 22      and  23   have  required  from  the  deceased      person".      The scheme of the section, which was inserted by the  Second Amendment  Act of 1933 and modified further  by  the  Amendment  Act  of  1939  is  as follows: Subsection (1) of a 24B makes, inter alia the legal  representative liable to pay out of the estate of  deceased person  to the extent to which the estate  is capable  of meeting the charge, the tax assessed  as payable by such person or any tax which would  have been  payable by  him under  the Act, if  he had  not died.  By this sub-section, a legal representative is made liable to pay the tax which might have been assessed but not paid by the deceased person  or which  might be assessed after his  death.   It   covers   all   situations   and contingencies and  makes the  liability  absolute, limited, however,  to  the  extent  to  which  the estate of  the deceased  is capable of meeting the charge. The  subsection does not provide for issue of  notices,  assessment  collection  or  anything connected with the imposition, levy and collection of the  tax, Subsection  (2) and  (3) next provide for  different   contingencies.   Subsection   (2) provides that where a person dies 148 before the  publication of  a  general  notice  or before he  is served  with a  special notice under s.22 or  s.34   his legal representative shall, on

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the service  of the  special notices  comply  with these notices,  and  the  Income-tax  officer  may proceed to assess the total income of the deceased person as  if the  legal representative  were  the assessee. Sub  section (3)  provides that  where a person dies  after he has been required to furnish a return but without having furnished such return, or where  he has  furnished  the  return  but  the Income-tax officer  has reason to believe it to be incorrect, the  Income-tax officer  may  make  the assessment of  the total  income of  such deceased person, and  determine, the tax after serving such notices, as may be required under s.22 or 23, upon the legal representative of the deceased person to produce the accounts, documents or other evidence.      In the  present case,  the matter  fell to be governed  by   the  second   sub-section,  because Ebenezer died  before  the  end  of  his  year  of account.  The  service  of  the  notice  upon  the respondent and  his assessment,  as if he were the assessee, were  made under the second sub-section. By  reason  of  this  assessment,  the  respondent became liable  under the  first sub-section to pay out of the estate of Ebenezer the tax assessed, to the extent  to which Ebenezer’s estate was capable of meeting the charge but he himself was deemed to be the assessee.      No doubt,  the fiction made the respondent an assessee for  the purpose  of assessing  the total income of  Ebenezer. But  the question  is whether the fiction  came to  an end after the assessment, so that  he remained  a mere  debtor thereafter to the Department.  The answer to this question would determine the  further application  of  the  other sections of  the Act. When a thing is deemed to be something else  it is  to be  treated as  if it is that thing,  though,  in  fact,  it  is  not.  The original assessee  being dead  before the  notice, either general or 149 special, to  him, he  could not  be treated as all assessee, and  the process  of the  Act is, by the fiction made  available against a different person like a  legal representative,  who is  fictionally deemed  to   be  an   assessee  for   purposes  of assessment. The  word "assessment" bears different meanings, and  in one  sense, it  comprehends  the entire process of computation and levy of the tax. It is  in this sense that the legal representative becomes an assessee by the fiction, and it is this fiction which  has to be fully worked out, without allowing the  mind "to  boggle"  as  was  said  in Commissioner  of   Income-Tax  v.   Teja  Singh(1) applying the  dictum of  Lord Asquith  in East End Dwellings   Co.,    Ltd.   v.   Finsbury   Borough Council(2).  If  we  turn  to  the  definition  of "assessee", it  says  that  an  assessee  means  a person by  whom income-tax  is  payable.  A  legal representative who by fiction, is decreed to be an assessee therefore,  comes within this definition, because he  is a  person  by  whom  income-tax  is payable, though  out  of  the  assets  left  by  a deceased  person.  The  assessment  of  the  legal representative is  then made  under s.  23 of  the Act, and  he has  the right to appeal under B. 30,

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which he  would not  have, if  he ceased  to be an assessee after  the determination  of the  tax. We are not  concerned in  this case with the position of the  legal representative  under the third sub- section  of  s.24  B,  and  are  not  required  to consider what  his position would be, if he made a default in  the payment of the tax. The fiction is enacted at  least for  the purpose  of sub-s. (2), and it  is to that subsection that we are confined in this  case. Nor  can the  fiction in  that sub- section be  limited by  provisions of  law  for  a totally different situation.      Under s.45,  if a  notice of demand is issued under  s.29  on  an  assessee  and  has  not  been complied with  the assessee  is deemed  to  be  in default, and  under s.  46 (1), if the assessee is in default,  a penalty,  can be imposed. All these stages the respondent      (1) (1959) Supp. 1 S.C.R. 394.     (2) [1952]                                      A.C 109, 132. 150 went through  in this  case.  He  was  himself  an assessee qua  the assets  and liability to tax, of Ebenezer he was, therefore, an assessee in default and liable  to the  imposition of penalty for this default. The question is whether s.29, which makes a  distinction  between  an  assessee  and  "other person", makes any difference.      The High Court as well as the learned counsel for  the  respondent  (who  pressed  upon  us  the reasons of  the High  Court) referred to the words of s.29  where in addition to an "assessee" liable to pay  the tax  occur the  words  "other  person" liable to  pay such  tax, and  observed  that  the respondent would  fall to be governed by the words "other person"  liable to  pay such tax and not by the words  "the assessee"  liable to pay such tax. The High Court reasoned, therefore, that the words "an  assessee"   in  ss.   45  and   46  in  their application are  limited to  an assessee,  who  is assessed on his own behalf and not "other person", who is  not  an  assessee.  This  distinction,  it observed, must  be borne  in mind  in interpreting the word  "assessee" used in ss. 45 and 46, and so construing, limited  the word  "assessee" in those two sections  to an  assessee  proper.  The  words "other   Person"   cannot   apply   to   a   legal representative, if  he is  an assessee by fiction, and the  section has  to  be  worked  out  to  its logical conclusion.  If he  falls within  the word "assessee’, as  has been  shown above, he does not fall within the words "other person" and it is not necessary to  find in  this case  what persons are there meant  to be  included. In  our opinion, the penalty could  be  imposed  on  respondent  as  an assessee.      The appeal thus succeeds, and is allowed with costs here and in the High Court.                                    Appeal allowed. 151