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PETITIONER: COMMISSIONER OF INCOME-TAX BIHAR AND ORISSA

       Vs.

RESPONDENT: MANAGER, COURT OF WARDS ESTATE, BETTIAH

DATE OF JUDGMENT: 24/02/1967

BENCH: MITTER, G.K. BENCH: MITTER, G.K. HIDAYATULLAH, M. SHELAT, J.M.

CITATION:  1968 AIR   16            1967 SCR  (2) 748

ACT: Practice and Procedure-Tax liability-Liability dependent  on outcome  of litigation-Assessment made while title suit  was pending-High  Court setting aside  assessment-Propriety  of- Procedure to be followed.

HEADNOTE: During the pendency of a suit by a person claiming to be the heir  of the Bettiah estate which was in the  possession  of the Manager, Court of Wards, the Income Tax Officer made  an assessment  on the Manager.  In those proceedings the  State of Bihar and the Manager claimed that the estate had  vested in  the  State by escheat and therefore the income  was  not liable  to  tax.   The  Income-tax  Officer,  the  Appellate Assistant  Commissioner  and the Tribunal held that  as  the litigation  was pending it could not be said of  the  estate that the same had vested in the State by escheat.  The  High Court  on  reference held that the  income  tax  authorities could not impose the tax.  Setting aside the judgment of the High Court this Court in appeal. HELD  :  The  proceedings should be  made  final  after  the disposal of the litigation and the High Court could call for a supplementary statement of the case if necessary [750 D]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1172 of 1965. Appeal  from the judgment and order dated December 17,  1963 of  the Patna High Court in Misc.  Judicial Case No. 566  of 1960. R.   H. Dhebar for R. N. Sachthey, for the appellant. S.   P. Varma, for the respondent. The Judgment of the Court was delivered by Mitter, J., This is an appeal from a judgment and answer  of the  High  Court  of Judicature,  Patna,  on  a  certificate granted by it under s. 66-A(2) of the Income-tax Act of 1922 corresponding to s. 261’of the Income-tax Act of 1961.   The Tribunal  referred  two questions of law to the  High  Court under s. 66(1)               "I. Whether on the facts and circumstances  of

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             the  case, could assessment be made  upon  the               Manager of Court of Wards, Bettiah Estate,  in               respect of the income from the Bettiah  Estate               ?               2.    If  the assessment could be made on  the               Manager of the  Court  of Wards in respect  of               the income from the               749               Bettiah  Estate, was it chargeable to  tax  at                             maximum rates under s. 41(1) of the  I ncome-tax               Act?" The facts of the case are as follows :- Maharani Janki  Kuer who was the last holder of the Bettiah Estate in Bihar  died on November 27, 1954.  For many years past before her death, the  estate was under the management of the Court  of  Wards and continued under such management even after her death  as it  was not known whether she had left any heirs.  Under  s. 13 of the Bengal Court of Wards Act (IX of 1879)               "Whenever,  on  the  death of  any  ward,  the               succession to his property or any part thereof               is  in  dispute, the Court may  either  direct               that  such  property or part thereof  be  made               over to any person claiming such property,  or               may retain charge of the same until the  right               to   possession  of  the  claimant  has   been               determined  under Bengal Act VII of  1876,  or               until  the  dispute has been determined  by  a               competent Civil Court." "Court’  here means the Court of Wards.  One  Suresh  Nandan Sinha  filed  a suit claiming the estate on  the  allegation that  he  was  the nearest heir of  the  deceased  Maharani. After the death of the Maharani, the Income-tax Officer made an  assessment  on  the Manager of the  Court  of  Wards  as representing the estate of Bettiah, the assessment  relating to the assessment year 1956-57 the accounting year being the financial  year  1955-56.  The Government of  Bihar  claimed that  the  estate  had vested in  the  State  Government  by escheat  and  the Manager, Court of Wards put  forward  that claim  before  the  Income-tax  authorities.   There  was  a further  contention raised by the Manager that even  if  the assessment  was  made on him representing  the  estate,  the income should not be taxed at a maximum rate under s. 41 (1) of the Income-tax Act, 1922.  As the litigation was pending, the   Income-tax   Officer  and  the   Appellate   Assistant Commissioner  both  held that it could not be  said  of  the estate that the same had vested in the State by escheat  and they  also held that the income was taxable at  the  maximum rate.   The  same  plea  was  raised  before  the  Appellate Tribunal  and the Tribunal observed that as no  notification had  been  issued  by the Government on  the  death  of  the Maharani  or later to the effect that the estate had  vested in the State of Bihar by escheat, there was no certainty  as to who would be found to be the ultimate heir in view of the pending litigation. The High Court on the case stated, referred to Arts. 289 and 296  of the Constitution and taking note of the  contentions urged on behalf of the parties observed :               "In the circumstances of the present case,  it               is  manifest that the  Income-tax  authorities               cannot validly impose a tax upon the  Manager,               Court of Wards,               750               Bettiah  Estate, merely because a  title  suit               has been filed with regard to the heirship  of

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             the   Bettiah  Estate  without  deciding   the               question as to whether the claim of the  State               of Bihar that the property has vested in it by               escheat is established or not." On  this view, the first question was answered in favour  of the assessee and no answer was given to the second  question because it was academic. It  was asserted on behalf of the respondent-and not  denied by  the appellant-that the suit of Suresh Nandan  Singh  had been  dismissed, but an appeal had been preferred  therefrom and  was pending.  On the facts as the same appear to us  at present,  it  is  not possible to hold that  the  estate  of Bettiah has escheated to the State of Bihar.  It is  obvious that  in case of such escheat there can be no assessment  to income-tax.  The position will be clarified after the appeal by Suresh Nandan Sinha is disposed of.  In this view of  the matter,  the judgment of the Patna High Court is set  aside. The  proceedings should be finalised after the  disposal  of the   litigation  and  the  High  Court  may  call   for   a supplementary  statement  of case, if it  thinks  necessary. The  question as to whether the estate has escheated to  the State  of Bihar is left open, and the costs of  this  appeal will  abide by the ultimate decision of the High Court.   In case  it  be  found that the escheat had  taken  place,  the appellant  before  us  will have to pay the  costs  of  this appeal  and  if there is no escheat, the  Commissioner  will have the costs of this appeal. Y.P. 749