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PETITIONER: HOMELY INDUSTRIES

       Vs.

RESPONDENT: THE SALES TAX OFFICER, SECTOR V, KANPUR

DATE OF JUDGMENT24/03/1976

BENCH: GOSWAMI, P.K. BENCH: GOSWAMI, P.K. KHANNA, HANS RAJ

CITATION:  1976 AIR 2086            1976 SCR  (3) 862  1976 SCC  (3) 705

ACT:      U.P. Sales  Tax  Act-Secs.  7C(3)-8(1)(2)-Liability  of heirs and  legal representatives  of  a  deceased  assessee- Whether service of a notice condition precedent, to recovery proceedings.

HEADNOTE:      Rashidul Hasan  was a  dealer registered under the U.P. Sales Tax  Act. During  the lifetime  of Rashidul Hasan, the Sales Tax  Officer sent a notice to him asking him to appear and to  produce all  books of  account, cash  memos,  bills, receipts,  bank   pass  books,   statement  of   income  and expenditure which  he may  desire to  produce.  He  died  in December, 1968  leaving behind three adult sons. At the time of  his   death  assessment   proceedings  relating  to  the assessment years 1960-61 and 1961-62 were pending before the Sales Tax  Officer. After  the death  of Rashidul Hasan, the business was continued by his sons by forming a partnership. His legal  representatives obtained a number of adjournments in order to make an effective representation. After granting 6 adjournments  the  7th  Application  for  adjournment  was rejected by  the Sales  Tax Officer and an ex-parte order of assessment was  made in  April, 1969.  The Sales Tax Officer thereafter initiated  recovery proceedings  in pursuance  of the assessment  orders and  the  demand  was  sought  to  be realised from the sons of the deceased by coercive measure.      Section 7C(3)  of the  Act provides that where a person having furnished  a return  dies and the assessing authority may determine the turnover of such person and assess the tax payable by  him on  the basis  of such determination and for this  purpose   may  by   notice  require   from  the  legal representative  of   the  deceased   person  any   accounts, documents  or  other  evidence  which  he  might  under  the provisions of  this Act  require from  the deceased  person. Section 8(1)  provides that  the tax  assessed under the Act shall be  paid within  such time not being less than 15 days from the  date of  service of  the notice  of assessment. It further provides  that in  default of  such payment the same may be  recovered as  arrears of land revenue. The appellant filed two  Writ Petitions before the High Court of Allahabad challenging the  orders  and  recovery  certificates  issued under section  8 of  the Act.  The High  Court rejected  the

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application.      On appeal by certificate under Article 133(1)(a) of the Constitution, the appellant contended:           (1)  The assessment orders are invalid as they are                made against  a  dead  person,  and  that  no                notice  as  required  by  section  7C(3)  was                served on the legal representative to produce                accounts, documents and other evidence.           (2)  A  proper   and  valid   notice  which  is  a                condition  precedent   for  fixing  liability                under section  8 has  not been  served on the                legal  representatives   and  therefore   the                recovery proceedings were illegal. ^      HELD :  (1)  The  notice  was  already  served  on  the deceased when  he was   alive. It was not necessary to serve the notice  on legal representatives again under Sec. 7C(3). The legal  representatives would  have been  entitled  to  a notice to produce documents and evidence if the deceased had not earlier  been served  with a  similar notice  during his life time.  The orders  of assessment  cannot, therefore, he held to  be invalid  on account of non-service of notice for production of  documents upon  the legal  representatives in this case.  Besides the  legal representatives were aware of the proceedings  and took  several adjournments  and if they did not  choose to  produce any  further evidence  it    was entirely their fault. [865 E, G, 866 A-B] 863      (2) It  is clear  that before  a certificate proceeding can be  instituted under  section 8  a notice  of demand  is condition  precedent.  There  can  be  no  recovery  without service of  a demand notice. It is admitted that such notice has not been served on the legal representatives. That being the position,  the recovery proceedings are not maintainable in law  and are invalid and the same along with certificates are liable to be quashed. [867 C-D]      Sahu Rajeshwar  Nath v.  Income-Tax Officer  I.C.  Ward Meerut, 72 I.T.R. 6971 S.C. distinguished.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION : Civil Appeal Nos. 1176- 77 of 1971.      From the  Judgment and order dated the 17th March, 1970 of the  Allahabad Court  in Civil Misc. Writ Nos. 2681-82 of 1968.      S. C.  Manchanda, J.  D. Jain,  Ujjal  Singh  and  Miss Kawaljit Miglani for the Appellant.      G. N. Dikshit and O. P. Rana for the Respondent.      The Judgment of the Court was delivered by      GOSWAMI, J.-These  are two  appeals on  certificates by the High Court of Allahabad from the judgments and orders of March 17, 1970.      The facts may briefly be stated:      The appellant Homely Industries is registered under the Uttar Pradesh  Sales Tax  Act (briefly  the Act).  Its  sole proprietor was  one Rashidul  Hasan. He died on December 10, 1968, leaving  behind three  adult sons,  namely, Syed Mohd. Ibrahim,  Syed  Mohd.  Ismail  and  Syed  Mohd.  Ilias.  The business was carried on by Rashidul Hasan under the name and style of  Homely Industries.  At the  time of  his death the assessment proceedings  relating  to  the  assessment  years 1960-61 and  1961-62  were  pending  before  the  Sales  Tax Officer  on   remand   from   the   Assistant   Commissioner

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(Judicial), Sales  Tax, in  pursuance  of  his  order  dated October 26, 1966.      It is  said that  after the death of Rashidul Hasan the business was  continued by the sons by forming a partnership and Nazir  Husain continued  as the  munim and also appeared before the Sales Tax Officer in the pending proceedings.      On December 19, 1968, Syed Mohd. Ibrahim, as legal heir and  partner,  sent  an  application  through  Nazir  Husain informing the  Sales Tax Officer, Kanpur, in connection with the two  assessment proceedings  that his father had expired on December  10, 1968  and that it was not possible for them to proceed with the case on that day.      It appears  that the  Sales Tax Officer during the life time of  Rashidul Hasan  had addressed  a notice  to  Homely Industries calling  upon it  to appear  in person or through pleader, or  authorised representative on November 29, 1968, and to  produce all  books of  accounts, cash  memos, bills, receipts,  bank   pass-books,  statement   of   income   and expenditure and  other documents  which  it  may  desire  to produce in  connection with  the assessment. This notice was served on November 20, 1968, on the son of the proprietor of Homely Industries.      It appears  that a  number of  adjournments were  taken after  the   death  of  Hashidul  Hasan,  sometimes  on  the application of the munim 864 and once  even on  the application  of the  son, Syed  Mohd. Ismail,  to   enable  the  assessee  to  make  an  effective representation. While  as  many  as  six  adjournments  were granted on  the application  of Nazir Husain and once of the son of the deceased between 19-12-1968 and 26-4-1969, on the last  date   a  further  application  by  Nazir  Husain  for adjournment was rejected by the Sales Tax Officer and an ex- parte order of assessment was made on April 28, 1969.      The Sales Tax Officer initiated recovery proceedings in pursuance of the assessment orders and the demand was sought to be  realised from  the sons of the deceased proprietor by coercive measures.  That led to two writ applications before the High  Court  of  Allahabad  challenging  the  assessment orders and  the recovery certificates issued under section 8 of the  Act. The  High Court  rejected the  applications and granted  certificates   under  Article   133(1)(a)  of   the Constitution.      It is  contended by  Mr. Manchanda  on  behalf  of  the appellant that  the assessment  orders are  invalid as  they were made against a dead person. Secondly, he submits that a proper and  valid service  of a demand notice is a condition precedent for  fixing liability  on the person from whom the tax is  sought to be recovered and in this case there was no service of  notice on  the heirs  and legal  representatives prior to the attempt of recovery through a coercive process.      With  regard  to  the  first  submission,  the  learned counsel draws  our attention  to section 7C of the Act which reads as follows:-           "7-C(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 meeting the charge,                the tax  assessed as  payable by such person,                or any  penalty which would have been payable                by him under this Act, if he had not died.           (2)  Where a  person dies  before the service upon                him  of   the  notice,   if  any,  issued  in                pursuance  of   section  7,   his   executor,

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              administrator or  other legal  representative                shall,  on   the  serving   of   the   notice                aforesaid, comply therewith and the Assessing                Authority may  proceed to assess the turnover                of the  deceased person  as if such executor,                administrator or  other legal  representative                were the assessee.           (3)  Where a  person dies without having furnished                a  return  which  he  has  been  required  to                furnish under  the provisions of section 7 or                having furnished a return which the Assessing                Authority  has   reason  to   believe  to  be                incorrect  or   incomplete,   the   Assessing                Authority may  determine the turnover of such                person and  assess the  tax payable by him on                the basis of such determination, and for this                purpose may,  by  notice,  require  from  the                executor,  administrator   or   other   legal                representative of  the  deceased  person  any                accounts, documents, or other 865                evidence which  he might under the provisions                of this  Act have  required from the deceased                person".      (4) & (5)     x      x      x      x      x      Relying upon  section 7C(3),  it is  submitted that  no notice as  required under that sub-section was served on the legal  heirs   and  representatives   to  produce  accounts, documents  and   other   evidence   for   the   purpose   of determination of the turnover and assessment of tax. Counsel submits that  after death  of the father no assessment order could be  passed without notice under section 7C(3) upon the heirs and legal representatives of the deceased assessee.      It is  true that  the Sales  Tax Officer did not accept the returns  submitted by  the dealer.  It  was,  therefore, incumbent under  the proviso  to section  7(3) of the Act to give a  reasonable opportunity to the dealer for the purpose of proving  the correctness  and completeness of the returns already submitted.  If the  returns were accepted as correct there was  no necessity  for giving  any opportunity  to the dealer as  the case will then be governed by section 7(2) of the  Act.  Mr.  Manchanda,  therefore,  submits  that  under section 7C(3)  read with  the proviso to section 7(3) it was obligatory on  the part  of the  Sales Tax Officer to give a reasonable  opportunity  to  the  legal  representatives  to produce the  documents and accounts before completion of the assessment. Admittedly  no notice  under section  7C(3)  had been served  on the legal representatives. It is, therefore, submitted that the orders of assessment are invalid.      Although  the   submission  on   the  first   blush  is attractive it does not bear a close scrutiny. This is a case where the  assessee had  submitted the returns and since the Sales Tax  Officer was not prepared to accept the returns as correct and  complete,  he  served  a  notice  on  the  sole proprietor of  the assessee,  when he  was alive, to produce documents and books of accounts under the proviso to section 7(3). We  have already referred to the said notice which was served on  the son  of the  proprietor on November 20, 1968, calling upon  the dealer to produce the accounts on November 29, 1968.  It was,  therefore, an  obligation on the part of the dealer to produce documents, books of accounts and other evidence to  prove before  the Sales  Tax Officer  that  the returns were  correct. This being the factual position about service of  notice on the deceased while he was alive, there was no legal entitlement to any further notice to the dealer

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even if the sole proprietor were alive.      Under section 7C(3) the Sales Tax Officer may by notice require from  the legal  representative of the deceased such accounts, documents or other evidence as "he might under the provisions of  the  Act  have  required  from  the  deceased person". The  Sales Tax  Officer  had  already  demanded  by notice from  the deceased  while he  was alive production of documents  and   the  books  of  accounts.  Hence  no  valid objection can  be taken  under section  7C(3) that a further notice for  production of documents and accounts should have been  served   on  the   legal  representatives.  The  legal representatives would  have been  entitled to  a  notice  to produce documents  and evidence  if  the  deceased  had  not earlier been  served with  a similar  notice during his life time. Section 7C(3) 866 does not  entitle the  legal representatives  to any  notice which the  deceased, if  alive, would not have been entitled to under  the provisions  of the  Act. Since  there  was  no obligation under  the Act  for service of a second notice on the dealer, if he were alive, the legal representatives were not entitled  to a  notice as claimed under section 7C(3) of the Act. The orders of assessment cannot, therefore, be held to be  invalid on  account  of  non-service  of  notice  for production of  documents upon  the legal  representatives in this case.  Besides, we  find that the legal representatives were  aware   of  the   proceedings  and   took  several  it adjournments and  if they  did not  choose  to  produce  any further evidence it was entirely their fault and they cannot blame the  Officer when  the request for adjournment was not granted after  so many requests had already been acceded to. We, however,  express no  opinion on  the  merits  of  their claim.      Mr. Dikshit  appearing  on  behalf  of  the  respondent strenuously contends  that the  word "may"  in section 7C(3) makes it  optional for  the Sales Tax Officer to give or not to give notice to the legal representative for production of documents after  death of  an assessee.  We  are  unable  to accede to this submission.      The scheme  of the relevant provisions of the Act is as follows:-      Omitting the  non-essentials for  the purpose  of  this case, under subsection (1) of section 7 a return is required to be submitted by a dealer showing his turnover. Under sub- section (2)  of section  7, if  the  Sales  Tax  Officer  is satisfied that  the return  submitted by a dealer is correct and complete  he shall  assess the  tax on the basis of that return. Under  sub-section (3)  of section  7 read  with the proviso, if,  according to the Officer, the return submitted by a  dealer is incorrect or incomplete, he shall make, what is called,  a best  judgment assessment  after  making  such enquiry as  he  considers  necessary  but  must,  under  the proviso thereto, give a reasonable opportunity to the dealer to prove  the correctness  and completeness  of  the  return submitted by him.      So far  as material  for  the  purpose  of  this  case, section 7C(3),  properly construed,  provides,  inter  alia, that if  a person  dies after  furnishing a  return and  his return, which  was submitted, is not accepted by the Officer as correct  or complete, the obligation to give a reasonable opportunity to prove the correctness and completeness of the return under  section 7(3)  read with  the proviso cannot be given a  go-by if  the person  who submitted the return dies without a  notice having been given for such an opportunity. The word  "may" in  section 7C(3)  does not clothe the Sales

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Tax Officer  with  arbitrary  power  of  assessment  without notice to  the legal  representative to  produce evidence or documents which,  if the  dealer were  alive, he  would have been entitled  to  do  under  section  7(3)  read  with  the proviso. The submission of Mr. Dikshit is, therefore, devoid of substance.      In the  view we  have taken that no fresh notice to the legal representatives was called for prior to the passing of the assessment  orders in  this case, we are not called upon to decide whether the legal representatives had waived their right to notice as urged in the alternative by Mr. Dikshit. 867      We may  now deal  with the  second  submission  of  Mr. Manchanda that  no recovery  proceedings could be instituted unless a  notice of  demand had  been served  on  the  legal representative under  section 8  of the  Act.  That  section reads as under:-           "8   (1) The  tax assessed under this Act shall be                paid in  such manner and in such instalments,                if any,  and within such time, not being less                than fifteen days from the date of service of                the notice of assessment, as may be specified                in the  notice. In  default of  such payment,                the whole  of the  amount then  remaining due                shall become  recoverable in  accordance with                sub-section (2).           (2)  Any tax  or other  dues payable  to the State                Government   under    this   Act   shall   be                recoverable as arrears of land revenue".      It is clear that before a certificate proceeding can be instituted under  sub-section (2)  of section  8 a notice of demand  under   sub-section  (1)   thereof  is  a  condition precedent. There  can be  no recovery  without service  of a demand notice.  It is admitted that such notice has not been served on the legal representatives. That being the position the recovery proceedings are not maintainable in law and are invalid and  the same along with the certificates are liable to be quashed.      Mr. Dikshit  has drawn  our attention  to a decision of this Court in Sahu Rajeshwar Nath v. Income-tax Officer, C-W and, Meerut, and Another(1) and submitted that this decision is an  authority for  the proposition  that no notice on the legal representative  is required under the law prior to the institution of recovery proceedings by certificate.      In that  case this  Court was considering the liability of a  partner of an unregistered firm which was the assessee and a  notice under  section 29 of the Income-tax Act, 1922, had been  served on  the unregistered  firm and  all the tax assessed against  the firm  was sought  to be recovered from the partner  in  proceedings  under  section  46(2)  of  the Income-tax Act.  It was  contended on  behalf of the partner that a fresh notice of demand upon the partner was necessary under the  law and  in its  absence the recovery proceedings were invalid.  This Court  repelled the  contention  holding that although  the unregistered  firm was  the assessee  the partner was  liable under  section 25 of the Partnership Act and since  the appellant,  therein, conceded  that he  was a partner of that firm during the accounting year, no separate notice under  section 29  of the  Income-tax  Act  upon  the partner was  necessary. It  was further held that the notice contemplated under  section 29  of the Income-tax Act, 1922, was to  the assessee  or to any other person liable and "any other person  liable under  section 29"  meant "liable under the Income-tax  Act" and not under any other law such as the Partnership Act.

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    That was  a case  where no  question  arose  about  the liability of  the appellant  therein under the provisions of the Income-tax  Act such  as section  24B of  the Income-tax Act, 1922,  which is  almost identical with section 7C(1) of the Act and that because of that under section 868 29 of  the Income-tax  Act a notice of demand was obligatory as a  condition precedent  to the institution of certificate proceedings for  recovery of  the dues  as arrears  of  land revenue. The  aforesaid  decision  of  this  Court  in  Sahu Rajeshwar  Nath’s   case  (supra)   is,  therefore,   of  no assistance to the learned counsel.      In the  result the  judgments of  the  High  Court  are affirmed  but   the  orders  with  regard  to  the  recovery proceedings, which  are invalid,  are set aside. The appeals are partly  allowed. There  will be, however, no order as to costs.      We should  observe that we express no opinion about the appeals which  are said  to be  pending before the Assistant Commissioner (Judicial), Sales Tax. P.H.P.                               Appeals partly allowed. 869