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High Court of Calcutta
Chakrabarti, Bachawat, JJ.
Asit Kumar Ghose – Appellant
Versus
Commissioner of Agricultural Income Tax – Respondent
IT Ref. No. 4 of 1952
Decided On : May 08, 1952
BENGAL AGRICULTURAL INCOME TAX ACT, 1944 - Ss. 13(b), 14, 16(2), 24(1), 24(2), 24(3), 24(4), 25(2), 25(3), 26, 27, 28, 62 - INDIAN INCOME TAX ACT, 1922 - Ss. 40, 41 - ASSESSMENT - EXECUTOR - RECEIVER - SUBSTITUTION - VALIDITY - NOTICE - RETURN - AGRICULTURAL INCOME - LIABILITY.
Fact of the Case:
The assessee, Asit Kumar Ghose, was appointed receiver of the estate of Akshoy Kumar Ghose in May 1933. In December 1946, an agricultural income tax proceeding was commenced against the executors of the estate for the accounting year 1945-46. Before Asit Kumar took possession of the estate, the executors had already filed a return upon the service of a notice under s. 24(2) of the Bengal Agricultural Income Tax Act, 1944. After Asit Kumar took possession, notices under ss. 24(4) and 25(2) of the Act were issued to the executors in ignorance of the appointment of Asit Kumar as receiver. However, when the Income Tax Officer came to know of the appointment, he issued fresh notices under ss. 24(4) and 25(2) on Asit Kumar in the dual capacity of "receiver and beneficiary to the estate of late Akshoy Kumar Ghosh". Asit Kumar responded to those notices and it appears that at his instance one of the executors was examined on the account books for the period. Ultimately on the 24th Aug., 1949, an assessment under s. 25(3) of the Act was made on Asit Kumar in the dual capacity to which I have already referred.
Finding of the Court:
1. The initiation of the proceedings against the executors was valid, not for the reason that they had received the income in a representative capacity on behalf of the assessee, but for the reason that they had received it themselves on their own behalf. 2. The proceeding so commenced ought to have been concluded as a proceeding as against the executors. 3. By such conclusion and the consequential demand for the tax, no hardship would have been caused to the executors if they would only consult their rights under the Act and return the money necessary for the payment of the tax under the authority of s. 62. 4. The assessment of the assessee was not valid and sustainable in law when the return was filed and income in question was, in the first instance, received by the executors on whom also all the notices had been served in the first instance.
Issues: 1. Whether the assessment on the receiver upon service upon him of notices under s. 24(4) and s. 25(2) was valid and sustainable in law when the return was filed and income in question was, in the first instance, received by the executors on whom also all the notices had been served in the first instance. 2. Whether the assessment of the assessee was valid under s. 13(b) of the Bengal Agricultural Income Tax Act, 1944. 3. Whether the assessment of the assessee was valid under s. 16(2) of the Bengal Agricultural Income Tax Act, 1944.
Ratio Decidendi: 1. An executor, while the administration is still incomplete, does not hold the estate or receive its income on behalf of any one else, but does so on behalf of himself as the person in whom the estate lies vested at the time. 2. The income of the estate of the deceased as such is not assessed to income-tax. The Tribunal was in error in thinking that the estate of the deceased was the assessee. 3. In Income-tax law the estate of the deceased as such is not a separate juristic entity or a corporation sole represented from time to time by managers and receivers. 4. The assessee, as receiver, was therefore not liable to be assessed in respect of the income in question. For the purpose of the statute the income of the accounting year was never found with him so as to make him chargeable to taxation.
Final Decision: The question referred must, in my opinion, be answered in the negative. The assessee is entitled to the costs of this Reference.
CHAKRAVARTTI, J.
1. THE proceeding which has led to this Reference gave rise to an important and attractive question of law, but unfortunately it suffered such drastic pruning at the hands of the Tribunal in the course of their editing of it that it has reached this Court only in a very attenuated and even misleading form. THE parties, however, agreed that the question might be reframed in order that its real basis and meaning might be brought out.
2. THE facts are as follows :One Akshoy Kumar Ghose died in October, 1931, leaving a will under which three persons were to be executors and trustees. Of them two obtained a probate of the will and took upon themselves the administration of the estate. In May, 1933, one Asit Kumar Ghose, who is the assessee before us, was adopted to the testator. In 1947 Asit Kumar brought a suit against the executors on the Original Side of this Court for administration of the estate and accounts and in that suit he was appointed receiver by an order made on the 12th Aug., 1948. He took possession of the estate on the 23rd August next and it is found by the Tribunal that all the assets of the estate were handed over to him, except that the executors were allowed to retain with them the account books and a sum of Rs. 5,000 on account of certain costs and expenses.
In the meantime, in December, 1946, a proceeding under the Bengal Agrl. IT Act had been commenced against the executors in respect of the agricultural income of the estate for the accounting year 1352 B. S. for which the corresponding assessment year was 1946-1947. Before Asit Kumar took over the possession of the estate, the executors had already filed a return upon the service of a notice under s. 24(2) of the Act upon them. At the date he took over possession, the assessment proceeding was still pending. Even after that date, notices under ss. 24(4) and 25 (2) of the Act were issued to the executors in ignorance, it is said, of the appointment of Asit Kumar as receiver. However, when subsequently the ITO came to know of the appointment, he issued fresh notices under ss. 24(4) and 25(2) on Asit Kumar in the dual capacity of "receiver and beneficiary to the estate of late Akshoy Kumar Ghosh". Asit Kumar responded to those notices and it appears that at his instance one of the executors was examined on the account books for the period. Ultimately on the 24th Aug., 1949, an assessment under s. 25(3) of the Act was made on Asit Kumar in the dual capacity to which I have already referred. Hereafter I shall refer to Asit Kumar as the assessee.
3. IT was in his appeal to the Asstt. CIT that the assessee first raised the objection which has given rise to this reference. IT was contended on his behalf that the assessment made on him was wholly invalid, inasmuch as it was the executors and not he who had received the income assessed and inasmuch as he not being the person to whom the preliminary notice under s. 24(2) had been issued and who had filed the return, the subsequent notices served upon him and the assessment made on their basis were unauthorised by the Act. The Asstt. CIT rejected that contention and so did the Tribunal on further appeal.
4. IT is perfectly clear that the objection of the assessee was of a two fold character, one branch relating to the substantive question of his liability for the tax and the other relating to the procedural regularity of the assessment. The Tribunal in its appellate order dealt with both, although in a somewhat confused manner, and more by reference to certain so-called general principles of taxation that to the terms of the sections to which they referred. In substance, they held that the initiation of the proceedings against the executors was valid under s. 13(b) of the Act which provided for the assessment of receivers and administrators who received income on behalf of another person. The ultimate assessment of the assessee was valid under s. 16(2) which made the beneficiary, on whose behalf
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