2000 (9) TMI 54 - HC - Income Tax

Invalid Certificates Post-Death; Res Judicata Applies; Recovery Proceeding Details

The court held that the 11 certificates issued after the death of the assessee were unenforceable against the legal representatives. The principle of res ... Recovery Of Tax, Legal Representative, Attachment And Sale Of Property Issues Involved:1. Recovery of amounts covered by 11 certificates from the legal representatives of the deceased assessee.2. Applicability of the principle of res judicata.3. Limitation on the recovery proceedings initiated against the legal representatives.Issue-wise Detailed Analysis:1. Recovery of Amounts Covered by 11 Certificates from the Legal Representatives of the Deceased Assessee:The petitioner, a legal representative of the deceased assessee Thangal Kunju Musaliar, contended that no penalty or prosecution could be initiated as per the settlements. The Department initiated recovery proceedings against the petitioner and other legal representatives for the alleged non-compliance with the settlement terms. The original petitions challenging these recovery proceedings were dismissed, leading to writ appeals. The Division Bench held that 11 certificates issued after the death of the assessee were unenforceable. This was confirmed by the Supreme Court in Isha Beevi v. TRO [1975] 101 ITR 449.Despite this, the Department continued coercive measures, compelling the petitioner to pay Rs. 20,000 per month. The petitioner argued that the entire tax liability had been paid, and only interest and penalties were being demanded, which were not enforceable. The learned judge concluded that the certificates issued after the death of the assessee could not be corrected by substituting the names of the legal representatives and enforced against them. The argument that corrected certificates could be treated as fresh certificates was rejected, and it was declared that the 11 certificates in dispute were not enforceable.2. Applicability of the Principle of Res Judicata:The learned judge held that the previous judgment in Original Petition No. 2287 and connected original petitions of 1968, confirmed by the Division Bench and the Supreme Court, operated as res judicata between the parties. The petitioner did not succeed in his earlier challenges except on the ground of the invalidity of the 11 certificates. The Supreme Court upheld the findings of the High Court regarding the invalidity of these certificates.The Department contended that the petitioner could not raise new arguments in the present proceedings that were not raised earlier, invoking the principle of 'might and ought.' The petitioner's appeal against this finding was dismissed, affirming that the earlier proceedings acted as res judicata.3. Limitation on the Recovery Proceedings Initiated Against the Legal Representatives:The learned judge rejected the argument that the recovery proceedings were barred by limitation. The petitioner had approached the court nearly ten years after the Supreme Court's judgment, challenging exhibit P-7, a notice for settling a sale proclamation. The Department argued that the certificates were corrected under section 224(2) of the Income-tax Act, 1961, which allows for the correction of clerical or arithmetical mistakes.However, the court found that the correction of the certificates was not merely a clerical error, as the legal representatives were not defaulters, and no demand notice was issued to them. Rule 85 of Schedule II to the Act, which allows proceedings to continue against legal representatives after the defaulter's death, was not applicable since the defaulter had died before the certificates were issued. The court agreed with the petitioner that the certificates could not be enforced against the legal representatives.Conclusion:The court disposed of the writ appeals with the following directions:1. The properties cannot be sold for the recovery of amounts covered by the 11 invalid certificates merely by correcting the names of the persons.2. The Department must proceed under the Travancore Income-tax Act.3. If the petitioner or other legal heirs file a statement regarding the amount paid towards discharge of the arrears within two months, the respondents must verify and pass appropriate orders within two months thereafter. Recovery proceedings shall be stayed until the orders are passed.