1996 (4) TMI 97 - HC - Income Tax

Validity of Estate Duty Notice Upheld, Subsequent Notices Not Barred by Limitation, Delay Deemed Unreasonable

The court upheld the validity of the notice issued under section 59 of the Estate Duty Act dated January 10, 1975, bringing the King Koti Palace into ... Assessment Proceedings, Estate Duty, High Court, Notice Of Reassessment, Orders Passed, Reassessment Proceedings Issues Involved:1. Validity of the notice under section 59 of the Estate Duty Act dated January 10, 1975.2. Whether the impugned notices issued by the respondent are fresh notices under section 59 or a continuation of the first notice.3. Whether the proceedings are barred under section 73A of the Estate Duty Act.4. Whether it is open to the respondent to pass an order of reassessment after over twelve years.Issue-wise Detailed Analysis:1. Validity of the Notice under Section 59 of the Estate Duty Act dated January 10, 1975:The petitioner challenged the validity of the notice dated January 10, 1975, issued under section 59 of the Estate Duty Act, 1953, on the grounds that the property chargeable to estate duty had escaped assessment. The notice was issued to bring to charge the value of the King Koti Palace in the estate duty assessment of the late Nizam. The respondent communicated the reason for reopening the assessment to the petitioner on February 28, 1975. The Appellate Controller of Estate Duty enhanced the original assessment by including the value of the King Koti Palace, which was later upheld by the Income-tax Appellate Tribunal and confirmed by the High Court. The court concluded that the purpose of issuing the notice under section 59 of the Act dated January 10, 1975, was achieved and the notice had worked out itself.2. Whether the Impugned Notices Issued by the Respondent are Fresh Notices under Section 59 or a Continuation of the First Notice:The respondent issued further notices on July 16, 1986, and February 28, 1987, stating that the assessment was reopened on grounds other than the King Koti Palace, including the wrongful exemption of heirloom jewelry. The court examined whether these notices were fresh notices or a continuation of the first notice dated January 10, 1975. The court held that the impugned notices were not independent notices but were purported to be issued in continuation of the first notice. Therefore, the bar of limitation under section 73A(b) of the Act did not apply, and the notices were not vitiated for that reason.3. Whether the Proceedings are Barred under Section 73A of the Estate Duty Act:Section 73A(b) of the Estate Duty Act stipulates that no proceedings for reassessment shall be commenced after the expiration of three years from the date of assessment. The original assessment was completed on January 25, 1973. The court held that the impugned notices issued in 1987 were not barred by section 73A(b) as they were a continuation of the first notice issued in 1975. However, the court noted that the reassessment proceedings should be completed within a reasonable time.4. Whether it is Open to the Respondent to Pass an Order of Reassessment after Over Twelve Years:The court examined whether the delay of over twelve years in completing the reassessment proceedings was reasonable. It was noted that no action was taken by the respondent to finalize the reassessment from January 1975 to July 1986, and no satisfactory explanation was provided for the inordinate delay. The court held that not completing the reassessment for over twelve years was unreasonable and amounted to an arbitrary exercise of power. The impugned letters issued after twelve years for completing the reassessment were deemed arbitrary and illegal.Conclusion:The court allowed the writ petition with costs, declaring the impugned letters dated February 20, 1987, and March 16, 1987, as arbitrary and illegal. The respondent was restrained from pursuing the reassessment proceedings initiated by the notice under section 59 dated January 10, 1975.