1989 (8) TMI 13 - HC - Income Tax

Court quashes assessment order, rules executors not liable for wealth-tax. Union ordered to refund with interest.

Chandabai Daga Versus Income-Tax Appellate Tribunal And Another

The court quashed the assessment order dated November 6, 1965, holding that executors were not liable for wealth-tax for the year in which the deceased ... Wealth Tax, Writ Issues Involved:1. Liability of executors for wealth-tax after the death of the deceased.2. Jurisdiction of the assessment order dated November 6, 1965.3. Refund of wealth-tax collected without authority of law.4. Equitable considerations in ordering the refund.Detailed Analysis:1. Liability of Executors for Wealth-Tax After the Death of the Deceased:The petitioner, as the sole surviving executor, filed a return of net wealth for the assessment year 1964-65, believing executors were liable for wealth-tax even if the deceased was not alive on the relevant valuation date. The assessment order was issued on November 6, 1965, with the valuation date being October 17, 1963. The petitioner later contended that executors were not liable for wealth-tax for the assessment year 1964-65. The Tribunal upheld the assessment based on the judgment in Jamnadas v. CWT [1965] 56 ITR 648 (Bom), which was later contradicted by the judgment in CWT v. Keshub Mahindra [1983] 139 ITR 22 (Bom). The latter judgment clarified that no assessment could be made on the executors for the year in which the deceased died.2. Jurisdiction of the Assessment Order Dated November 6, 1965:The court analyzed the conflicting judgments in Jamnadas' case and Keshub Mahindra's case. In Jamnadas' case, the court held that there was no provision in the Wealth-tax Act for charging and assessing wealth-tax on the estate of a deceased individual beyond the financial year in which the person died. Keshub Mahindra's case reaffirmed this, stating that executors could not be assessed for wealth-tax for the financial year during which the deceased died. Based on this precedent, the court concluded that the assessment order dated November 6, 1965, was without jurisdiction.3. Refund of Wealth-Tax Collected Without Authority of Law:The petitioner argued that the wealth-tax collected was based on a mistake of law and sought a refund. The court referenced the Supreme Court decision in Salonah Tea Co. Ltd. v. Superintendent of Taxes [1988] 173 ITR 42 (SC), which held that taxes collected without authority of law must be refunded. The court emphasized that in a society governed by the rule of law, taxes collected without legal authority should be returned to the taxpayer. The court concluded that the wealth-tax collected from the petitioner and her co-executors was without authority of law and must be refunded.4. Equitable Considerations in Ordering the Refund:The Revenue's counsel argued against the refund on several grounds: (i) the assessment was not without jurisdiction, (ii) the inequity of ordering a refund after 25 years, (iii) the small amount of tax involved, and (iv) the settled nature of the case. The court rejected these arguments, stating that the assessment order clearly indicated October 17, 1963, as the valuation date, and thus was without jurisdiction. The passage of 25 years did not negate the requirement to refund the tax, and the heirs would manage its distribution. The court also dismissed the argument about the small amount involved, stating that Rs. 53,000 was not trifling. The petitioner was entitled to the benefit of the law as clarified in Keshub Mahindra's case.Conclusion:The court quashed and set aside the assessment order dated November 6, 1965. The Union of India was directed to repay the petitioner Rs. 53,322 (subject to verification) with interest at 12% per annum from April 24, 1983, until payment or realization. No order as to costs was made.