1978 (2) TMI 70 - HC - Income Tax

Court rules in favor of plaintiff in ownership dispute, defers final decree pending letter of administration.

The court ruled in favor of the plaintiff, finding that the sum of Rs. 93,611.69 belonged to Keshab Prasad Goenka and subsequently to the plaintiff. The ... Attachment of bank funds - ownership under Hindu widow's estate and Hindu Succession Act - liability of legal representative under s. 24B of the Incometax Act - bar on civil suit under s. 67 of the Incometax Act - bank's discharge on compliance with notice under s. 46(5A) of the Incometax Act - thirdparty suit to claim property seized in tax recovery - deferment of decree pending grant of letters of administrationAttachment of bank funds - thirdparty suit to claim property seized in tax recovery - The sum standing in the bank account did not belong to the deceased assessee Gouri Shankar Goenka and the attachment by the revenue was wrongful as against the plaintiff. - HELD THAT: - The court found that the defendants failed to discharge the onus of proving that the funds in the account were assets inherited from Gouri Shankar. The evidence relied on by revenue (two dividend warrants and the estate duty return) did not conclusively establish that the amounts or shares belonged to Gouri Shankar or were inherited by Keshab Prasad. The plaintiff's evidence, supported by the bank passbook and account statements and oral evidence as to collections and deposits after Keshab Prasad's death, was accepted. As the plaintiff was a third party whose right to the property was asserted and she was not an assessee in the assessment proceedings, she was entitled to challenge the taking of the funds and the court held the attachment wrongful insofar as it affected her proprietary right.Issue answered in favour of the plaintiff; attachment held wrongful as against her.Ownership under Hindu widow's estate and Hindu Succession Act - The plaintiff became the owner of the sum standing to the credit of Keshab Prasad Goenka after his death and, after the Hindu Succession Act, 1956, became absolute owner. - HELD THAT: - On the evidence accepted by the court the bank account was that of Keshab Prasad and the sums deposited after his death were shown to have been received for his moneylending business and credited to that account. The plaintiff, as widow and sole heir, acquired a widow's estate and by operation of the Hindu Succession Act, 1956 she became absolute owner of those funds. The court therefore answered the issue of ownership in the plaintiff's favour.Issue answered affirmatively for the plaintiff; she is owner and, post1956, absolute owner.Liability of legal representative under s. 24B of the Incometax Act - Keshab Prasad Goenka was not personally liable to pay the tax dues of Gouri Shankar to the extent asserted, because revenue did not prove that he had inherited assets from Gouri Shankar. - HELD THAT: - The court recognised that under existing authority a legal representative can be liable to the extent of assets received from the deceased, but emphasised that liability is limited to property actually inherited. The revenue failed to prove that Keshab Prasad had received the relevant property from Gouri Shankar; the documentary material offered did not conclusively show succession of the contested funds. In consequence, the legalrepresentative liability pleaded by defendants Nos. 1 and 2 was not established.Issue answered for the plaintiff; no personal liability of Keshab Prasad established.Bar on civil suit under s. 67 of the Incometax Act - thirdparty suit to claim property seized in tax recovery - The suit by the plaintiff is not barred by s. 67 of the Incometax Act. - HELD THAT: - The court held that s. 67 bars suits by an assessee to set aside or modify an assessment, but does not deprive a third party of the remedy to claim proprietary rights in property taken by the revenue in purported satisfaction of a deceasedassessee's dues. The plaintiff was not party to the assessment proceedings and sought a declaration of her title to funds; accordingly, her suit was maintainable in the civil court.Issue answered in favour of the plaintiff; suit not barred by s. 67.Bank's discharge on compliance with notice under s. 46(5A) of the Incometax Act - The bank (defendant No. 3) was discharged from obligation to the plaintiff by payment made in bona fide compliance with the notice under s. 46(5A). - HELD THAT: - The court found that the bank had been served with the notice and, faced with the statutory provision, made payment to the revenue in compliance therewith. The bank had given the plaintiff opportunity and time to produce letters of administration and to contest the revenue claim; the payment was therefore treated as a bona fide compliance and constituted a sufficient discharge of the bank's liability. The plaintiff's counsel did not press a claim against the bank.Issue answered for the bank; payment in compliance with notice discharged its obligation.Deferment of decree pending grant of letters of administration - Final decree in favour of the plaintiff was deferred until she obtains and files letters of administration in respect of Keshab Prasad's estate. - HELD THAT: - Although the court answered substantive issues in the plaintiff's favour, it declined to pass an immediate decretal order because the plaintiff had not obtained letters of administration. The court directed that the decree be withheld until such letters are procured and filed, thereby requiring the plaintiff to regularise her title administratively before the court grants final relief.Decree deferred; plaintiff to obtain letters of administration and file them before decree is passed.Final Conclusion: The High Court held that the bank funds did not belong to the deceased assessee and that the plaintiff (the widow) acquired ownership, becoming absolute owner after the Hindu Succession Act, 1956; the revenue failed to prove legalrepresentative liability of Keshab Prasad and the suit by the thirdparty plaintiff was maintainable and succeeded on the merits. The Central Bank's payment to the revenue under notice was bona fide and discharged the bank; final decretal relief to the plaintiff is deferred until she obtains and files letters of administration. A fourweek stay on operation of the order was directed. Issues Involved:1. Ownership of Rs. 93,611.69.2. Plaintiff's absolute ownership of the sum.3. Personal liability of Keshab Prasad Goenka.4. Wrongfulness of the attachment.5. Suit barred by Section 67 of the I.T. Act, 1922.6. Discharge of defendant No. 3's obligation.7. Relief entitled to the plaintiff.Issue-wise Detailed Analysis:1. Ownership of Rs. 93,611.69:The court examined whether the sum belonged to Gouri Shankar Goenka. The defendants Nos. 1 and 2 argued that the money belonged to Gouri Shankar Goenka and was inherited by Keshab Prasad Goenka. However, the plaintiff provided evidence, including bank statements and witness testimony, indicating that the money was deposited in the account of Keshab Prasad Goenka and did not originate from Gouri Shankar Goenka. The court concluded that the defendants failed to prove that the money belonged to Gouri Shankar Goenka, answering this issue in the negative.2. Plaintiff's Absolute Ownership of the Sum:The plaintiff claimed that she became the absolute owner of the sum after the death of her husband, Keshab Prasad Goenka, and the passing of the Hindu Succession Act, 1956. The court found that the money belonged to Keshab Prasad Goenka and, upon his death, passed to the plaintiff. The court answered this issue in the positive.3. Personal Liability of Keshab Prasad Goenka:The court examined whether Keshab Prasad Goenka was personally liable to pay the sum as the legal heir and representative of Gouri Shankar Goenka. The court found that there was no evidence that Keshab Prasad Goenka inherited any property from Gouri Shankar Goenka that would make him liable for the dues. The court answered this issue in the negative.4. Wrongfulness of the Attachment:The plaintiff argued that the attachment of the sum was wrongful as it did not belong to Gouri Shankar Goenka. The court agreed with the plaintiff, finding that the money belonged to Keshab Prasad Goenka and not to Gouri Shankar Goenka. The court answered this issue in the positive.5. Suit Barred by Section 67 of the I.T. Act, 1922:The defendants argued that the suit was barred by Section 67 of the I.T. Act, 1922, which prohibits suits to set aside or modify any assessment made under the Act. The court found that the plaintiff was not an assessee and was not seeking to set aside or modify an assessment but was asserting her right to the property. The court answered this issue in the negative.6. Discharge of Defendant No. 3's Obligation:The court examined whether the defendant No. 3 (the bank) was discharged from any obligation to pay the money after paying it to defendants Nos. 1 and 2 pursuant to a notice under Section 46(5A) of the I.T. Act. The court found that the bank acted bona fide and complied with the notice, thus discharging its obligation. The court answered this issue in the positive.7. Relief Entitled to the Plaintiff:The court deferred passing a decree in favor of the plaintiff until she obtained a letter of administration in respect of the estate of Keshab Prasad Goenka. The court did not pass a decree at present but allowed the plaintiff to file the letter of administration in court.Conclusion:The court found in favor of the plaintiff on most issues, determining that the money belonged to Keshab Prasad Goenka and subsequently to the plaintiff. The court deferred the final decree until the plaintiff obtained the necessary letter of administration. The court also stayed the operation of the order for four weeks upon the oral prayer of the counsel for defendant No. 1.