Invalid demand notice defeats penalty under the Estate Duty Act when the underlying assessment has been quashed.

Penalty for default under the Estate Duty Act could not be sustained because no valid demand notice in the prescribed form under rule 26 was served under section 73(1). The notice omitted material particulars required to notify the accountable person of the amount due, the consequences of default, and available remedies, so the statutory basis for treating the person as in default was absent. The demand was also founded on a rectified assessment under section 61 that had already been quashed, which meant the underlying demand had ceased to exist. The penalty order was therefore held unsustainable and was quashed.

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Issues: Whether penalty under the Estate Duty Act could be sustained when the demand notice was not served in the prescribed form and the rectified assessment on which the demand was based had already been quashed.

Analysis: Liability to penalty for default under the Estate Duty Act arose only after a valid demand notice under section 73(1) was served in the prescribed form under rule 26 of the Estate Duty Rules, 1953. The prescribed form was intended to notify the accountable person of the amount due, the consequence of default, and the available remedies. In the present case, the notice did not contain the material clauses required by the prescribed form, so the statutory basis for treating the petitioner as in default was lacking. In addition, the demand notice was founded on a rectified assessment under section 61 of the Estate Duty Act, 1953, which had already been quashed, with the result that the demand itself had ceased to be valid.

Conclusion: The penalty order was not sustainable in law and was quashed.

Final Conclusion: The writ petition succeeded, and the impugned penalty imposed for non-compliance with the invalid demand notice was set aside.

Ratio Decidendi: A penalty for default in payment under the Estate Duty Act cannot be imposed unless a valid demand notice in the prescribed form is served, and a penalty founded on a demand based on a quashed assessment cannot survive.

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