1964 (10) TMI 6 - SC - Income Tax

Supreme Court Remands Tax Case for Review on Notice Compliance

The Supreme Court held that the High Court correctly entertained the writ petition despite the complexity of facts and law as the 1st respondent sought ... Whether the High Court should have dismissed the writ petition in exercise of its discretion as the question raised by the 1st respondent involved complicated questions of fact and law which could not be satisfactorily disposed of in a summary proceeding under article 226 of the Constitution? Whether on the facts stated and omitted to be stated in the affidavit, no right to relief was disclosed and, therefore, the High Court should have dismissed the petition in limine? Whether either on the basis of the existence of a will or on the basis of intestacy, the notices served on E. D. Sadanandan on behalf of all the legal representatives of late S. P. Sadanandan were sufficient to sustain the assessment against the estate of S. P. Sadanandan? Whether in any view, the order of assessment would be effective against E. D. Sadanandan, and the order of the High Court couched in very wide language should be clarified so as to confine it only to the claim of the 1st respondent? Held that:- This court has held in more than one decision that the existence of an alternative remedy is no ground for refusing to issue an appropriate writ under article 226 of the Constitution if fundamental rights are affected. The High Court, therefore, rightly disposed of the petition on merits. Except the affidavit filed by the Income-tax Officer, which is vague to the extreme, and that filed by the respondent, which is equally unhelpful, no material has been placed before us. The records of the income-tax proceedings on which the learned judges of the High Court have fully drawn upon are also not available to us. On the scanty material it is impossible to come to any definite conclusion on any of the points posed by us. We, therefore, with some reluctance, set aside the order of the High Court and remand the matter to it for fresh disposal. The parties will have opportunity to file fresh affidavits and to place all the relevant material before the High Court to enable it to come to a definite conclusion Issues Involved:1. Whether the High Court should have dismissed the writ petition due to the complexity of facts and law.2. Whether the reassessment orders were void due to non-compliance with Section 24B of the Income-tax Act.3. Whether the notices served on E. D. Sadanandan were sufficient to sustain the assessment against the estate.4. Whether the assessment order against E. D. Sadanandan should be clarified to be effective only against him.Detailed Analysis:1. Discretion of the High Court in Entertaining the Writ Petition:The appellant argued that the High Court should have dismissed the writ petition due to the complexity of facts and law which could not be satisfactorily disposed of in a summary proceeding under Article 226 of the Constitution. The Supreme Court rejected this argument, noting that the 1st respondent sought protection of her fundamental right under Article 19(1)(f) of the Constitution. The Court cited precedents affirming that the existence of an alternative remedy is no ground for refusing to issue a writ under Article 226 if fundamental rights are affected. Therefore, the High Court rightly disposed of the petition on merits.2. Validity of Reassessment Orders under Section 24B of the Income-tax Act:The core issue was whether the reassessment orders were void due to non-compliance with Section 24B of the Income-tax Act. Under sub-section (1) of Section 24B, the executor or legal representative is liable to pay the tax out of the estate of the deceased. Sub-section (2) allows the Income-tax Officer to serve notices on the legal representative and proceed to assess the total income of the deceased as if the legal representative were the assessee. The term 'legal representative' includes all executors or heirs. The Court emphasized that all legal representatives must be impleaded to make the representation of the estate complete. The High Court found that not all executors were served with notices, rendering the reassessment order void.3. Sufficiency of Notices Served on E. D. Sadanandan:The appellant contended that the notices served on E. D. Sadanandan were sufficient to sustain the assessment against the estate. However, the Supreme Court noted that the affidavits and material placed before the High Court did not disclose crucial facts necessary for a definite answer. The will appointed three executors, and without probate, they could not establish their rights as executors in court. The Court highlighted that if E. D. Sadanandan alone had managed the entire estate, he could be considered the legal representative. However, this was not established, and no material was placed before the High Court to show that all or some of the executors had intermeddled with the estate.4. Clarification of the Assessment Order's Effectiveness:The appellant argued that the assessment order should be effective against E. D. Sadanandan and that the High Court's order should be clarified accordingly. The Supreme Court noted that the records did not disclose how the proceedings were conducted or whether the other executors and legatees accepted the representation by E. D. Sadanandan. The Court emphasized that even if the will was ignored, the question of whether the estate was properly represented by one or other of the legal representatives remained. The Court also considered the possibility that the assessment order could be effective against the part of the estate in E. D. Sadanandan's possession or management.Remand to High Court:Due to the lack of material and crucial facts, the Supreme Court set aside the High Court's order and remanded the matter for fresh disposal. The High Court was directed to consider the following points:1. Whether E. D. Sadanandan was in possession and management of the entire estate.2. Whether the Income-tax Officer bona fide treated him as the representative of the estate.3. Whether E. D. Sadanandan represented the estate with the consent of other executors and representatives.4. Whether the 1st respondent could question the enforceability of the assessment order made against E. D. Sadanandan.The Supreme Court made it clear that it had not expressed any final opinion on the questions of law or fact and that the High Court should consider all contentions without being influenced by its observations. The appellant was directed to pay the costs of the 1st respondent in the Supreme Court, with the costs of the High Court to abide by the result.