Estate duty penalty cannot survive once the underlying assessment is quashed and the recoverable duty becomes nil.

Penalty under section 73(5) of the Estate Duty Act could not survive once the underlying estate duty assessment was finally quashed and the duty payable became nil. The incorporated recovery and penalty machinery applied to estate duty defaults, and an appeal by itself did not suspend the demand or prevent default. However, when the final determination eliminated the substantive liability, the recoverable arrears fell to nil, and the penalty could not exceed those arrears. The validation provision on excess penalty also supported relief where the demand was reduced to nothing. The penalty was therefore unsustainable and stood cancelled.

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Issues: Whether penalty under section 73(5) of the Estate Duty Act, 1953 could survive when the underlying estate duty assessment had been held invalid and the duty payable had become nil.

Analysis: Section 73(5) makes the recovery and penalty machinery of section 46 of the Indian Income-tax Act, 1922 applicable to estate duty defaults, and the incorporated provisions operate as if written into the Estate Duty Act. Although filing an appeal does not by itself suspend the demand or prevent default, the later final order quashing the assessment eliminated the duty liability. In that situation, the penalty could not exceed the duty in arrears, and once the arrears stood at nil, no penalty could legally remain recoverable. The validation provision dealing with excess penalty also supported relief where the final determination reduced the demand to nothing.

Conclusion: The penalty was not sustainable and stood cancelled in favour of the accountable person.

Ratio Decidendi: Where the substantive duty demand is finally set aside, a penalty for non-payment linked to that demand cannot survive because the recoverable arrears become nil and the penalty cannot exceed the arrears.

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