Garnishee notice under estate duty recovery was valid, but penalty for non-compliance was unauthorised absent statutory deeming fiction.

A garnishee notice issued under the Estate Duty Act recovery machinery was valid where it required a tenant to pay rent due to the estate toward arrears of estate duty, and it was not invalid merely because the lessors were not named specifically or because no prior demand notice had been served on the accountable persons. The tenant was therefore bound to comply. However, penalty could not be imposed for non-compliance because the garnishee was not an assessee in default, and neither the Indian Income-tax Act, 1922 nor the Estate Duty Act created a deeming fiction extending penalty liability to a garnishee. The penalty order was thus unsustainable.

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Issues: (i) Whether a garnishee notice issued for recovery of estate duty under section 73(5) of the Estate Duty Act, 1953 read with section 46(5A) of the Indian Income-tax Act, 1922 was valid and binding on the tenant to pay rent due to the estate. (ii) Whether penalty could be imposed on the garnishee for non-compliance with that notice.

Issue (i): Whether a garnishee notice issued for recovery of estate duty under section 73(5) of the Estate Duty Act, 1953 read with section 46(5A) of the Indian Income-tax Act, 1922 was valid and binding on the tenant to pay rent due to the estate.

Analysis: Section 73(5) incorporates the garnishee machinery of section 46(5A) for recovery of estate duty. On the scheme of the Estate Duty Act, every accountable person may be liable for estate duty in respect of the estate passing on death, and the rent payable by the tenant to the persons in possession of the leased premises was money due to the estate. The notice, in substance, required payment of money due to the estate towards arrears of estate duty, and the absence of a specific reference to the lessors by name did not invalidate it. A prior notice of demand to the accountable persons was not a condition precedent for issuing the garnishee notice.

Conclusion: The garnishee notice was valid, and the tenant was bound to comply with it.

Issue (ii): Whether penalty could be imposed on the garnishee for non-compliance with that notice.

Analysis: Penalty under section 46(1) of the Indian Income-tax Act, 1922 could be imposed only on an assessee in default. A garnishee under section 46(5A) does not become an assessee, and the Act of 1922 contained no deeming provision treating a defaulting garnishee as an assessee in default. The corresponding estate duty provisions also contained no legal fiction making a garnishee liable to penalty for breach of the notice. Therefore, the penalty order was beyond jurisdiction.

Conclusion: Penalty could not be imposed on the garnishee, and the penalty order was unsustainable.

Final Conclusion: The garnishee notice was upheld, but the penalty imposed for non-compliance was quashed, resulting in a partial allowance of the appeal.

Ratio Decidendi: A garnishee notice under the estate duty recovery machinery is valid without a prior demand notice to the accountable person, but a garnishee cannot be penalised for disobedience unless the statute expressly deems the garnishee to be an assessee or person in default.

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