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Arvind N. Mafatlal and ors. Vs. Union of India and ors. - Court Judgment

SooperKanoon Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberMiscellanous Petition No. 235 of 1967
Judge
Reported in[1973]90ITR429(Bom)
ActsIncome Tax Act, 1961 - Sections 214; Wealth Tax Act, 1957 - Sections 4, 5 and 19
AppellantArvind N. Mafatlal and ors.
RespondentUnion of India and ors.
Appellant AdvocateS.J. Sorabjee, Adv.
Respondent AdvocateR.J. Joshi, Adv.
Excerpt:
.....dies, liability is created against executors .to pay wealth-tax as assessed in respect of the wealth of the deceased person .the provisions in sub-section (2) when read with sub-section (1) clearly indicate that the provisions in this section were to enable the revenue to recover wealth-tax in respect of the net wealth of the deceased person for the financial year in which the person died. these orders must accordingly be held to be 'nullity'.11. now it is well-established that the orders which are a nullity need not be set aside and quashed......whereof the petitioners are the executors. in connection with the wealth-tax liability, for the assessment year 1961-62, of the estate of navinchandra mafatlal, the petitioners, as executors, were assessed under the assessment order dated january 16, 1962, and a claim for wealth-tax of rs. 1,43,683.88 was made against the petitioners by a notice of demand dated february 15, 1962. the petitioners paid that amount on march 27, 1962, though on certain points the petitioners filed an appeal, which was dismissed by the appellate assistant commissioner by his order dated june 2, 1962. the income-tax appellate tribunal, in further appeal, by its appellate order dated january 20, 1964, reduced the liability, from the above sum to rs. 1,30,485.40. 2. in the case of jamnadas v. commissioner of.....
Judgment:

K.K. Desai, J.

1. One Navinchandra Mafatlal died at Bombay on August 31, 1955, prior thereto making and publishing his last will and testament, whereof the petitioners are the executors. In connection with the wealth-tax liability, for the assessment year 1961-62, of the estate of Navinchandra Mafatlal, the petitioners, as executors, were assessed under the assessment order dated January 16, 1962, and a claim for wealth-tax of Rs. 1,43,683.88 was made against the petitioners by a notice of demand dated February 15, 1962. The petitioners paid that amount on March 27, 1962, though on certain points the petitioners filed an appeal, which was dismissed by the Appellate Assistant Commissioner by his order dated June 2, 1962. The Income-tax Appellate Tribunal, in further appeal, by its appellate order dated January 20, 1964, reduced the liability, from the above sum to Rs. 1,30,485.40.

2. In the case of Jamnadas v. Commissioner of Wealth-tax, the executors of the estate of one Sodradevi N. Daga contended before a Division Bench of this court that there was no provision in the Wealth-tax Act, 1957, entitling the revenue to charge wealth-tax in respect of the wealth of a deceased person from after the financial year next to the financial year in which such person dies. The relevant provisions are in section 19 of the Act. After considering section 19 along with the definitions contained in the Act and sections 4 and 5, the Division Bench held that there was no provision in the Wealth-tax Act in respect of assessing wealth-tax on the estate left by a deceased individual except to the extent as provided in section 19. It was observed that under section 19 :

'. . . it is clear that in respect of the financial year in which a person dies, liability is created against executors . . . to pay wealth-tax as assessed in respect of the wealth of the deceased person . . . . The provisions in sub-section (2) when read with sub-section (1) clearly indicate that the provisions in this section were to enable the revenue to recover wealth-tax in respect of the net wealth of the deceased person for the financial year in which the person died. . . . by legal fiction the tax was intended to be levied on the footing that he continued to town the estate left by him during the complete duration of the relevant financial year.'

3. The court came to the conclusion that there was no provision in the Wealth-tax Act for charging and assessing wealth-tax in respect of the net wealth of a deceased individual beyond the financial year in which such person dies and that there was no further liability attached to the estate left by a deceased individual and continuing in the hands of the executors, administrators or other legal representatives. Apparently, Navinchandra Mafatlal, having died on August 31, 1955, the petitioners, as executors of the estate, left by Navinchandra, were not liable to pay any wealth-tax for the assessment year 1961-62. Having regard to the law pronounced in the case of Jamnadas v. Commissioner of Wealth-tax there was no provision in the Wealth-tax Act to initiate any proceedings to assess wealth-tax in respect of the estate left by Navinchandra and remaining in possession of the executors of his will during the assessment year 1961-62.

4. The petitioners' case in that, in pursuance of the assessment order dated January 16, 1962, and the notice of demand dated February 15, 1962, the petitioners paid Rs. 1,43,683.88 under misapprehension and mistake that there was provision in the Wealth-tax Act for assessing the estate of Navinchandra to wealth-tax under the Wealth-tax Act. It was under this mistake that the petitioners allowed themselves to be assessed and filed appeals mentioned above. Since there was in law no provision in the Wealth-tax Act to assess the estate of Navinchandra in the hands of the petitioners during the assessment year 1961-62 to wealth-tax, the assessment order and the two appellate orders mentioned above were all without authority of law. The tax authorities, including the Tribunal, had no jurisdiction to assess wealth-tax in respect of the estate of Navinchandra in the hands of the petitioners during the assessment year 1961-62. The orders were without authority of law and by Tribunals which suffered from want of jurisdiction altogether. The mistake and misapprehension of law about this matter was discovered by the petitioners when information about the report of the above decision in the tax reports was conveyed to them by their chartered accounted in the middle of 1965. The petitioners accordingly claimed refund and repayment of the amount paid by them in pursuance of the above assessment order as moneys paid under mistake of law. In that connection the petitioners have claimed refund and in prayer (b) of the petition relief for setting aside and quashing of the above orders (if necessary).

5. On behalf of the respondents in their affidavit-in-reply it is contended that the Wealth-tax Act defines exhaustively the remedies open to the assessee, including that for claiming refund. The relief for refund of tax claimed in the petition was accordingly misconceived. It is further contended that in writ jurisdiction under article 226 of the Constitution of India relief for refund of taxes recovered cannot be given, that the petitioners' application is after gross delay and laches and that for that reason also the petition should be dismissed. The allegation that the petitioners came to know about the alleged mistake in the middle of 1965 through the petitioners' chartered accountant was also denied.

6. At the hearing of this petition, the contention on behalf of the petitioners that there was no provision in the Wealth-tax Act for assessing the estate left by Navinchandra and in the hands of the petitioners as executors for the assessment year 1961-62, was not denied on behalf of the respondents. In fact, Mr. Joshi for the respondents fairly indicated that the law pronounced in the case of Jamnadas v. Commissioner of Wealth-tax was accepted by the revenue and accordingly statutory amendment was introduced in the Wealth-tax Act at a subsequent date. The result of the law pronounced in the case of Jamnadas v. Commissioner of Wealth-tax, is that in this petition it must be held that the petitioners were wrongly assessed to wealth-tax by the assessment order and the two appellate orders mentioned in the petition in respect of the estate left by Navinchandra for the assessment year 1961-62, that there was no provision in the Wealth-tax Act that was applicable to the estate left by Navinchandra and in the hands of the petitioners during the assessment year 1961-62 and that the Income-tax Appellate Tribunal proceeded to decide the matters of wealth tax by their orders mentioned above when the law did not authorise them to deal with the matters to decide that. The assessment order and the two appellate orders were without authority of law and were made by authorities who suffered from want of jurisdiction altogether. These orders must accordingly be declared to be altogether null and void.

7. The petitioners' contention that they were not liable to pay any amount whatsoever in pursuance of these orders is accordingly correct.

8. There is no reason not to accept the petitioners submission that the true position regarding the liability of the estate of the deceased and his legal representatives to wealth-tax in respect of the estate left by the deceased as declared in the case of Jamnadas v. Commissioner of Wealth-tax came to be known for the first time to the petitioners when the report of the decision in the case was conveyed to the petitioners by their chartered accountant. In no event the petitioners could have come to realise the above mistake of law before the declaration of law that was made in this connection in the case of Jamnadas v. Commissioner of Wealth-tax. The judgment in the case of Jamnadas v. Commissioner of Wealth-tax was delivered on November 13, 1964. The mistake could never have been discovered by the petitioners before that date.

9. The question is whether the claim of the petitioners for refund cannot be adjudicated upon in writ jurisdiction and must be held to be barred by the law of limitation as submitted on behalf of the respondent. In this connection Mr. Joshi for the respondents relied upon the decision of the Privy Council in the case of Commissioner of Income-tax v. Tribune Trust, Lahore. The claim of the assessee, the Tribune Trust, was that the income of the trust was exempt from tax under section 4(3)(i) of the Indian Income-tax Act. The High Court decided on June 4, 1935, that this claim for exemption was not sustainable and the Tribune Trust appealed to His Majesty in Council. In the meantime the assessments relating to six subsequent years were made in accordance with the judgment of the High Court and tax was duly paid. The Privy Council divided the appeal in respect of the assessment year 1932-33 on June 13, 1939, in favour of the assessee and held that the claim for exemption was correct. In the result the estate applied for refund and the Commissioner granted that application for refund for the year 1932-33, but refused to reopen the other assessments on certain grounds. In the matter of the application for refunds in respect of the tax paid for other years, in appeal the question which arose before the Privy Council was regarding the assessments for the subsequent years being altogether a nullity. The Privy Council referred to the fact that until the decision of the High Court was set aside by the Privy Council the law was as declared by the High Court and observed :

'If this Board had otherwise divided the appeal which came before it in 1939, they would have stood unquestionable and unquestioned. It does not appear to their Lordships that they were a 'nullity' in any other sense than that if they had been challenged in due time they might have been set aside. . . . . .They would repeat that they do not find in it any justification for the view that an assessment which may ultimately be held to be invalid in that it does not give effect to the provision for exemption, is thereby rendered a 'nullity'.'

10. Mr. Joshi relied upon the above observations and contended that the scheme for assessment to wealth-tax was completely codified by the provisions of the Wealth-tax Act. The decisions of the Tribunals as regards the matters of assessment of wealth-tax cannot be held to be a nullity because the Tribunals function under and in accordance with the provisions in the Wealth-tax Act. He, therefore, submits that the assessment order and the two appellate orders mentioned in the petition cannot be declared to be a 'nullity'. It is sufficient to state that the observations of the Privy Council related to cases which were not deciding the jurisdiction and competence of the tax authorities. The question was whether under section 4(3)(i) of the Indian Income-tax Act, 1922, income received by the Tribune Trust was exempted from liability to pay any tax. The question was about the true effect and construction of the above section and as regards the exemption claimed by the Tribune Trust. The facts of the present case are altogether different because there was no provision whatsoever in the Wealth-tax Act in respect of levy of assessment of wealth-tax on the estate left by the deceased person except to the limited extent of the one assessment year up to the death of a deceased person. In the case of Jamnadas v. Commissioner of Wealth-tax it was decided that there was no provision whatsoever in the Wealth-tax Act for imposing and assessing to wealth-tax in respect of the estate left by a deceased person beyond the period of one year. The impugned assessment order and the two appellate orders were accordingly made when the law did not provide for levying assessment and the authorities suffered from want of jurisdiction altogether. These orders must accordingly be held to be 'nullity'.

11. Now it is well-established that the orders which are a nullity need not be set aside and quashed. In the cases of State of Kerala v. Aluminium Industries Ltd. and Gill and Co. Private Ltd. v. Commercial Tax Officer, the Supreme Court held that the claim for refund could be made in writ jurisdiction subject to the same restriction and also to the bar of limitation under article 96 of the Limitation Act, 1908, namely, 3 years from the date when the mistake becomes known to the person who made the payment by mistake. It is the duty of the State to investigate the facts when the mistake is brought to its notice and to make a refund if mistake is proved and the claim is made within the period of limitation. Mr. Joshi was therefore not right in his submission that the claims for refund cannot be considered in writ jurisdiction.

12. In the present case, having regard to the findings made above, the petitioners can never be held to have discovered the mistake of law on which they rely before the decision in the case of Jamnadas v. Commissioner of Wealth-tax, which was announced on November 13, 1964. This petition was filed on May 10, 1967, and the rule therein was issued on June 27, 1967. It was within one month and seventeen days from the date of discovery (sic) of the above mistake. The petition was accordingly never barred by the law of limitation as submitted on behalf of the respondents.

13. The petitioners are entitled to repayment of Rs. 1,30,845.40 which is now admittedly the sum which has been retained by the respondents and is liable to be refunded. Rule made absolute in terms of prayer (a) of the petition for the above sum of Rs. 1,30,845.40. The respondents will pay to the petitioners the cost of this petition.


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