1. This is appeal by the accountable person against the order of the Appellate Controller, Ernakulam.
2. After the original memorandum of appeal, the assessee had filed additional grounds. These additional grounds have been admitted by us.
These will be considered first before going into the regular grounds of appeal, as the additional grounds raise the question of jurisdiction of the Assistant Controller to make the reassessment under Section 58(3) read with Section 59 of the Estate Duty Act, 1953 ("the Act").
3. The original assessment was made by the Assistant Controller on 31-7-1971. The Assistant Controller issued a notice under Section 59 on 28-8-1974. There is no dispute regarding these dates and the issue of the notice under Section 59. No notice under Section 59 was issued prior to this date. In the additional grounds, it has been submitted that under the provisions of Section 73A of the Act no proceedings for the levy of estate duty in the case of reassessment shall be commenced after the expiration of three years from the date of assessment of such property to estate duty. The contention of the accountable person is simply that the reassessment was commenced by the issue of the notice under Section 59 on 28-8-1974 which is clearly beyond three years of the date of assessment, namely, 31-7-1971. According to the accountable person, the "commencement" contemplated under Section 59, which is governed by Section 73A, is by the issue of notice contemplated under Section 59 to the accountable person. It is pointed out, that on a similar provision in respect of "commencement" of recovery proceedings under the U.P. Agricultural Income-tax Act, 1948, it has been held by the Supreme Court in Raja Yuveraj Dutt Singh v. Deputy Commissioner [1970] 78 ITR 252 that only when a notice is issued to the collecting authority, can the recovery proceedings be considered to have been commenced. Reliance is also placed on Padampat Singhania v. CED [1980] 122 ITR 162 (All.) and V.S.L. Narasimha Rao v. CED [1971] 80 ITR 662 (AP).
4. On behalf of the department, it is urged that the Assistant Controller has made an entry in the order sheet of the file of the accountable person on 10-5-1974 directing the issue of notice under Section 59 for the reassessment. It is contended that with this direction in the file the reassessment proceedings should be considered to have been commenced. This order of the Assistant Controller was within the period of three years from the date of completion of the original assessment and, therefore, the reassessment proceedings should be considered to have been commenced within the statutory limit provided under Section 73A. In this regard, it is pointed out that the statute does not impose any obligation upon the Assistant Controller to make any particular enquiry or investigation before reopening an assessment and that in order to reopen an assessment under Section 59(6) it is only necessary for the Assistant Controller to act upon information coming into his possession. Since it was not necessary for the Assistant Controller to have made any pre-reopening enquiry and since it is only necessary for the Assistant Controller to have satisfied himself that the reopening under Section 59(6) is necessary, the expression of such satisfaction in the order sheet and consequential direction to the office to issue notice under Section 59 would be sufficient to meet the requirements of a "commencement" of the proceedings contemplated under Section 59. It is pointed out that on a similar provision, namely, Section 28 of the Indian Income-tax Act, 1922 (1922 Act), it has been held in Artisan Press Ltd. v. ITAT [1958] 33 ITR 670 (Mad.) that a direction by the Tribunal to issue notice to the assessee under Section 28 in conformity with the order in appeal was initiation of penalty proceedings. It is pointed out that the observations at page 673 to the effect that the direction to the office to issue a notice on the relevant date was a step in the proceedings and being the first step would amount to the initiation of the penalty proceedings. Reliance is also placed on the decision of the Delhi High Court in Durga Timber Works v. CIT [1971] 79 ITR 63 wherein a similar provision in Section 275 of the Income-tax Act, 1961 (1961 Act), came up for consideration. It was also held therein that the expression of satisfaction by the authority to initiate the penalty proceedings would amount to the commencement of the proceedings under Section 271 of the 1961 Act.
5. We have considered these submissions carefully. The question that requires examination in this appeal is as to when the proceedings for the levy of estate duty under the reassessment had commenced. Section 73A provides that no proceedings for the levy of estate duty shall be commenced in the case of a reassessment after the expiration of three years from the date of assessment of such property to estate duty under this Act. Section 59 provides for the consideration by the Controller of property escaping assessment. It is analogous to Section 147 of the 1961 Act and contains two limbs (a) and (b). Acting under either of these limbs, the Controller may at any time subject to the provisions of Section 73A require the person accountable to submit an account as required under Section 53 and may proceed to assess or reassess such property as if the provisions of Section 58 apply. Section 58 provides for the making of the assessment and is analogous to Sections 143 and 144 of the 1961 Act. The manner in which the proceedings for reassessment can commence is provided in Section 59. It lays down that the Controller may require the accountable person to submit an account.
It would appear from this that in order to commence the reassessment proceedings it may not be enough for the Controller to entertain the reason contemplated under either Clause (a) or Clause (b) of Section 59 but must take the further step of intimating the accountable person for the submission of the account. It is only when the Controller takes the positive active step of requisitioning an account from the accountable person after he had entertained the reason contemplated under the preceding part of this section that the reassessment proceedings can be said to have been commenced.
6. The provisions of Section 59 are, therefore, in our opinion, materially different from the provisions of either Section 28 of the 1922 Act or Section 271 of the 1961 Act. Under those provisions of the Income-tax Act, it is not necessary for the authority initiating the penalty proceedings to intimate the assessee that penalty proceedings are to be initiated. There is no requirement there for the calling of any particular statutory return in respect of the penalty proceedings.
The penalty provisions in Section 28 of the 1922 Act and Section 271 of the 196| Act merely contemplate the affording of an opportunity to the assessee before the completion of the penalty proceedings in a penalty.
That intimation giving an opportunity to the assessee is to be made after the commencement of the penalty proceedings. The manner in which the penalty proceedings under Section 28 of the 1922 Act/section 271 of the 1961 Act are to be commenced is, therefore, different from the manner in which the proceedings for reassessment under Section 59 of the Act. Under the latter provision, it is not merely enough for the Controller to entertain a reasonable belief that property had escaped assessment to Estate Duty. It is further necessary for the Controller to establish contract with the accountable person in the form of an intimation requiring submission of an account.
7. We do not, therefore, agree with the departmental representative that the interpretation of the position under Section 28 of the 1922 Act in the case of Artisan Press Ltd. v. ITAT (supra) and of Section 275 of 1961 Act in the case of Durga Timber Works v. CIT (supra) would be relevant for the consideration of the question before us.
8. The departmental representative has also urged that no pre-reopening enquiry is contemplated under Section 59. For this purpose, he has also relied upon the observations of the Privy Council in CIT v. Mahaliram Ramjidas [1940] 8 ITR 442 where the contention, on behalf of the assessee, that under Section 34 of the 1922 Act a quasi-judicial enquiry should have been made by the ITO before the issue of the notice contemplated under Section 34 was rejected. It was held that the ITO was not required by the section to convene the assessee or to intimate to him the nature of the alleged escapement or to give him an opportunity of being heard before he decides to operate the powers conferred by the section. It is clear that these observations were made in the context of the contention made on behalf of the assessee there that there should be a quasi-judicial enquiry held by the ITO before he decided to act under the provisions of Section 34 of the 1922 Act. This is clearly not to say that the proceedings under Section 34 of the 1922 Act would commence as soon as the ITO had come to the conclusion that there was reason to believe that income had escaped assessment. The proceedings even under Section 34 could not be considered to have commenced without (he issue of the notice under Section 34.
9. We do consider that the decision of the Supreme Court reported in Raja Yuvaraj Dutt Singh v. Deputy Commissioner (supra) and the observations at page 254 are relevant in the context of the case. The question there was about the commencement of the recovery proceedings under the U.P. Agricultural Income-tax Act. The commencement there is akin to the commencement of the reassessment proceedings here. It was not merely a decision on the part of the ITO to issue a notice to the Recovery Officer. It was necessary under the relevant provisions that the decision of the ITO to issue a request to the Recovery Officer to commence recovery is to be communicated to the Recovery Office. It is only when that particular step, namely, the communication is taken that the commencement of the recovery proceedings was considered to have taken place. The position under Section 59 is similar in that a communication to the assessee is necessary in order to fruitfully carry out the belief that is entertained by the Controller that property has escaped assessment. Without taking that particular step of communication it cannot be said that the reassessment proceedings had commenced. It may be mentioned that the following observations of the Andhra Pradesh High Court in V.S.L. Narasimha Rao v. ACED (supra) at p.
666 clearly support this issue : ... According to Section 73A, Clause (b), the period of limitation in the case of reassessment is fixed at three years and its commencement is the date of assessment of such property to estate duty under the Act. It is true that if the first notice dated January 31, 1967, is considered as not a notice within the purview of the Act and if the letter dated February 19, 1969, is treated as a notice under Section 59, then the proceedings of reassessment would be barred by limitation. But we are not inclined to accept this argument as correct. We have already held that the notice dated January 31, 1967, is a notice under Section 59 and there can be no doubt in regard to its validity or effectiveness. Moreover, the latter letter dated February 19, 1969, is not a notice under Section 59 at all. The letter itself takes note of the fact that a notice under Section 59 was already issued on January 31, 1967. The petitioners also treated that notice to be a notice under Section 59 and that is why after obtaining some time they submitted a return....
The following commentary at p. 565 on this particular aspect of Section 73A read with Section 59 in the book The Estate Duty Act, 3rd edn. by D.H. Nanavati and H.D. Nanavati also expresses the same opinion : The relevant date of commencement of reassessment proceedings referred to in Section 73A is the date on which a notice under Section 59 of the Act is issued notwithstanding the fact that such notice may not specify the particular property in regard to which the allegation is made that it has escaped assessment. See Narasimha Rao v. Assistant Controller of Estate Duty, AP [1971] 80 ITR 662 at p. 666, considered further at pages 581-582 and also at pages 585 and 586.
10. In view of the foregoing, we hold that the commencement of the reassessment proceedings which has resulted in the reassessment dated 4-8-1977 was barred by limitation as provided under Section 73A. The Assistant Controller cannot be considered to have properly exercised the jurisdiction by issuing the notice under Section 59 on 28-8-1974.
The reassessment made cannot, therefore, be considered to have been validly made. It is, accordingly, cancelled.
11. Since we have held that the reassessment has not been validly made the other grounds raised along with the original memorandum of appeal are not considered by us.