Judgment:
1. This appeal has been filed by the accountable person against the order dated 7-3-1984 of the Appellate Controller by which he reduced the penalty of Rs. 16,000 imposed by the Assistant Controller under Section 73(5) of the Estate Duty Act, 1953 ('the Act') to Rs. 13,000.
2. The Assistant Controller imposed the penalty of Rs. 16,000 for nonpayment of duty under Section 73(5). The accountable person appealed to the Appellate Controller and urged that sufficient opportunity to explain his case was not afforded. It was explained before the Appellate Controller that an appeal has been filed before the Tribunal against the estate duty assessment order and that full relief was expected so that there was no necessity to pay any estate duty. The Appellate Controller observed that the above ground taken by the accountable person was not sufficient reason for not paying the estate duty which had been legally imposed after due assessment. However, in view of some reduction of duty by an order of the Commissioner (Appeals), he reduced the quantum of penalty to Rs. 13,000.
3. Shri S.P. Bagadthey, the learned representative for the accountable person, placed before us a copy of the order of the Tribunal in ED Appeal No. 33 (Cal.) of 1983 dated 22-10-1984 in this very case passed in the appeal against the estate duty assessment. He pointed out that in paragraph 7 of the said order the Tribunal has come to the conclusion that the assessment made by the Assistant Controller was not a valid assessment and so it was barred by limitation. He also pointed out that a reference application moved by the department against the order dated 22-10-1984 of the Tribunal has been rejected by the Tribunal by its order in Reference Application No. 358 (Cal.) of 1985 dated 22-8-1985.
4. Shri P. Thiagarajan, the learned representative for the department, urged before us that the department might have gone to the Hon'ble High Court and if the decision of the Tribunal against the assessment of estate duty is reversed, then the penalty matter will be revived.
5. We have considered the contentions of both the parties as well as the facts on record. Section 73(5) says that the provisions of Section 46 of the Indian Income-tax Act, 1922 would apply in case of non-payment of estate duty within the prescribed time. Section 46 of the Indian Income-tax Act corresponds to Section 221 of the Income-tax Act, 1961. On going through Section 221, we find that it says that penalty imposable for non-payment of duty should not exceed the amount of duty in arrears. In view of the order of the Tribunal dated 22-10-1984 which now holds the field, the amount of duty payable by the accountable person is nil. Consequently, the amount of penalty that can be levied under Section 73(5) for non-payment of estate duty is nil. In this view of the matter it is not necessary to go into the merits of the case. Consequently, we cancel the penalty of Rs. 13,000 sustained by the Appellate Controller.
1. In my judgment this appeal of the accountable person from the order of the Appellate Controller deserves to be allowed for these reasons : The assessment order was passed by the Assistant Controller on 20-1-1982. Then the Appellate Controller by order dated 4-4-1983 partly allowed the appeal of the accountable person. The accountable person came in second appeal before the Tribunal. The Tribunal by order dated 22-10-1984 held that the assessment was framed by the Assistant Controller after expiry of period of limitation and as such it was not a valid assessment. The Tribunal recorded alternative finding to the effect that the accountable person was still entitled to certain relief. The Assistant Controller served upon the accountable person a notice demanding the amount of the duty assessed by him. The accountable person did not comply with the said notice of demand. The Assistant Controller, therefore, treated the accountable person in default and initiated penalty proceedings under Section 73(5). He imposed penalty of Rs. 16,000 on the accountable person. Till then the appeal of the accountable person from the assessment order was pending before the Appellate Controller. The accountable person also filed appeal against the penalty order before the Appellate Controller. The only ground taken by the accountable person for non-payment of duty was that he got substantial relief in the quantum appeal from the Appellate Controller and his further appeal was pending before the Tribunal.
This was not taken as sufficient ground for non-payment of duty. The Appellate Controller held that notwithstanding some reduction in the amount of duty payable by the accountable person in consequence of the order in the first appeal and the pendency of the second appeal, the accountable person was a defaulter. However, he reduced the amount of penalty from Rs. 16,000 to Rs. 13,000. The accountable person is now in second appeal against the order of the Assistant Controller sustaining penalty of Rs. 13,000.
2. It is to be noticed that for the purpose of imposition of penalty in the event of the accountable person being a defaulter and for recovery of duty and penalty Sub-sections (1), (1A), (2), (3), (4), (5), (5A), (6) and (7) of Section 46 of the Indian Income-tax Act have been made applicable. According to Section 73(5) of the Estate Duty Act the said sub-sections of Section 46 of the Indian Income-tax Act shall apply as if the said provisions were provisions of the Estate Duty Act. The Indian Income-tax Act has been repealed by Section 297 of the Income-tax Act. Despite such repeal the various sub-sections of Section 46 shall have to be read in Section 73(5). In the words of Lord Esher, M.R.--"If a subsequent Act brings into itself by reference some of the clauses of a former Act, the legal effect of that, as has often been held, is to write those sections into the new Act just as if they had been actually written in it with the pen, or printed in it, and the moment you have those clauses in the later Act, you have no occasion to refer to the former Act at all." [Vide Craies on Statute Law, Seventh edn., pp. 223-224.] In this connection reference may also be made to Mahindra & Mahindra Ltd. v. Union of India AIR 1979 SC 798. It is, therefore, inappropriate to make reference to Section 221 of the Income-tax Act, which is to certain extent analogous to Section 46 of the Indian Income-tax Act.
3. No doubt, the accountable person had filed appeal from the order of the Assistant Controller but filing of an appeal does not operate as stay of the original order and, therefore, it cannot be a valid ground for non-payment of the duty. The penalty was when imposed, the assessment order was in operation since till then even the first appellate order was not passed. In the words of the Hon'ble Supreme Court in the case of ITO v. Seghu Buchiah Setty [1964] 52 ITR 538 at p.
552--"Once a default is incurred, it continues and the filing of an appeal does not save the assessee from the default. The Income-tax Officer can start and continue the proceedings for recovery of the tax notwithstanding the filing of the appeal.
4. Section 73(4) though provides that notwithstanding anything contained in the said section, where the accountable person has presented appeal under Section 62 of the Act, the Controller may in his discretion treat the accountable person is not being in default as long as such appeal has not been disposed of. However, this is discretionary with the Controller. This can be better put in these words of the Hon'ble Supreme Court--"To save an assessee from penalty, the Income-tax Officer may treat him as not in default but if he does not, he is within his rights." [See Seghu Buchiah Setty's case (supra) at p.
552.] The accountable person, therefore, cannot escape liability from penalty under the garb that he had filed appeals and ultimately succeeded in the second appeal. The Assistant Controller when passed the order imposing penalty there was no appeal order in existence and as such the imposition of penalty was legal and valid. It could not be set at naught by subsequent events. However, it is apparently harsh that a person ultimately found not liable for payment of any duty has been penalised. In order to give relief against such harshness and in view of the judgment of the Hon'ble Supreme Court in Seghu Buchiah Settfs case (supra) the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964 was enacted. It has been extended to the 1953 Act. First proviso to Section 3(1) of the said Act reads as under : Provided that if as a result of any final order such Government dues (other than annuity deposit) have been reduced and the penalty imposed on the assessee for default in payment thereof exceeds the amount so reduced, the excess shall not be recovered and if it has already been recovered, it shall be refunded to the assessee on an application made by him to the taxing authority within such time and in such manner as may be prescribed by rules made under this Act: 5. In view of the aforesaid provision no penalty is imposable on the accountable person since the assessment order has been quashed by the Tribunal. The accountable person thus succeeds.