High Court Of Karnataka
CIT Vs. Smt. V. Rukmini
Section : 159,260A
Kumar And H. S. Kempanna, JJ.
IT Appeal Nos. 32 And 3048 Of 2005
August 9, 2010
K. Kumar, J. – The revenue has preferred this appeal challenging the order passed by the Appellate Tribunal on the merits.
2. This appeal was filed on 15-1-2005. During the pendency of the appeal, the respondent-assessee expired on 14-3-2008. This came to the notice of the appellant-Revenue only when the matter was posted for final hearing. Thereafter, an application was filed under Order XXII, rule 4 of the Civil Procedure Code on 7-12-2009 to bring the legal representatives of the deceased respondent on record. As there was a delay of 523 days in filing the said LR application, one more application also came to be filed for condoning the delay. Detailed objections are filed to the application for condonation of delay contending that the Revenue had the knowledge of the death of the assessee on June 10, 2008 itself which they were informed about the same by a letter dated June 3, 2008. Therefore, the contention that the Revenue had no knowledge of the death of the deceased and it came to know about the death of the deceased recently is not correct and therefore, the delay should not be condoned and the applications have to be dismissed.
3. Learned counsel for the Revenue firstly contended that, in view of section 159 of the Income-tax Act, on the death of the assessee there is no abatement. In law, the legal representatives are deemed to be parties to the appeal and the applications filed to bring the legal representatives on record and for condonation of delay in filing such application are superfluous. Even otherwise, the Revenue was not aware of the death of the assessee as contended by the legal representatives of the assessee and therefore, the cause shown would constitute sufficient cause for condoning the delay.
4. Per contra, learned counsel for the assessee submitted that this is an appeal filed under section 260A of the Income-tax Act, 1961 (for short hereinafter referred to as “Act”). Sub-section (7) of section 260A clearly provides that “save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908, relating to appeals to the High Court shall as far as may be apply in the case of appeal under this section”. Therefore, if in an appeal, one of the parties dies, Order 22, rule 11 of the Civil Procedure Code makes the provisions of Order 22 mutatis mutandis applicable to the appeals also and therefore, if the application to bring the legal representatives on record was not filed within the time prescribed under law, an application for condonation of delay in setting aside the abatement has to be filed, and therefore, the objections filed for condoning the delay have to be considered by this court before considering the application on the merits.
5. Secondly, he contended that though section 159 of the Act contains a deeming provision sub-section (2) of section 159 makes it clear that it applies only to assessment proceedings. It enables the revenue to collect the tax, but it does not have the effect of overriding sub-section (7) of section 260A. He also contended that, in the Income-tax (Appellate Tribunal) Rules, 1963 which governs the appeal before the Appellate Tribunal rule 26 categorically states that the appeal shall not abate. That is the way the Legislature intends expressing its intention which is conspicuously missing in the appeals to the High Court. In interpreting the statutes, not only the court has to bear in mind the express words used in a statute, but also to take note of what has not been expressed. When the procedural law does not expressly state that the appeal does not abate and in view of sub-section (7) of section 260A, the provisions of the Civil Procedure Code regarding appeals are made applicable it follows that in such an appeal, if one of the parties dies, in view of the provisions expressed under Order 22, rule 7 of the Civil Procedure Code, Order 22 is attracted and therefore, the contention that appeal does not abate is without any substance.
6. Further, he contended that section 159(2)(c) expressly states that all the provisions of this Act shall apply and therefore, the Civil Procedure Code which is made applicable expressly under sub-section (7) of section 260A provides a procedure for bringing the legal representatives on record and it has to be followed in prosecuting the appeal before the High Court. Seen from any angle, he submits that in the appeal before the High Court, if the assessee dies, it is mandatory that application has to be filed to bring the legal representatives on record and if it is not filed, the right to prosecute the appeal stands extinguished.
7. In the light of the aforesaid facts and the rival contentions, the point that arises for our consideration is as under :
“In an appeal under section 260A of the Act, if the assessee dies, whether the appeal abates ?”
8. In order to answer the aforesaid question it is necessary to refer to the relevant provisions under the Act.
9. Section 2(29) of the Income-tax Act, 1961 defines the word “legal representative” as under :
“legal representative” has the meaning assigned to it in clause (11) of section 2 of the Code of Civil Procedure, 1908 (5 of 1908).”
10. Clause (11) of section 2 of the Code of Civil Procedure, 1908 defines legal representative as follows :
“(11) ‘legal representative’ means a person who in law represents the estate of a deceased person, and includes any person who intermeddles with the estate of the deceased and where a party sues or is sued in a representative character the person on whom the estate devolves on the death of the party so suing or sued.”
11. Section 159 of the Act deals with the liability of the legal representatives to pay of tax under the Act which reads as under :
“159. (1) Where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased.
(2) For the purpose of making an assessment (including an assessment, reassessment, or recomputation under section 147) of the income of the deceased and for the purpose of levying any sum in the hands of the legal representative in accordance with the provisions of sub-section (1),-
(a) any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased ;
(b) any proceeding which could have been taken against the deceased if he had survived, may be taken against, the legal representative ; and
(c) all the provisions of this Act shall apply accordingly.
(3) The legal representative of the deceased shall, for the purposes of this Act, be deemed to be an assessee.
(4) Every legal representative shall be personally liable for any tax payable by him in his capacity as legal representative if, while his liability for tax remains undischarged, he creates a charge on or disposes of or parts with any assets of the estate of the deceased, which are in, or may come into, his possession, but such liability shall be limited to the value of the asset so charged, disposed of or parted with.
(5) The provisions of sub-section (2) of section 161, section 162 and section 167, shall so far as may be and to the extent to which they are not inconsistent with the provisions of this section, apply in relation to a legal representative.
(6) The liability of a legal representative under this section shall, subject to the provisions of sub-section (4) and sub-section (5) be limited to the extent to which the estate is capable of meeting the liability.”
12. A perusal of the aforesaid provision makes it clear that the death of a person who is liable to pay tax under the Act would not get extinguished on account of his death. If he dies, his legal representative shall be liable to pay any tax which would have been liable to be paid by such person if he had not died. Sub-section (2) makes the position clear that for the purpose of assessment, reassessment or recomputation under section 147 of the Act, any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of death of the deceased. The language employed in this sub-section manifests the intention of the Legislature which expressly provides on the death of a person any proceeding by way of assessment, reassessment or recomputation initiated under the Act is deemed to have been initiated against the legal representative himself and therefore, it can be continued from the stage at which it stood on the death of the deceased. Therefore, the concept of abatement is completely excluded in these proceedings. Sub-section (2)(b) makes it clear even if proceedings had not been initiated against the deceased during his life time, such proceedings may also be initiated against the legal representative after his death. Whether the proceedings are initiated under clause (a) or clause (b), the provisions of the Act shall apply. Sub-section (3) expressly provides that the legal representative of the deceased shall, for the purpose of this Act, be deemed to be an assessee. Therefore, the aforesaid provision makes it clear that, once the liability is incurred under the Act, the said liability is to be discharged either by the person who is liable to pay tax under the Act or by his legal representatives, if he has not discharged the liability during his life time. Death of a person/assessee does not in any way extinguish the liability under the Act. However, such a tax is to be levied in accordance with the Act.
13. The Full Bench of the Madras High Court in the case of State of Tamil Nadu v. Arulmurugan & Co.  51 STC 381 considering the scope of the appellate jurisdiction has held as under (page 392) :
“An appellate authority under the taxing enactments sits in appeal, only in a manner of speaking. What it does, functionally, is only to adjust the assessment of the appellant in accordance with the facts on record and in accordance with the law laid down by the Legislature. An appeal is a continuation of the process of assessment, and an assessment is but another name for adjustment of the tax liability to accord with the taxable event in the particular taxpayer’s case. There can be no analogy or parallel between a tax appeal and an appeal, say, in civil cases. A civil appeal, like a law suit in the court of first instance out of which it arises, is really and truly an adversary proceeding, that is to say, a controversy or tussle over mutual rights and obligations between contesting litigants ranged against each other as opponents. A tax appeal is quite different. Even as the assessing authority is not the taxpayer’s ‘opponent’, in the strictly procedural sense of the term, so too the appellate authority sitting in appeal over the assessing authority’s order of assessment is not strictly an arbitral tribunal deciding a contested issue between litigants ranged, on opposite sides. In a tax appeal, the appellate authority is very much committed to the assessment process. The appellate authority can itself enter the arena of assessment either by pursuing further investigation or causing further investigation to be done. It can do so on its own initiative, without being prodded by any of the parties. It can enhance the assessment, taking advantage of the opportunity afforded by the taxpayer’s appeal even though the appeal itself has been mooted only with a view to a reduction in the assessment. These are special and exceptional attributes of the jurisdiction of a tax appellate authority. These attributes underline the truth that the appellate authority is no different, functionally and substantially, from the assessing authority itself. This position has been well brought out in more than one decision of the Supreme Court.”
14. Therefore, in a tax appeal the appellate authority is no different functionally and substantially form the assessing authority itself. An appeal is a continuation of the process of assessment. The appellate authority can itself enter the arena of assessment either by pursuing further investigation or causing further investigation to be done. It can do so on its own initiative. It can enhance assessment in the assessee’s appeal. The intention of the Legislature in enacting section 159 of the Act is very clear and therefore, either before the appellate authority or in the appeal before the Commissioner (Appeals), there is no question of abatement of the proceedings initiated against the person under the Act on account of his death. After his death the proceedings would be continued against his legal representatives.
15. The position is different in the case of a second appeal before the Tribunal. The procedural law before the Tribunal is governed by the Income-tax (Appellate Tribunal) Rules, 1963. These Rules are framed by the Appellate Tribunal in exercise of the powers conferred by sub-section (5) of section 255 of the Act. Rule 26 deals with continuation of proceedings after the death or adjudication of a party to the proceedings which reads as under :
“26. Where an assessee whether he be the appellant or the respondent to an appeal dies or is adjudicated insolvent or in the case of a company is being wound up, the appeal shall not abate and may, if the assessee was the appellant, be continued by and if he was the respondent be continued against, the executor, administrator or other legal representative of the assessee or by or against the assignee, receiver or liquidator, as the case may be.”
16. Therefore, it is obvious this underlying principle of no abatement upon the death of the assessee equally applies to the appeal before the Tribunal. The aforesaid rule expressly states, the appeal shall not abate. It is in conformity with the principle underlying section 159 of the Act.
17. Now, the question is, what is the legal position in an appeal before the High Court under section 260A of the Act. This is a provision which was introduced into the Act substituting sub-heading CC and sections 260A and 260B by the Finance (No. 2) Act of 1998 with effect from 1-10-1998. Therefore, it is necessary to find out what was the position earlier to the amendment. Prior to the aforesaid amendment, section 256(1) of the Act provided for making an application by the assessee or the Commissioner requiring the Appellate Tribunal to refer to the High Court any question of law arising out of the order of the Tribunal. Sub-section (2) provided for the parties approaching the High Court in the event of a request made in section 256(1) of the Act is refused by the Tribunal. In a proceeding under section 256(1) or (2) of the Act, which was pending before the High Court, if the assessee died, it was well settled that there was no abatement of such reference. In fact, the Patna High Court in the case of Addl. CIT v. S. Surjit Singh  101 ITR 433 dealing with the said question reviewing the entire case law has held as under (page 436) :
“The Income-tax Act contains provisions in sections 256 to 260 in respect of references under the Act. Next, it provides in sections 261 to 262 for appeals to the Supreme Court. Section 256 lays down how a statement of the case is to be drawn up and referred to the High Court. Section 257 provides for a similar statement of case to the Supreme Court in certain cases. Section 258 is in respect of the power of the High Court or the Supreme Court. Section 259 provides how the case is to be heard by the High Court and section 260 lays down how the decision of the High Court or the Supreme Court is to be given. Section 261 provides for appeal to the Supreme Court and section 262 provides for the manner in which the appeal is to be heard by that court. It will appear from the aforesaid provisions relating to the High Court that there is no procedure similar to that, as laid down under Order XXII of the Code contained in this Act. For the matter of that, so far as High Courts are concerned, these provisions do not make the provisions of Order XXII of the Code applicable to cases of reference. I will do well, however, to point out that, in respect of the appeal to the Supreme Court, section 262 of the Act clearly states that the provisions of the Code relating to appeals to the Supreme Court, shall, so far as may be, apply in the case of appeals under section 261 of the Act as they apply in the case of appeals from decrees of a High Court. It is significant that in respect of appeals to the Supreme Court, the Code in its relevant parts is made applicable, but in respect of reference to the High Court it is not. A reference to some of the sections of the Act will further show that there are some other provisions which make relevant provisions of the Code applicable to proceedings under the Act. Section 131 of the Act provides that the Income-tax Officer, Appellate Assistant Commissioner, Inspecting Assistant Commissioner and Commissioner shall have the same powers as are vested in a court under the Code, when trying a suit in respect of the matters relating to discovery and inspection, enforcing the attendance of any person, including any officer of a banking company and examining him on oath, compelling the production of books of account and other documents, and issuing commissions. Turning to section 255 of the Act one finds sub-section (6) thereof providing that the Appellate Tribunal shall, for the purpose of discharging its functions, have all the powers which are vested in the income-tax authorities referred to in section 131. I have already referred to the provisions contained in section 262 of the Act.
It will thus appear that, there are no provisions in the Income-tax Act which provide for abatement of a case of reference on account of the death of an assessee and the non-substitution of his heirs within any particular period of time. It also appears that wherever the Legislature considered it necessary to apply the relevant provisions of the Code to proceedings under the Act it has done so. Upon well-established principle of construction of statutes, it must be said that if the whole of the Code of Civil Procedure applied to proceedings under the Income-tax Act, the Legislature could not have the necessity of making certain provisions alone thereof applicable to proceedings under the Act. The conclusion is obvious that only those provisions of the Code which have been specifically made applicable to proceedings under the Act to apply.
There is another way of looking at this and that is, that abatement of a suit or appeal after a certain time is in the nature of penalty which is the result of non-compliance with the statutory provision of law. If results in the extinguishment of the right of a plaintiff or an appellant to prosecute the suit or appeal any further. In the absence of any such penal provision in the Income-tax Act, it would be unfair to read such a provision contained in the Code as incorporated in the Income-tax Act and thereby saddle a litigant with an obligation which a litigant, prima facie, does not suffer from. If that were to be done, it would affect a special law like the Income-tax Act and the special jurisdiction conferred thereby on the High Court. In my view, therefore, Order XXII of the Code has no application even for this reason.”
18. Therefore, it was well settled that Order 22 of the Civil Procedure Code has no application to a reference under section 256 of the Act to the High Court. It is after deleting the aforesaid provision. Section 260A of the Act is introduced as aforesaid. In the reasons while introducing this provision this is what Parliament has to say as the procedure for filing appeals before the High Court is prescribed in the Code of Civil Procedure, it is proposed to provide the necessary reference that the relevant provisions of the Code of Civil Procedure shall apply mutatis mutandis to section 260A of the Income-tax Act and section 27A of the Wealth-tax Act. In the circular issued by the Department, showing the substance of the Act which is stated as under :
“As the procedure for filing appeals before the High Court is prescribed in the Code of Civil Procedure, the Act has, amended section 260A of the Income-tax Act to provide that the relevant provisions of the Code of Civil Procedure shall apply, mutatis mutandis, to section 260A of the Income-tax Act.”
19. It is in this background we have to see what section 260A which reads as under :
“260A. Appeal to High Court.—(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal before the date of establishment of the National Tax Tribunal, if the High Court is satisfied that the case involves a substantial question of law.
(2) The Chief Commissioner or the Commissioner or an assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this sub-section shall be—
(a) filed within one hundred and twenty days from the date on which the order appealed against is received by the assessee or the Chief Commissioner or Commissioner ; . . .
(c) in the form of a memorandum of appeal precisely stating therein the substantial question of law involved.
(3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question.
(4) The appeal shall be heard only on the question so formulated and the respondents shall, at the hearing of the appeal be allowed to argue that, the case does not involve such question :
Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question.
(5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit
(6) The High Court may determine any issue which—
(a) has not been determined by the Appellate Tribunal ; or
(b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1).
(7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section.”
20. Section 260A(1) confers a right on the parties to prefer an appeal to the court from every order passed in an appeal before the Tribunal. However, such an appeal could be admitted by the High Court only if it is satisfied that it involves a substantial question of law. The High Court shall formulate the question at the time of admitting the appeal. Sub-section (4) makes it very clear that the appeal shall be heard only on the question so formulated and the respondent is conferred a right to argue that the case does not involve a substantial question of law. The proviso also confers power on the High Court to formulate any other substantial question of law which is not formulated at the time of admission. Sub-sections (5) and (6) confer wide powers on the High Court in deciding the appeal. It also provides for a time limit within which an appeal has to be filed and what memorandum of appeal should contain. Sub-section (2A) which was inserted by the Finance Act, 2009, provides a provision for condoning the delay in preferring the appeal, if it is filed beyond time. The Act itself provides under sub-section (7) that save or otherwise provided under this Act, the provisions of the Code of Civil Procedure, 1908 relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under the said section. Therefore, a separate procedure for hearing of appeals under section 260A of the Act is not provided. The provisions contained in the Civil Procedure Code relating to appeal are made applicable to appeals under section 260A of the Act. In the Civil Procedure Code sections 96, 100, 104, Order 41 and Order 43 deal with appeals against the judgment and decrees and orders. None of these provisions expressly states that in an appeal if any of the parties to the appeal die, the appeal abates. When these provisions are made applicable to an appeal under section 260A when those provisions do not expressly state that an appeal abates on account of the death of the assessee, we cannot read into the aforesaid sections or section 260A the concept of abatement on account of the death of a party to the appeal. In interpreting these provisions the court has to bear in mind what the Legislature actually intended. The intention of the Legislature has to be gathered from the language used in the statute. It means attention has to be paid to what has been said and also to what has not been said. If the Legislature has not chosen to expressly state an appeal abates on account of the death of the assessee, in interpreting the aforesaid provisions we cannot read into the provision that the appeal abates. When the Legislature did not choose to use express words, it means they did not intend such a consequence on account, of the death of a party to the appeal. The concept of abatement is alien to the fiscal law. The concept of abatement as understood in civil and criminal law cannot be smuggled into taxation law.
21. It is contended that sub-section (7) of section 260A of the Act expressly says the provisions of the Code of Civil Procedure, 1908, relating to appeals to the High Court shall, as far as may be, be applicable to the appeals under this section. It takes within it Order 22 in general and rule 11 of the Civil Procedure Code in particular.
22. Reliance was placed on the express words contained in Order XXII, rule 11 which reads as under.
“11. Application of order to appeals.—In the application of this Order to appeals, so far as may be the word ‘plaintiff’ shall be held to include an appellant, the word ‘defendant’ a respondent and the word ‘suit’ an appeal.”
23. As the wordings of the said provision makes it clear that Order 22 is made applicable to appeals also, Order 22 exclusively deals with death, marriage and insolvency of the parties. Order 22, rule 1 expressly declares that no abatement by party’s death if right to sue survives. It also deals with the procedure when the plaintiff or the defendant dies, to bring the legal representatives on record, what are the questions to be gone into by the court at the time of considering the said application if the application is objected to and the effect of abatement or dismissal. As all those provisions refer to only suits, rule 11 makes it clear the said rule also applies to appeals.
24. When sub-section (7) of section 260A restricts the application of the Civil Procedure Code, only to the matters covered under the Code relating to appeals, when there is no specific reference to Order 22, merely because Order 22, rule 11 of the Civil Procedure Code makes the order applicable to the appeals, the said Order cannot be made applicable to proceedings under the Act. If the intention of the Legislature was to make Order 22 of the Civil Procedure Code also applicable to appeals under section 260A of the Act, they would have expressly stated so. If they have not expressly referred to the said provision, it is not without any reason. As set out above, section 159 of the Act makes it expressly clear that the liability to pay tax under the Act does not cease on account of the death of the person/assessee. Rules explicitly make it clear that a second appeal preferred against the order of the first appellate authority does not abate on account of the death of the assessee. Similarly, prior to the introduction of section 260A of the Act, a reference before the High Court did not abate on account of the death of the parties on reference. Therefore, the Legislature had no intention to depart from this well established position of law. With this in mind they did not make Order XXII, the Civil Procedure Code applicable to appeal before High Court. Any other interpretation of this provision not only runs counter to the scheme of the Act, but also would be opposed to the express statutory provisions. The words contained in sub-section (2) of section 159 of the Act only mean the provisions of the Act and not the procedural provisions contained under the Civil Procedure Code. Not only the Act deals with imposition of tax, it also provides the procedure for recovery of tax. That procedure is totally different from the procedure of bringing the legal representative on record in proceedings initiated under the Act. When section 159 of the Act expressly states the death of the party is of no consequence and the proceedings under the Act could be proceeded against the legal representatives and the proceedings initiated against the deceased is deemed to be the proceedings initiated against the legal representatives from the inception which could be continued from the stage of his death, this concept of abatement totally runs counter to the scheme of the Act. As set out above at every stage the Legislature has taken pains to exclude the concept of abatement. Therefore, in an appeal under section 260A of the Act if the assessee dies, the question of abatement of the appeal would not arise. No such abatement takes place. An application is to be filed to bring the legal representatives on record as the principle of natural justice requires that they should be heard before any order is passed to the extent of the liability to pay tax in respect of the estate which they have inherited. In that view of the matter, the objection taken by the respondent that Order 22 of the Civil Procedure Code applies to an appeal under section 260A of the Act and if there is a delay in filing the said application, abatement takes place and therefore, the applications filed for setting aside abatement, for condoning the delay are required to be rejected as no sufficient cause is shown, is without any substance.
25. The learned counsel for the respondent brought to our notice the judgment of the Division Bench of this court in I.T.A. No. 9/2000 in the case of the ITO v. T. Parthasarathy where it was observed in paras 3 and 4 of the judgment as follows :
“3. At the time of argument, it is brought to our notice that the assessee has died on March 11, 2006. No legal representative have been brought on record as on today.
4. In the circumstance, the appeal stands abated as on today. Ordered accordingly. No costs.”
26. As is clear from the aforesaid wordings, the Division Bench did not go into the question whether the appeal abates or not. It proceeded on the basis that as the legal representatives are not brought on record, the appeal stands abated. In the circumstance, it cannot be said the said question is decided in the aforesaid appeal and it would bind us. No law is laid down. Nothing is decided in the aforesaid appeal.
27. On the merits also, we have gone through the averments and the statement of objections filed and we are satisfied that sufficient cause is made out for condoning the delay.
28. Accordingly, the applications filed by the revenue for condoning the delay, for setting aside abatement and to bring the legal representatives of the deceased-assessee on record are allowed. The Revenue to amend the cause title accordingly.
[Citation : 331 ITR 102]