High Court Of Karnataka
K.A. Appanna vs. Agricultural Income Tax Officer
Section KAR Agrl. 18(2A)(b)
S.R. Rajashekara Murthy, J.
Writ Petitions Nos. 5488 & 5489 of 1985
20th November, 1989
Hemraj, for the Petitioner
R. RAJASHEKARA MURTHY, J. :
The writ petition is file by the son of the deceased assessee, late Sri K. A. Kalappa, and the second writ petition is filed by K. A. Mandanna represented by next friend, K. A. Appanna.
2. The notices issued against the petitioner under s. 18(2)(b) of the Karnataka Agrl. IT Act, 1957 (” the Act “), are challenged in these writ petitions, so far as the petition is concerned, the assessee, K. A. Kalappa, died on April 9, 1981. An assessment came to the made on September 8, 1981, in the name of Appanna as legal representative of the deceased assessee. After the completion of the assessment, the respondent issued notice to the petitioner proposing to levy penalty under s. 18 (2A)(b) of the Act. This notice is dated June 29, 1984.
3. So far as the second assessment against late K. A. Mandanna is concerned, the assessment was completed during the lifetime of K. A. Mandanna on March 29, 1982. A notice under s. 18(2A)(b) of the Act was issued to the petitioner, the brother of late K. A. Mandanna proposing to levy penalty. This notice is dated July 4, 1984 (annexure B). Objections were filed in response to both the notice by the chartered accountant as per Annexures C and D. It was represented that the proposed penalty may be waived in view of the fact that the shortfall in the payment made along with the return was on account of the fact that certain expenses claimed were disallowed in the course of the assessment and that, therefore, there was no deliberate intention in not depositing the tax payable as determined in the assessment orders. But the respondent did not agree with the objections filed on behalf of the assessee and proceeded to levy penalty as per Annexures E and F. These orders levying penalty are challenged in these writ petitions.
4. Two contentions are urged by Sri Hemraj on behalf of the petitioners. The first contention is that, for the reasons stated by the assessee’s auditors in the reply to the show cause notices, no penalty was called for.
5. The second contention is that the notices to levy penalty have been issued to the legal representatives of the deceased assessee in both the cases after the death of the assessee and that, therefore, the action initiated to levy penalty is without jurisdiction. It is argued that there is no provision in the Act either to levy or initiate penalty proceedings against the legal representatives of a deceased assessee. Sri Hemraj has referred to the provisions of s. 24 of the Act in support of his contentions. In particular, he has referred to s. 24(2) which is in pari materia with s. 19 of the WT Act.
6. Learned counsel, in support of his contentions, has relied upon the decisions of several High Courts rendered on the interpretation of s. 19 of the WT Act and derived support for his contention that the same principle should apply to s. 24 of the Agrl. IT Act also.
7. The first decision rendered on this point is that of the Madras High Court in the case of CWT vs. V. Varadarajan (1980) 122 ITR 1014 (Mad). The next in the series is the decision of the Allahabad High Court in Rameshwar Prasad vs. CWT (1980) 17 CTR (All) 71: (1980) 124 ITR 77(All) and CWT vs. Rani Sajjan Kumari (1985) 48 CTR (Raj) 331:(1985) 155 ITR 438 (Raj) and he also relied on the decision of this Court in the case of M. P. Laxman vs. Agrl. ITO (1985) 51 CTR (Kar) 189: (1986) 157 ITR 1 (Kar).
8. In the first three decisions referred to above, the High Courts have taken the view that, under the WT Act, no penalty proceedings under s. 18 can be initiated against the legal representatives on the ground that the legal representatives cannot be made liable to pay penalty for the default committed by the deceased assessee. Sec. 18 of the WT Act provides for levy of penalty for delay in filing the return. The High Courts have held that the default having been committed by the original assessee, the legal representatives cannot be made liable for such default nor can the WTO initiate proceedings against the legal representatives. It was further held that the liability of the legal representatives is only to pay the tax payable, out of the assets of the deceased and to the extent he is possessed of those assets. In M. P. Laxman’s case (supra), this Court held that before levying penalty under s. 18(2A)(b), the authority is bound to issue a show-cause notice, consider the cause shown by the assessee, and make a speaking order to enable the assessee to challenge the same in appropriate legal proceedings that are available to him under the Act. This Court was dealing with the validity of the order levying penalty under s. 18(2A)(b) and on the facts of that case, this Court set aside the penalty order and remanded the case to the assessing authority directing him to make a fresh order after affording opportunity to the assessee to file his objections. The observations made by the Division Bench in M. P. Laxman’s case (supra), at p. 9, help the petitioners’ case to some extent. It was ruled by this Court that the assessing authority must consider the cause shown by the assessee before levying penalty. This observation must be considered along with the decisions of other High Courts rendered and which have categorically laid down that no penalty proceedings can be initiated on the legal representatives under s. 18 of the WT Act. Sec. 18(2A) is modelled on the WT Act. It is virtually a replica of the WT Act corresponding to s. 19 of the WT Act. Under s. 24 of the Act, the legal representative is made liable to pay out of the estate of the deceased. Under sub-s. (2) of s. 24 of the Act, the Agrl. ITO may proceed to assess the total agricultural income of the deceased person in the hands of his legal representatives. An executor or administrator or other legal of his legal of the deceased assessee has to comply with the notice issued under s. 18(2) or s. 36, as the case may be, for the purpose of assessing the agricultural income of the deceased person in his hands.
Reference is also made by learned counsel for the petitioners to s. 159 of the IT Act. Parliament has made a specific provision in s. 159(3) to treat the legal representatives of the deceased assessee as the assessee for the purpose of the Act. Both the Madras and Allahabad High Courts have held that, in the absence of a provision similar to s. 159 of the IT Act, the legal representatives of an assessee under the WT Act, cannot be penalised for the default of the deceased assessee.
In the statement of objections filed on behalf of the respondents, this point of jurisdiction is not met and the penalty is sought to be justified on facts only.
Having regard to the provisions of s. 24(2) and in the light of the decisions of the High Courts referred to above, dealing with the corresponding provisions of s. 19 of the WT Act, I am of the opinion that the orders levying penalty on the petitioners under s. 18(2A)(b) of the Agrl. IT Act, impugned in these writ petitions, cannot be sustained in law. The liability on the legal representatives under the Act is only to pay tax from out of the estate of the deceased to the extent it is capable of meeting the charge of the agricultural income-tax assessed.
[Citation :182 ITR 196]