# MADAN LAL LORIA v. ASSISTANT CONTROLLER & ORS - **Citation:** [1977] 3 S.C.R. 489 - **Court:** Supreme Court of India - **Decided:** 1977-04-11 - **Case number:** Civil Appeal No. 783 of 1972 - **Bench:** P. N. Bhagwati, S. Murtaza Fazal Ali - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/madan-lal-loria-v-assistant-controller-ors-7179 - **Pages:** 19 ## Headnote B · Garnishee Proceedings-Estate Duty A.ct, 1953 (Act 34 of 1953 ), S .. 73(5) r/w. s. 46(5A) of the Income Tax Act, 1922-Scope of. The appeUant, a tenant" in the building situate at No. 13 India Exchri.nge Place, Calcutta and belonging to one Rai Bhupathi Nath Deb Bahadur who died on September 23, 1959, was inducted in as a tenant through a registered lease deed dated 5th March 1960 for a period of thirty one years effective from 18th March 1960 and on a monthly rent of Rs. 1,400/· by nine persons who claimed to be the nephews and nieces of the said Bhupathi Nath Deb. C Respondents Nos. 3 and 4 claiming respectively to be the son and daughter of the deceased Bhupathi Nath, in their capacity as executors of the WiU dated 20th November 1957 said to have been made by the deceased prior to his death filed an account in form No. ED-1, of the properties including the building at 13 India Exchange Place, in respect of which, according to them estate duty was payable on the death of the deceased. The Assistant Controller of Estate Duty, after assessing the principal value of the estate under s. 58 of the Act determined a sum of Rs. 1,40,090/28 as the amount of duty payable by the accountable persons. Being unable to recover the amount, the Assistant Controller of Estate Duty, in view of the fact that the rent payable by the appeilant was a fortiorari an amount which in law belonged to the estate issued a notice to the appellant uls. 73 (5) of the Act r /w section 46(5A) of the Income Tax Act, 1922, pointing out that "a sum of Rs. lA0,090/20 is due from Tutsi Charan Deb and others on account of estate duty as accountable persons to the estate of late Rai Bhupathi Naith Deb" and requiring him to pay forthwith "any amount due from you to or, held by you, for, or on account of the said estate of Bhupathi Nath Deb Bahadur" upto the amount of Rs. 1,40,090/20. The appellant on receipt of the notice paid a sum of Rs. 2800 /- being the rent for the months of December 1961 and January 1962. From February 1962 to May 1962, the appellant paid the rent to his lessors on the strength of a notice dated 24th February 1962 from the lessor's attorney to the effect that the Assistant Controller had no jurisdiction to demand from the appellant the rent, since the lessors were not the accountable persons as they were not assessed to estate duty. No further payment of rent, therefore· was made either to the 1essors or to Revenue; but instead the appeI!ant preferred a claim for refund of Rs. 2800 /- on the ground that this payment had been made by him under a bonafide 1nistake of law. By his order dated 25th March 1964, the Assistant Controller, holding that the appellant had acted in contravention of the notice dated 9th January 1962 issued against him, imposed a penalty of Rs. 3000/- under s. 73(5) of the Estate Duty Act, 1953 r/w. s. 46(1) and required the appellant to pay up the amounts of Rs. 35,000/- and Rs. 3,000/- on or before 6th April 1964. The writ petition filed by the appellant challenging the said order was rejected by the Calcutta High Court. Allowing the appeal by special leave in part, the Court, HELD: (I) Two conditions must be fulfilled before penalty can be imposed u/s. 46(1) of the Income Tax Act, 1922 : one is that the person on whom penalty is so_ught to be imposed· must be ~ assessee and the other __ is t~at_ tl!_e assessee must be in default within the tnean1ng of s. 45. Where a garn1shee IS required by notice issued under sub-section (SA) of section 46 to pay to the Income Tax Officer so much of the money due or which may become due frOm the garnishee to the assessee or held or which, may s~boequently be held by the garnishee for or on account of the assess(;e, aS 1s ~uffic1ent to pay the amount due by the tax-payer in respect of the arrears of income tax, he does not become an assessee as defined in section 2, sub-section (2). The garnishee merely pa vs the amonnt which is due from him to the assessee. and such payment. is ,in . ## Text _Characters 0–36,702 of 64,759. This is a partial read: ask again with offset=36702 for what follows._ • 489 MADAN LAL LORIA A v. ASSISTANT CONTROLLER & ORS. April 11, 1977 [P. N. BHAGWATI AND S. MURTAZA FAZAL ALI, JJ.j B · Garnishee Proceedings-Estate Duty A.ct, 1953 (Act 34 of 1953 ), S .. 73(5) r/w. s. 46(5A) of the Income Tax Act, 1922-Scope of. The appeUant, a tenant" in the building situate at No. 13 India Exchri.nge Place, Calcutta and belonging to one Rai Bhupathi Nath Deb Bahadur who died on September 23, 1959, was inducted in as a tenant through a registered lease deed dated 5th March 1960 for a period of thirty one years effective from 18th March 1960 and on a monthly rent of Rs. 1,400/· by nine persons who claimed to be the nephews and nieces of the said Bhupathi Nath Deb. C Respondents Nos. 3 and 4 claiming respectively to be the son and daughter of the deceased Bhupathi Nath, in their capacity as executors of the WiU dated 20th November 1957 said to have been made by the deceased prior to his death filed an account in form No. ED-1, of the properties including the building at 13 India Exchange Place, in respect of which, according to them estate duty was payable on the death of the deceased. The Assistant Controller of Estate Duty, after assessing the principal value of the estate under s. 58 of the Act determined a sum of Rs. 1,40,090/28 as the amount of duty payable by the accountable persons. Being unable to recover the amount, the Assistant Controller of Estate Duty, in view of the fact that the rent payable by the appeilant was a fortiorari an amount which in law belonged to the estate issued a notice to the appellant uls. 73 (5) of the Act r /w section 46(5A) of the Income Tax Act, 1922, pointing out that "a sum of Rs. lA0,090/20 is due from Tutsi Charan Deb and others on account of estate duty as accountable persons to the estate of late Rai Bhupathi Naith Deb" and requiring him to pay forthwith "any amount due from you to or, held by you, for, or on account of the said estate of Bhupathi Nath Deb Bahadur" upto the amount of Rs. 1,40,090/20. The appellant on receipt of the notice paid a sum of Rs. 2800 /- being the rent for the months of December 1961 and January 1962. From February 1962 to May 1962, the appellant paid the rent to his lessors on the strength of a notice dated 24th February 1962 from the lessor's attorney to the effect that the Assistant Controller had no jurisdiction to demand from the appellant the rent, since the lessors were not the accountable persons as they were not assessed to estate duty. No further payment of rent, therefore· was made either to the 1essors or to Revenue; but instead the appeI!ant preferred a claim for refund of Rs. 2800 /- on the ground that this payment had been made by him under a bonafide 1nistake of law. By his order dated 25th March 1964, the Assistant Controller, holding that the appellant had acted in contravention of the notice dated 9th January 1962 issued against him, imposed a penalty of Rs. 3000/- under s. 73(5) of the Estate Duty Act, 1953 r/w. s. 46(1) and required the appellant to pay up the amounts of Rs. 35,000/- and Rs. 3,000/- on or before 6th April 1964. The writ petition filed by the appellant challenging the said order was rejected by the Calcutta High Court. Allowing the appeal by special leave in part, the Court, HELD: (I) Two conditions must be fulfilled before penalty can be imposed u/s. 46(1) of the Income Tax Act, 1922 : one is that the person on whom penalty is so_ught to be imposed· must be ~ assessee and the other __ is t~at_ tl!_e assessee must be in default within the tnean1ng of s. 45. Where a garn1shee IS required by notice issued under sub-section (SA) of section 46 to pay to the Income Tax Officer so much of the money due or which may become due frOm the garnishee to the assessee or held or which, may s~boequently be held by the garnishee for or on account of the assess(;e, aS 1s ~uffic1ent to pay the amount due by the tax-payer in respect of the arrears of income tax, he does not become an assessee as defined in section 2, sub-section (2). The garnishee merely pa vs the amonnt which is due from him to the assessee. and such payment. is ,in .discharge of the debt owed by hhn to th~ ass_, It LS not a paym~nt tlie l1aq1!1ty for which is created under any proVISion of the Act. There LS 110 provmon D E F H A B c D E F G H 490 SUPREME COURT REPORTS [1977] 3 S.C.R. in. the Act which by. a legal fkti.on makes him an assessee. Unlike s. 226(3 )(x) of 1961 Act,, there ts ll? p~ov1s1on 1n the 1922 Act that the garnishee who fails to comply with_ the nottce issued under sub-s. (SA) of s. 46 shall be deemed to be an assessee in default. No pe~alty, .therefore, can be imposed on a garnishee ll1;lder sub-s. ( 1) of s. 46, even if he fails to comply with the notice issued to him under sub-s. SA of s. 46. [496 G-H, 497 Al (2) Section 73, sub-sections (I). and (2) of the Estate Duty Act correspond to s. 4S(l) of. the 1922 Act deemmg the accountable person to be in default only on h.1s failure to pay in. accordance with the requisition contained in the notice. Since s. 73, sub-section (5) by incorporating the provisions of sub· sections (1), (lA), (Z), (3), (4), (S), (SA), (6) and (7) of s. 46 of the 1922 Act m?-kes them applicable for the purpose of collection and recovery of estate duty, It ~ust follow a fqrtiori that penalty cati be imposed on a garnishee, under sect10n 73, sub-sect10n (5) of the Estate Duty Act, 1953 read with section 46, sub-section (1) of the Act of 1922 only, if the garnishee can be said to be an accountable person in default. The garnishee cannot be regarded as an accountable person, since section 2, sub-section (12A) defines 'accountable person' to mean the person accountable for estate duty within the 1neaning of ~he Ac~ and the garnishee does not come within the category of persons specified ln sections 53 and 54 (\S persons accountable for estate duty. There is also no provision in the Estate Duty Act, 1953, deeming a defaulting garnishee as an accountable person in default by a legal fiction. In the instant case the order dated 25th March, 1964, imposing penalty of Rs. 3,000/- on the appellant is outside the power of the Assistant Controller under the Estate Duty Act, 1953. (497 B, D-Hl (3) The plain effect of section 53, sub-s. (1) read with s. 73, sub-sec. (1) is that when an order of assessment is made not only the accountable person in respect of whom proceeding for assessment has been taken, but also every othe-r accountable person as defined in s. 2(2) and (12A) would be liable to pay the amount of estate duty, limited of course to the assets of the deceased which.he actually received or which, but for his own negligence or default, he might have received. [501 C.H, 502 Al ( 4) The words ''the property passing on the death", appearing in the ex.pression "the whole of the estate duty on the property passing on the death" in subsection (1) of s. 53, according to their plain grammatical construction, indicate that every accountable person would be accountable for the estate duty on the entire property passing or deemed to pass on the death of thi~ deceased. [502 C-Dl (5) The argument that having regard to the words "where any property passes" appearing in the opening part of the sub-section, coupled with the words "such property so passes", and "the property so passing", appearing in the respective sub-clauses, the word "the" appearing before the words "property passing on the death" must again refer to the same property which is referred to in the respective sub-clauses (a), (b) or (c), as .the case may be is not "'ell founded, for it ignores one very important circumstance namely, that each of the persons. mentioned in sub clauses (a), (b) and (c) is rendered accountable for the whole of the estate duty not merely "on the property so passing", but on "the property passing on the death". [502 D-Fl (6) Where the legislature wanted to refer to the specific property passing on the death of the deceased described in the opening part of the sub-section, the legislature used the words "such property so passes" and "the property so passing" in the sub-clauses (a), (b) and (c), but while imposing accountability for the estate duty the legislature made a deliberate departl\t"e and instead of the words "the proPerty so passing", which were familiar coinage, it used the words ~'the property passing on the death". This highly significant departure in phraseology clearly indicates that the legislative intent was that each of the persons mentioned in sub-clauses (a), (b) and (c) should be accoun,table for the estate ·duty on the entire property passing on the death. It was for this reason that the Hability of each of these persons had to be limited to "the assets of the decease.d which he actually received or which, but for his own neglect or ·default, he might ·have received". If the liability of each of these persons was only to the extent of the estate duty on the particular property falling within the respective sub- -clauses,_ th~re .was need for limitipg' it. ~ the MSets of the deceased which such person received or ought to have received. (502 F-H, S03 Al J • M. L. LOH!A V. ASSTT. CONTROLLER 491 ( 7) The possibility that an anomaly may arise is only a factor to be taken A into account by the court where two interpretations are possible, but where the meaning of a statutory provision is plain, it cannot alter such meaning. Though the trustee of an insurance policy taken out by the deceac:;ed uiider the Married Women's Property Act, 1874 would fall within sub-clause (b) and hence become accountable for the estate Quty on the entire property passing on the death, he would not be liable to pay the estate duty out of the policy monies, since the estate of the deceased would have no interest in the policy monies and the policy monies would not form part of the estate of the deceased and his liability as an accountable persori would be limited only to the assets of the deceased which B he has actually received or which he ought to have received. [503 C-D] (8) Sub-section (5) of s. 53 merely emphasises the principle of joint and several liability where two or more persons are a-ccountable for estate duty in respect of any property passing on the death of the deceased, reg&rdJess whether they are so accountable in the same capacity or in different capacities. It would be reading much more in sub-section (5) than what its language. warrants to say that this sub-section is consistent only with an accountable person mentioned in sub-clause (a), (b) or (c) of sub-section (I) being accountable only in respect ·c of estate duty on the particular property passing to him on the death of the deceased. (9) The object of sub-se~tion (5) of s. 53 is to provide that every accountable person shall be liable not only jointly with other accountable persons, but also severally for estate duty in respect of any and every property passing on the death of the deceased. · On a proper construction of sub-section (1) of s. 53, re3.d in the context of the other provisions of the Act, each of the persons mentioned in sub-clauses (a), (b) and ( c) would be accountable for the estate D duty on the entire property passing on the ~eath and his accountability qua the Revenue would not be limited only to the estate:; duty on the particular property passing to him. [503 F, 503 C-DJ (10) In the instant case, the lessors were clearly accountable persons since they admittedly took possession of and in.termeddled with the leased premises which formed part of the estat_e of the deceased. The order of assessment made by the Assistant Controller of Estate Duty was not challenged by the appellant in the writ petition, nor was it decared invalid by a superior authority at the E instance of the lessors. Not even any steps appear to have been taken by the lessors for the purpose of challenging the order of assessment. The lessors were in the circumstances, accountab1e for the whole of the estate duty on the entire prQperty. passing on the death of the deceased and hence they were liable to pay the estate duty of Rs. 1,40,0920 /20 limited of course to the extent of the leased premises which constituted the asset of the deceased received by them. (504 H, 505 A-BJ (11) Since the rent of the leased premises was payable by the appellant to the lessors under the lease deed and the lessors were liable ito pay the estate duty of Rs. 1,40,090/20 it was competent to the Assistant Controller to issue a notice under section 73. sub-section (5) read with section 46, sub-section (5A) of the Act of 1922 requiring the appeltant to pay the amount of rent due and to he· come due in respect of the leased premises. [505 C-D] (12) The notice dated 9th January 1962 was a valid notice ancl the appellant was bound to comply with it and to pay to the Assistant Controller the amount of rent due or to become due in respect of the leased premises. Non-mentioning of the lessors in the notice as the persons to whom the amount of rent was due from the appellant in respect of the leased premises does not render the notice invalid or ineffective. What the notice dated 9th January 1962, in substance and effect required the appellant to do was to pay to the Assistant Contrl1Jler, the amount due or to become due from the appellant to the lessors in respect of the leased premises; that amount could rightly and legitimately be described as amount due to the estate of the deceased so as to be covered bY the terms of the notice. [505 H, 507 DJ ( 13) Questions of fact not raised in the writ petition nor argued before the High Court, oannot be allowed to be agitated for the first time before ·thi• Court. [506 Bl F G 492 SUPREME. COURT REPORTS . [1977] 3 S.C.R. A ~ _ C.14). In !Jrder that proceeding may be validly ta_ken against a garnishee under section 73, sub-section (5) read with section 46, sub-section (SA), it, is not necessary that the accountable person must be deemed to be in default and hence suCh garnishee proceeding need not be preceded by a notice of demand on the accountable person under sub-section (1)· of section 73~ [506 G-H} B c D E F G ll Third Income- Tax Officer, Mangalore v. M. Damadar Bhat, 11 ITR 806, followed. ]Their Lordships expressed their opinion that the view taken ill this decision was not correct for three reasons given by them.] CIVIL APPELLATE JURISDICTION : Civil Appeal No. 783 of 1972). (Appeal by Special Leave from the Judgment and Order dated the 1st December 1969 of the Calcutta High Court in Civil Rule No. 1274 of 1974). S. C. Majumdar and Mrs. Laxmi Arvind, for the appellant. G. C. Sharma and P. L. Juneja, for the respondent. The Judgment of the Court was delivered by BHAGWATI, J.-This appeal by special leave raises a short question of law as to the scope of granishee proceeding under section 73, sub-section (5) of the Estate Duty Act, 1953 read with section 46(5A) of the Indian Income-Tax Act, 1922. A brief narration of the facts giving rise to the appeal would be sufficient to .explain the background against which the question arises for determination in the appeal. One Raj Bhupati Nath Dev Bahadur died on 23rd Se)'tember, 1959 leaving considerable movable and immovable properties which included inter alia a building situate at No. 13, India Exchange Place, Calcutta. Respondents Nos. 3 and 4 claiming respectively to be the son and daughter of the deceased delivered to the Assistant Controller of Estate Duty an account in form ED-1 of the properties in respect of which, according to them, estate duty was payable on the death of the deceased. The account was filed by respondents Nos. 3 and 4 in their capacity as executors of the Will dated 20th becember, 1957 said to have been made by the deceased prior to his death. The Assistant Controller issued notice under section 58, sub-section (2) to respondents Nos. 3 and 4 as accountable per>ons and after hearing them, made an order dated 23rd September, 1960 assessing the principal value of the estate of the deceased and deter- ·mining a sum qf Rs. 1,40,090.20 as the amount payable as estate duty. It appears that the Assistant Controller was not able to recover the amount of estate duty from respondents Nos. 3 and 4, since most of the estate of the deceased consisted of immovable properties which were let out to different tenants and according to respondents Nos. 3 and 4, rent was not being paid to them by the tenants. One of the immovable properties left by the deceased, namely, the building situate at No. 13, India Exchange Placei Calcutta was in the possession of the appellant. According to the ~ ..... ' ii . .,. ~ l t l I I • I M. L. LOHIA v. ASSTT. CONTROLLER (Bhagwati, J.) 4 93 appellant, it had been let out to him by nine persons who were the nephews and nieces of the deceased and who claimed to be the heirs of .the deceased on the basis that the deceased tlied wittlout making any Will and did not leave any widow or son or daughter surviving him. The lease given to the appellant by these nine persons, who may for the sake of convenience be hereinafter referred to as the lessors, was under a registered deed dated 5th March, 1960 ~nd it was a'lease for a period of thirty-one years with effect from 1st March, 1960 carrying rent at the rate of Rs. 1,400/- per month. Sinoe the leased premises-that is how we propose to describe. the building leased to the appellant by the lessors-admittedly belonged to the estate of the deceased, the rent payable by the appellant was a fortiori an amount which in law belonged to the estate and hence the Assistant Controller issued a notice dated 9th January, 1962 to the appellant under section 73, sub-section (5) of the Estate Duty Act. 1953 read with section 46, sub-section (SA) of the Indian Income-Tax Act, 1922 (hereinafter referred to as the Act of 1922) pointing out that "a sum of Rs. 1,40,090.20 is due from Sim Tulsi Charan Deb and others on account of estate duty as account· able persons to the estate of late Rai Bhupati Nath Deb" and re,quiring him to pay forthwith "any amount due from you to or, held by you, for, or on account of the said estate of Bhupati Nath Deb Bahadur" upto the amount of Rs. 1,40,090.20 as also "to pay money which may subsequently become due from you to them or which you may subsequently hold for or on account oi them upto the amount of arre-drs still remaining unpaid, forthwith on the money becoming due or being held by you as aforesaid, as such payment is required to meet the amount due by the accountable person in respect of arrears of estate duty''. It was stated in the notice that ~ny payment made by the appellant in compliance with the request contained in the notice would in law be "deemed ro have been made under the authority of the accountable person" and the receipt of the Assistant Controller "will constitute a good and sufficient discharge of his liability to the person to the extent of the amount referred to in the receipt". The appellant, on receipt of the notice, paid the rent for the months of December, 1961 and January 1962 aggregating to Rs. 2,800/- to the Assistant Controller and informed the lessors about the same. The lessors, by their attorney's letter dated 24th February, l 962, however, contended that the notice issued by the Assistant Controller against the appellant was ineffectual, since the lessors had not been assessed to estate duty by the Assistant Controller as accountable persons and the Assistant Controller was, therefore, not competent to require the appellant to pay to him the amount of retlt which was due from the appellant to the lessors and moreover, the notice required the appellant to pay only such amount as was due from the appellant to respondents Nos. 3 and 4 as accountable persons and since the amount of rent was due from the appellatlt to the lessors and not to respondents Nos. 3 and 4, the appellant was not liable to pay the amount of rent in respect of the leased premises. to the Assistant Controller. The 3ppellant, acting on this letter of the lessors' attorneys, did not l'W any further rent to· the Assistant Controller btlt ·paid rent for the months frotn Fehroary to May 1962 to the lessors. ·No further payment of 5-502 SCJ /77 • A B c D E F G H A c D iE F G H 494 SUPREME COURT REPORTS [1977] 3 s.c.R. rent was thereafter made by the appellant either to the Assistant COntroller or to the lessors. Since the appellant did not pay any rent to the Assistant Controller for the period subsequent ·10 January 1962 in defiance of the notice dated 9th January, l 962, the Assistant Controller issued a notice dated 5th March, 1964 to the appellant requiring him to show cause why penalty in the sum of Rs. 10,000 /- should not be levied for the default committed by him. The appellant addressed a letter dated 13th March, 1964 pointing out that the accountable persons mentioned in the notice dared 9th January, 1962 were "Shri Tulsi Chandra and Others'', that is, respondents Nos. 3 and 4 and the appellant had no concern or connection with these accountable persons nor was any amount due from him to them and hence the notice dated 9th January, 1962 was misconceived. The appellant also called upon the Assistant Controller to refund the sum of Rs. 2,800/- paid by him in respect of rent for the months of December 1961 and January 1962 on the !!fOuhd that this payment had been made by him under a bona fide mistake of law. This explanation furnished by the appellant was found unacceptable and the Assistant Controller passed an order dated 25th March, 1964 holding that rent for the months commencing from .March 1962 and ending with March 196'1 aggregating to Rs. 35,000/- had been paid by the appellant to the lessbrs in contravention of the notice dated 9th January, 1962 issued against him and imposing a penalty or Rs. 3,000/- under section 73, ~ub section (5) of the Estate Duty Act, 1953 read with section 46(1) of the Act of 1922 and requiring the appellant to pay up the amounts of Rs. 35.000/- and Rs. 3,000/- on or before 6th April, 1964. The appellant thereupon filed a writ petition in the High Court challenging the validity of the proceedings adopted by the Assistant Controller under section 73(5) of the Estate Duty Act, 1953 read with s. 46(5A) of the Act of 1922 for recovery of the amount of estate duty from the appellant as also the legality of the Order dated 25th March. 1964 imposing penalty of Rs. 3,000/- on the appe'llant. The Hioh Court, by a judj!lllent dated 1st December, 1969. rejected the writ petition and hence the present appeal by special leave obtained from this Court. There are two questions which arise for determination in this appeal : first. whether the notice dated 9th January, 1962 issued by the Assistant Controller to the appellant was a valid · notice under which the appellant was bound to pay the amount or. rent in re«iect of the leased oremises to the Assistant < in force and hence the notice was i