I. T. AS. NOS.706 TO 710 OF 1958-59 VS I. T. AS. NOS.706 TO 710 OF 1958-59
1994 P T D (Trib.) 108
[Income-tax Appellate Tribunal Pakistan]
Before M. Ameen and A.S.M. Salek Members
I. T. As. Nos.706 to 710 of 1958-59, decided on 19/04/1960.
Income-tax---
----Penalty---Penalty cannot be imposed on a man after his death for a default committed in his life time---Income-tax Act (XI of 1922), S.28(1)(a) & (b).
Penalty proceedings cannot be started against the -representative of deceased for any default committed by the deceased nor can any pending penalty proceedings be continued against the representative after the death of the original assessee though the representative being an assessee within the meaning of the Act would be liable to penalty for his own default as for example, penalty under section 46(1) for default being the tax assessed on him under section 24-B(1). If a penalty has already been imposed on the deceased prior to his death it will be demanded from the representative and collected out of the estate.
There is no provision for any penalty, which might be imposed on a deceased person.
Law does not provide for imposition of penalty on a man after his death for a default committed by him in his lifetime.
Punjab Province v. The Federation of Pakistan (1957) 32 ITR 198 ref.
Z.S. Siddiqi for Appellant.
G. Mawla, D.R. for Respondent.
ORDER
M. AMEEN (MEMBER): --These five appeals arise out of the consolidated order of the Appellate Assistant Commissioner concerning the five orders of penalty imposed in terms of sections 28(1)(a) and 28(1)(b) for the five tax years 1943-44, 1944-45, 1945-46, 1946-47 and 1947-48. Identical objections have been stated in numerous paragraphs by the assessee's representative. A few of grounds described as additional were filed at as late as 15th April, 1960. They do not in fact raise any new ground not already set down for our decision in the petitions of appeal filed on 30th July, 1958. The grounds taken by the assessee need not be noted here in detail but the main objections can be summarised without loss of substance as below:--
(1) That the penalty imposed under section 28 of the Income-tax Act is legally invalid as the person whom the penalty was imposed should be alive not when the proceedings are initiated against him but at the time when the order imposing penalty was passed; and
(2) Alternatively inasmuch as the alleged defaults were purely technical appropriate relief should be granted.
2. The facts of the case are that the assessee used to carry on business in the area, which is now known as Pakistan and Bharat. The number of branches were near about 70, but the number of branches in the area now forming part of Pakistan was only 3, at Karachi, Bhairab and Chittagong. As to the fact that the assessee did not file any return nor produced any accounts there is no dispute, but whether non-compliance was deliberate or due to circumstances over which he had no control are the points on which we need not express any opinion. Notice under section 28(3) was served on the assessee on 9th March 1950, and explanation was given by him in October, 1957. The five orders of penalty were passed on 29th January, 1958, but the important fact in this connection is that the assessee passed away on 24th October, 1957, broadly speaking three months before the five orders, of penalty were passed. The point, therefore, is that the assessee was dead at the time the penalty orders were passed. The question in this case is whether passing of such order can be considered valid. The proceedings started with the issue of a notice under section 28(3) and they continued till the penalty orders were passed. It is obvious, therefore, that the final stage of the proceedings came to a close after the death of the assessee.
3. We quote below that we consider to be relevant sections in this connection:
"(3) Charge of Income-tax.---Where any Act of the Central legislature enacts that income-tax shall be charged for any year at any rate or rates tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of this Act in respect of the total income of the previous year of every individual, Hindu Undivided Family, company and local authority, and of every firm and other association of persons or the partners of the firm or the members of the association individually."
"28(1) If the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal, in the course of any proceedings under this Act, is satisfied that any person--
(a) has without reasonable cause failed to furnish the return of his total income which he was required to furnish by notice given under subsection (1) or subsection (2) of section 22 or section 34 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by such notice, or ...
(c) has, either in the said proceedings, or in any earlier proceedings relating to an assessment in respect of the same previous year, concealed the particulars of his income or deliberately furnished inaccurate particulars of such income, he or it may direct that such person shall pay by way of penalty, in the case referred to in clause (a), in addition to the amount of the income-tax and super-tax, if any, payable by him, a sum not exceeding one and a half times that amount, and in the cases referred to in clauses (b) and (c), in addition to any tax payable by him, a sum not exceeding one and half times the amount of the income-tax and super-tax, if any which would have been avoided if the income as returned by such person had been accepted as the correct income:"
4. The word "individual" appearing in section 3 has been considered as meaning only a natural person, that is, a human being by the Federal Court of Pakistan in the case of the Punjab Province v. The Federation of Pakistan (1957) 32 ITR 198). The word "person" used in section 28 according to the definition under section 2(9) includes a Hindu Undivided Family and a local authority. The word "person" in section 28 would cover thus the several categories in section 3. If the word "person" stands for an "individual" it should mean a living human being. The scheme of the several sections of the Act would indicate that penalty proceedings cannot be started against the representative for any default committed by the deceased, nor can any pending penalty proceedings be continued against the representative after the death of the original assessee though the representative being an assessee within the meaning of the Act would be liable to penalty for his own default, as for example, penalty under section 46(1) for default in paying the tax assessed on him under section 24-B(1). If a penalty has already been imposed on the deceased prior to his death it will be demanded from the representative and collected out of the estate.
5. The language of section 28 affords little ground to hold that orders of penalty can be passed on the assessee's ceasing to live, if the two parts of section 28 are taken in juxtaposition. If the officer is satisfied that any person has done something by way of non-compliance without reasonable cause the Income-tax Officer may direct that such person shall pay by way of penalty etc. Now the word "person" appears twice in both the parts and the person must be the same person throughout. If a person committed default and the Income-tax Officer is satisfied that the default was without reasonable cause that person will be visited by a penalty. In this particular case the person who was visited with penalty had already gone irremediably beyond the Income-tax Officer's jurisdiction by death. The Appellate Assistant Commissioner somewhat erroneously referred to section 24-B. Section 24-B provides for recovery of the tax assessed to the extent of the capacity of the estate from the deceased's executor, administrator or other legal representative. This is subsection (1) of section 24-B. This contemplates an assessment made during the assessee's lifetime; the other two subsections provide modus operandi for assessment where the assessee's death took place before the assessment. There is no provision for any penalty, which might be, imposable on a deceased person.
6. We are of the opinion that the Income-tax Act, as it stands, does not provide for imposition of penalty on a man for a default committed in his lifetime after his death. Accordingly we cancel all the five orders imposing penalty in this case. The appeals are allowed.
M.B.A./4/T.T.Appeals allowed.