Bhagwati, J. - (1.) This appeal by special leave raises a short question of law as to the scope of garnishee proceeding under S. 73. sub-s. (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.
(2.) One Rai Bhupati Nath Deb Bahadur died on 23rd September, 1959 leaving considerable movable and immovable properties which included inter alia a building situated 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 D/- 20-12-1957 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 persons and after hearing them, made an order dated 23rd September 1960 assessing the principal value of the estate of the deceased and determining a sum of 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 Place, Calcutta was in the possession of the appellant. According to the appellant it had been let out to him by nine persons who were the nephews and nices of the deceased and who claimed to be the heirs of the deceased on the basis that the deceased died without 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 and it was a lease for a period of thirtyone years with effect from 1st March, 1960 carrying rent at the rate of Rs. 1,400/- per month. Since 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 (5A) of the Indian Income Tax Act, 1922 (hereinafter referred to as the Act of 1922) pointing out that "a sum of Rupees 1,40,090.20 is due from Shri Tulsi Charan Deb and others on account of estate duty as accountable persons to the estate of late Rai Bhupati Nath Deb" and requiring him to pay forth-with "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 of them upto the amount of arrears 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 any payment made by the appellant in compliance with the request contained in the notice would in law be "deemed to 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 Rupees 2,800/- to the Assistant Controller and informed the lessors about the same. The lessors, by their attorney's letter dated 24th February, 1962, 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 rent 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 appellant 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 appellant acting on this letter of the lessor's attorneys did not pay any further rent to the Assistant Controller but paid rent for the months from February to May 1962 to the lessors. No further payment of 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 to January 1962 in defiance of the notice dated 9th January, 1962 the Assistant Controller issued a notice dated 5th March, 1964 to the appellant requiring him to show cause why penalty in the sum of Rupees 10,000/- should not be levied for the default committed by him. The appellant addressed a letter dated 13th March ,1964 pointing our that the accountable persons mentioned in the notice dated 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 ground 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 1964 aggregating to Rs. 35,000/- had been paid by the appellant to the lessors in contravention of the notice dated 9th January, 1962 issued against him and imposing a penalty of Rs.3,000/- under S. 73, sub-sec. (5) of the Estate Duty Act, 1953 read with S. 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 Section 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 appellant. The High Court, by a judgment dated 1st December, 1969, rejected the writ petition and hence the present appeal by special leave obtained from this Court.
(3.) There are two questions which arise for determination in this appeal:first, whether the notice dated 9-1-1962 issued by the Assistant controller to the appellant was a valid notice under which the appellant was bound to pay the amount of rent in respect of the leased premises to the Assistant Controller, and secondly, even if the notice dated 9th January, 1962 was a valid notice and it obligated the appellant to pay the amount of rent to the Assistant Controller, whether any penalty could be levied on the appellant for contravention of the terms of the notice. The first question is not free from difficulty but the second is relatively simple and hence it would be convenient to begin first with a discussion of the second question. Now, at the date when the notice dated 9th January, 1962 was issued by the Assistant Controller the Act of 1922 was in force and hence the notice was issued under Section 73, sub-section (5) of the Estate Duty Act, 1953 read with Section 46 (5A) of the Act of 1922. Section 73, sub-section (5) of the Estate Duty Act, 1953 provides inter alia that the provisions of sub-sections (1), (1A), (2), (3), (4), (5A), (6) and 7 of Section 46 of the Act of 1922 shall apply as if the said provisions were provisions of Estate Duty Act, 1953 and referred to estate duty and sums imposed by way of penalty or interest under the Estate Duty Act, 1953 instead of to income-tax and sums imposed by way of penalty or interest under the Act of 1922 and the Controller of Estate Duty instead of the Income-tax Officer. Section 46 of the Act of 1922 lays down the mode and time of recovery of income-tax and two sub-sections of this section are material, namely, sub-sections (1) and (5A) which read as follows: "(1) When an assessee is in default in making a payment of income-tax, the Income-tax Officer may in his discretion direct that, in addition to the amount of the arrears, a sum not exceeding that amount shall be recovered from the assessee by way of penalty." and "(5A) The Income-tax Officer may at any time or from time to time, by notice in writing (a copy of which shall be forwarded to the assessee at his last address known to the (I-T.O.) require any person from whom money is due or may become due to the assessee or any person who holds or may subsequently hold money for or on account of the assessee to pay to the Income-tax Officer, either forthwith upon the money becoming due or being held or at or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount due by the tax-payer in respect of arrears of Income-tax and penalty or the whole of the money when it is equal to or less than that amount. The Income-tax Officer may at any time or from time to time amend or revoke any such notice or extend the time for making any payment in pursuance of the notice. Any person making any payment in compliance with a notice under this sub-section shall be deemed to have made the payment under the authority of the assessee and the receipt of the Income-tax Officer shall constitute a good and sufficient discharge of the liability of such person to the assessee to the extent of the amount referred to in the receipt. Any person discharging any liability to the assessee after receipt of the notice referred to in this sub-section shall be personally liable to the Income-tax Officer to the extent of the liability discharged or to the extent of the liability of the assesses for tax and penalties, whichever is less. If the person to whom a notice under this sub-section is sent falls to make payment in pursuance thereof to the Income-tax Officer, further proceedings may be taken by and before the Collector on the footing that the Income-tax Officer's notice has the same effect as an attachment by the Collector in exercise of his powers under the proviso to sub-section (2) of S. 46. Where a person to whom a notice under this sub-section is sent objects to it on the ground that the sum demanded or any part thereof is not due to the assessee or that he does not hold any money for or on account of the assessee, then, nothing contained in this section shall be deemed to require such person to pay any such sum or part thereof, as the case may be, to the Income-tax Officer." The penalty under sub-section (1) of the Section 46 can obviously be imposed on an assessee only when the assesses is in default in making payment of income-tax and under Section 45, the assessee would be deemed to be in default when he fails to pay the amount of income-tax specified as payable in a notice of demand served, inter alia, under Section 29 within the time mentioned in the notice of demand or if no time is so mentioned then on or before the first day of the second month following the date of service of the notice of demand. Thus, two conditions must be fulfilled before penalty can be imposed under Section 46, sub-s. (1):one is that the person on whom penalty is sought to be imposed must be an assessee and the other is that the assessee must be in default within the meaning of Section 45. Where a garnishee is required by notice issued under sub-section (5A) 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 subsequently be held by the garnishee for or on account of the assessee, as is sufficient 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). That sub-section defined an assessee to mean a person by whom income tax or any other sum of money is payable under the Act and the amount which the garnishee is required to pay to the Income Tax Officer in virtue of a notice under sub-section (5A) of Section 46 is not "income tax or any other sum of money-....payable under this Act". The garnishee merely pays the amount which is due from him to the assessee and such payment is in discharge of the debt owed by him to the assessee. It is not a payment the liability for which is created under any provision of the Act. The garnishee is thus not an assessee within the meaning of the definition of that term in Section 2, sub-section (2) nor is there any provision in the Act which by a legal fiction makes him an assessee. The Act also does not contain any provision that the garnishee who fails to comply with the notice issued under sub-section (5A) of Section 46 shall be deemed to be an assessee in default. It is interesting to compare the provisions of the Act of 1922 with the corresponding provisions of the Income-tax Act. 1961 (hereinafter referred to as the Act of 1961). Clause (x) of sub-section (3) of Section 226 of the Act of 1961 provides in clear and explicit terms that if the garnishee, to whom a notice under sub-section (3) is sent. fails to make payment in pursuance thereof to the Income Tax Officer, he shall be deemed to be an assessee in default in respect of the amount specified in the notice. But no such provision is to be found in the Act of 1922. It is, therefore, obvious that no penalty can be imposed on a garnishee under sub-section (1) of Section 46 even if he fails to comply with the notice issued to him under sub-section (5A) of Section 46. Now the scheme of collection and recovery of estate duty under the Estate Duty Act. 1953 is substantially the same as that under the income-tax law. Section 73. sub-sections (1) and (2) of the Estate Duty Act, 1953 correspond to S. 45, sub-section (1) of the Act of 1922. These two sub-sections provide that where any estate duty, penalty or interest is due in consequence of any order passed under the Act, the Controller shall serve upon the person accountable or other person liable to pay such estate duty, penalty or interest, a notice of demand in the prescribed form specifying the sum and the time within which it shall be payable and any amount specified as payable in the notice of demand shall be paid within the time, at the place and to the person mentioned in the notice, or if no time is so mentioned, then on or before the first day of the second month following the date of service of the notice and any person accountable failing so to pay shall be deemed to be in default. The Estate Duty Act, 1953 also, therefore, contemplates issue of a notice of demand to the accountable person after an order of assessment is made under the Act and it is only when the accountable person fails to pay in accordance with the requisition contained in the notice of demand that he is to be deemed to be in default. Section 73, sub-s. (5) then incorporates the provisions of sub-sections (1), (1A), (2), (3), (4), (5), (5A), (6) and (7) of Sec. 46 and makes them applicable for the purpose of collection and recovery of estate duty. It must follow a fortiori that penalty can be imposed on a garnishee under Section 73, sub-section (5) of the Estate Duty Act, 1953 read with Section 46, sub-s (1) of the Act of 1922 only if the garnishee can be said to be an accountable person in default. But, for like reasons as those discussed while dealing with the provisions of the Act of 1922. 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 meaning of the Act and the garnishee does not come within the category of persons specified in Sections 53 and 54 as 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 be a legal fiction. It is, therefore difficult to see how an order imposing penalty could be passed against the appellant, even if the notice dated 9th January, 1962 was a valid notice under which the appellant was bound to pay the amount of rent in respect of the leased premises to the Assistant Controller and he failed to do so. The order dated 25th March, 1964 imposing penalty of Rs. 3,000/- on the appellant must, therefore, be held to be outside the power of the Assistant Controller under the Estate Duty Act, 1953 and it must be quashed and set aside.;