Holding

Section 59 of the Estate Duty Act is not retrospective in operation and the reopening of the assessment under it is bad in law.

Summary

The deceased A.G. Merchant died in 1959 and the accountable persons filed estate duty returns, resulting in an assessment on 26 February 1960 under the Estate Duty Act, 1953. The Estate Duty (Amendment) Act, 1958 repealed sections 56‑65 and introduced a new Section 59, effective 1 July 1960, to allow reassessment of property that escaped assessment. In February 1962 the Revenue issued a notice under the new Section 59 to reopen the earlier assessment, which the respondents contested. The Appellate Controller, Tribunal and Gujarat High Court all held that Section 59 was not retrospective and could not be applied to the completed assessment. The Supreme Court affirmed this view, holding that Section 59 does not have retrospective effect and that reopening the assessment was illegal. Consequently, the revenue's appeal was dismissed with costs.

Issues considered

Whether the newly enacted Section 59 of the Estate Duty Act, 1953 (as substituted by the Estate Duty (Amendment) Act, 1958) is retrospective in operation and can be applied to assessments already completed before its commencement.
Whether the reopening of an estate duty assessment under Section 59 in the present case is valid.

Legislation cited

Estate Duty Act, 1953s. 56-65, s. 59, s. 62, s. 73A
Estate Duty (Amendment) Act, 1958s. 56-65
Income Tax Act, 1922s. 34
Income Tax Act, 1961s. 147

Subjects

Estate dutyReassessmentRetrospective legislationVested rightsSection 59Amendment ActProperty escaping assessmentRectification of mistakes

Judgment

CONTROLLER OF ESTATE DUTY, GUJARAT I,
A
AHMED ABAD.
v.
M.A. MERCHANT ACCOUNTABLE PERSON OF
LATE SHRI A.G MERCHANT, MAJIRAJWADI ROAD,
BHAVNAGAR, ETC.
B
MAY 2, 1989

[R.S. PATHAK, CJ AND SABYASACHI MUKHARJI, J.]

Estate Duty Act, 1953: Sections 56-65-Valuations for estate
duty-Rectification of mistake-Reopening of assessment made under
section 59-Permissibility of-Effect of the Estate Duty (Amendment) c
Act. 1958.

The respondents who were the accountable persons filed returns
under the Estate Duty Act, 1953, and an assessment was made by the
Deputy Controller of Estate Duty-Appellant on 26th February, 1960. D

The Estate Duty (Amendment) Act, 1958 repealed the original
sections 56 to 65. Section 59 which substituted for the original section 62
made provision for re-assessment. It came into force with effect from
!st .July, 1960.
E
On 21st February, 1962, a notice under the new section 59 of the
Act was issued to the respondents for re-opening the assessment on the
ground that some property had escaped the levy of estate duty. The
respondents raised objections but the same were rejected by the
~· Assistant Controller who reopened the assessment.
F
Against the aforesaid order three different appeals were tiled by
the respondents before the Appellate Controller. who allowed the
appeals, set aside the reassessment order holding that section 59 under
which action had been taken by the Assistant Controller was not
retrospective in operation.
G
On appeal by the Revenue, the Tribunal upheld the view of the
Appellate Controller relying on the decision of the Bombay High Court
in A.N. Majat!al v. Deputy Controller of Estate Duty, [1968] 67 I.T.R.
~~9.

Thereafter. at the instance of the Revenue 3 references were made H

987
988 SUPREME COURT REPORTS [1989] 2 S.C.R.

to the High Court raising the indentical question whether section 59 was
A
retrospective in operation and reopening of the assessment under
section 59 was bad. The High Court analysed the provisions of the new
section 59 and the old section 62, came to the conclusion that the power
of reassessment conferred by the new section 59 is quite different from
the power conferred by the old section 62, and answered the question in
B each case in favour of the assessee.

The Revenue appealed to this Court. On the question: whether J
the newly enacted section 59 of the Estate Duty Act is retrospective in
operation so as to affect the assessment already completed on the
accountable persons.
c Dismissing the appeals, the Court

HELD: l. Section 59 of the Estate Duty Act is not retrospective in
operation and reopening of the assessment under section 59 of the Act in
the instant case is bad in law. {9930]
D
2. The Estate Duty (Amendment) Act, 1958 effected a substantial
change in the parent Act. Sections 56 to 65 were substituted in place of
the existing sections 56 to 65. and the originally enacted section 62 was
repealed. The original section 62 provided essentially for the rectifica-
tion of mistakes apparent from the record or in the valuation of any
E property or by reason of the omission of any property. [9920-E]

3. The newly enacted section 59 deals with properly escaping
assessment. The provision is analogous to section 34 of the Indian
Income Tax Act. 1922 and section 147 of the Income Tax Act, 1961. The ..

~::t ~:ec::~~ ~~ ~~~:~~ s::~i~: c:;.e~=:~~:;a::!:'~h~~:e;;;~:::::,~ o~
0 0
F ·~
to the two provisions relates to the "omission of any property", but
the incidents of the power under section 62 relate to a situation mate- _.-
rially different from the incidents of the power contemplated under
section 59. l992E-F]

G 4. There are no specific words which confer retrospective effect "..r
to section 59 as it stands. To spell out retrospectivity in section 59
there must be soniething in the intent to section 59 from which
retrospective operation can be necessarily inferred. There is no such
intent. [992G-H]

H 5. The new section 59 is altogether different from the old section
CONTR. OFESTATEDlITY, GUJARAT v.M.A.MERCHANT [PATHAK. CJ.] 989

62 and there is nothing new in the new section 59 from which an intent
to give retrospective effect to it can be concluded. [992H; 993A]
A

6. There is a well-settled principle against interference with
vested right by subsequent legislation unless the legislation has been
made retrospective expressly or by necessa1·y implication. If an assess-
~ ment has already been made and completed, the assessee cannot B
)·be subjected to re-assessment unless the statute permits that to be
\done. [993B-C]

7. The new section 59 came into force from 1st July. 1960. Much
earlier, on 26th February. 1960, the assessment on the accountbie
persons in the instant case had already been·completed. So. there can be
no question of reopening the assessment. [993B] c
Controller of Estate Duty, West Bengal v. Smt. Ila Das and
Others, [1981 i 132 I. T.R. 720 relied on.

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 2-4 D
of 1975.

From the Judgment and Order dated 8th/9th November 1973 of
the Gujarat High Court in Estate Duty Reference Nos. 2, 3 and 4 of
1971.
E
Dr. V. Gauri Shankar and Miss A. Subhashini for the Appellant.

V.S. Desai, Mrs. A.K. Verma and Joel Peres for the Res-
pondents.

'· The Judgment of the Court was delivered by F

PATHAK. CJ. The facts in these appeals lie within a narrow
compass. One Abdulhussein Gulamhussein Merchant died on 8
February, 1959. The accountable persons filed returns under the
provisions of the Estate Duty Act, 1953 and an assessment was made
by the Deputy Controller of Estate Duty on 26 February, 1960. The G
Estate Duty (Amendment) Act, 1958, repealed the original sections 56
to 65. Section 59, which substituted for the originals. 62, made provi-
sion for reassessment. It came into force with effect from l July 1960.
On 21 February, 1962 a notice under the new s. 59 of the Act was
issued to the accountable person concerned for reopening the assess-
ment on the ground that some property had escaped the levy of estate H
990 SUPREME COURT REPORTS [1989] 2 S.C.R.

A duty. The accountable persons raised objections to the reopening of
the assessment under s. 59. The Assistant Controller rejected the con-
tentions of the accountable persons and reopened the assessment.
Against the order of reassessment the accountable persons filed three
different appeals before the Appellate Controller. The Appellate
Controller allowed the appeals anc' set aside the reassessment orders
B holdi1tg that s. 59 under which action had been taken by the Assistant
Controller was not retrospective in operation. On appeal by the•.
Revenue, the Tribunal upheld the view of the Appellate Controller J
relying on the decision of the Bombay High Court in A.N. Mafatlal v.
Deputy Controller of Estate Duty, [1968] 67 I.T.R. 449. There-
after three references were made to the High Court at the instance of
the Revenue raising the identical question:
c
"Whether Section 59 of the Estate Duty Act, 1953 is retros- .(
pective in operation and if so, in the facts and circum-
stances of the case, the reopening of the assessment under
s. 59 of the said Act was bad in law?"
D
Section 62 as originally enacted read as follows:

"Rectification of mistakes relating to valuation for estate
duty:, (1) If, after the determination of the estate duty
payable in respect of any estate, it appears to the Control-
E ler that by reason of any mistake apparent from the record
or of any mistake in the valuation of any property in any
case other than a case in which the valuation has been the
subject matter of an appeal under the Act or of the omis-
sion of any property, the estate duty paid thereon is either
in excess of or less than the actual duty payable, he may,
F either on his own motion or on the application of the
person accountable and after obtaining the previous
approval of the Board, at any time within three years from
the date on which the estate duty was first determined-
,.A

(a) refund the excess duty paid, or, as the case may be,
G
(b) determined the additional duty payable on the
property;

Provided that where the person accountable had
fraudulently under-estimated the value of any property or
H omitted any property, the period will be six years:
CONTR. OF ESTATE DUTY, GUJARAT ... M.A. MERCHANT [PATHAK, CJ.] 991

Provided further that no order shall be made under
this sub-section unless the person accountable has been A
given an opportunity of being heard.

(2) Nothing contained in sub-section (!) shall render any.
person accountable to whom a certificate that the estate
duty has been paid is granted liable for any additional duty B
in excess of the assets of the deceased which are still in his
possession, unless the person accountable had frauduler,tJy
attempted to evade any part of the estate duty in the first
instance."

The provisions of section 59 introduced by the Amendment Act
of 1958 are as follows:
c
"59. Property escaping assessment: If the Controller,

(a) has reason to believe that by re~son of the omis- D
sion or failure on the part of the person account-
able to submit an account of the estate of the
deceased under Section 53 or Section 56 or to
disclose fully and truly all material facts necessary
for assessment, any property chargeable to estate
duty has escaped.assessment by reason of under- E
valuation of the property included in the account
·or of omission to include therein any property
which ought to have been included or of assess-
ment at too low a rate or othen.vise, or

(b) has, in consequence of any information in his p
possession, reason to believe notwithstanding
that there has not been such omission or failure
as is referred to in clause (a) that any property
chargeable to estate duty has escaped assess-
ment, whether by reason of under-valuation of
the property included in the account or of omis- G
sion to include therein any property which ought
to have been included, or of assessment at too
low a rate or otherwise, he may at any time, sub-
ject to the provisions of section 73A, require the
person accountable to submit an ai:-·~ount as
reg uired under section 53 and may proceed to H
992 SUPREME COURT REPORTS [19891 2 S.C.R.

assess or reassess such property as if the provi-
~
A
sions of Section 58 applied thereto."

The High Court considered the question of law referred to it at
great length and after a detailed judgment answered the question in
each case in favourofthe assessee.
B \.._
~

The Revenue now app&.ils.
;
t
The question is whether the newly enacted s. 59 of the Estate
Duty Act is retrospective in operation so as to affect the assessment
already completed on the accountable persons. It is urged that the new
s. 59 is substantially similar in content as the olds. 62 and therefore the
-
c new provision must be regarded as retrospective. The contention may .(
be examined.

The Estate Duty (Amendment) Act, 1958 effected a substantial
change in the parent Act. Ss. 56 to 65 were substituted in pla~e of\he
D existing ss. 56 to 6?, and the originally enacted s. 62 was repealed. The
original s. ~2 provided essentially for the rectification of mistakes
apparent from the record or in the valuation of any property or by
reason of the omission of any property. The newly enacted s. 59 deals
~
with property escaping assessment. The provision is analogous to s. 34
of the Indian Income Tax Act, 1922 ands. 147 of the Income Tax Act,
E 1961. It seems to us that the news. 59 endeavours to cover a substan-
tially different area from that treated by the old section 62. The only
area which seems common to the two provisions relates to the "omis-
sion of any property", but it seems to us that the incidents of the power
under s. 62 relate to a situation materially different from the incidents
of the power contemplated under s. 59. The High Court has closely i:
F analysed the provisions of the two sections and has come to the conclu-
sion that the power of reassessment conferred by the news. 59 is quite i
different from the power conferred by the old s. 62. We are in agree- /
ment with the High Court. The contention on behalf of the Revenue
based on the identity alleged between the news. 59 and the olds. 62,
and that, therefore, the new section should be regarded as retrospec-
G tive cannot be accepted. ·~

As it stands, there are no specific words either which confer
retrospective effect to s. 59. To spell out retrospectivity ins. 59, then,
there must be something in the intent to s. 59 from which retrospective
operation can be necessarily inferred. We are unable to see such
H intent. The new s .. 59 is altogether different from the old s. 62 and

-L-•.
CONTR. OF ESTATE DUTY, GUJARAT v.M.A. MERCHANT IPAIBAK, CJ.I 993

"' there is nothing in the news. 59 from which an intent to give retrospec-
.

tive effect to it can be concluded.
A

The new s. 59 came into force from 1 July, 1960. Much earlier,
on 26 February, 1960 the assessment on the accountable person had
already been completed. There is a well settled principle against B
J interference with vested rights by subsequent legislation unless the
(egislation has been made retrospective expressly or by necessary
ilnplication. If an assessment has already been made and completed,

- the assessee cannot be subjected to re-assessment unless the statute
permits that to be. done. Reference may be made to Controller of
Estate Duty, West Benga/v. Smt. Ila Das and others, [1981) 132 I.T.R.
720 where an attempt to reopen the Estate Duty assessment conse- C
quent upon the insertion of the news. 59 of the Estate Duty Act was
held infructuous.

We hold thats. 59 of the Estate Duty Act is not retrospective in
operation and that the reopening of the assessment under s. 5\1.of thi: D
Act is bad in law.

In the result the appeals fail and are dismissed with costs .
..{
N.V.K. Appeals dismissed.