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Issues:
1. Taxation of a deceased person's income in the hands of an heir. 2. Applicability of section 26(2) of the Income Tax Act in the case of succession. Analysis: The judgment by the Patna High Court involved a case where the late Maharajadhiraj of Darbhanga passed away, leaving behind a money lending business and other undertakings. The Income Tax Officer initially served a notice to the deceased, which was later cancelled and re-served to the appropriate person. Before the extended time for filing a return expired, the late Maharajadhiraj died. Subsequently, the Income Tax Officer assessed the tax liability on the present Maharajadhiraj under section 26(2) of the Income Tax Act based on the income of the late Maharajadhiraj for the previous year. The main issue raised was whether the present Maharajadhiraj could be held liable for the tax of the deceased. The court addressed two key contentions raised by the assessee regarding the applicability of section 26(2). Firstly, it was argued that since the late Maharajadhiraj had not filed a return before his death, section 23, which deals with assessment, had not come into operation, thus section 26(2) should not apply. The court rejected this contention, emphasizing that the real meaning of the relevant provisions was that when the time comes to make an assessment, it can be done based on a return filed by the present Maharajadhiraj. Secondly, the assessee argued that the term "succeeded in such capacity by another person" in section 26(2) only applied to a transfer of ownership inter vivos and not succession by operation of law. The court disagreed, citing the case of Bell v. National Provincial Bank of England to explain that if a business is continued with a change in ownership, it constitutes succession. The court concluded that in this case, as there was no change in the character of the business or its management, and the business was continued after the ownership transfer, there was indeed a succession to the business under section 26(2). In the final decision, the court affirmed that section 26(2) applied to the present Maharajadhiraj in this case, agreeing with the Commissioner of Income-tax. The court also highlighted the inappropriateness of the practice where assessees provide opinions from legal practitioners to support their case, stating that such practices should be ceased immediately. The judgment clarified that legal contentions should be stated by the petitioner without the need for opinions from practitioners. In conclusion, the court upheld the applicability of section 26(2) to the present Maharajadhiraj in the case of succession, emphasizing the continuity of the business and rejecting the arguments against its application based on ownership transfer and legal interpretations.
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