1965 (8) TMI 100 - HC - Income Tax

Issues Involved:

1. Applicability of section 24B(3) of the Income-tax Act, 1922.
2. Applicability of the second proviso to sub-section (3) of section 34 of the Income-tax Act, 1922.
3. Validity of reassessments on Mrs. Aruna Devi.
4. Jurisdiction of the Income-tax Officer to make reassessments on Mrs. Aruna Devi based on directions given in the appeals of Sri Sankarlal Jajodia.
5. Whether the legal representative is a different person from the deceased for the application of section 24B(3).
6. Whether the original assessments made on Sri Sankarlal Jajodia have abated.
7. Validity of assessment on an indeterminate group of persons as legal representatives.
8. Validity of assessments to income-tax and excess profits tax.

Issue-wise Detailed Analysis:

1. Applicability of section 24B(3) of the Income-tax Act, 1922:

The court examined whether sub-section (3) of section 24B applied to the case, where the deceased had already submitted returns and complied with notices before his death. The court held that section 24B(3) was applicable and that the procedure prescribed by this section must be reiterated in the presence of the legal representative. The court emphasized that the legal representative must be given an opportunity to show that the return filed by the deceased was correct or complete, and this opportunity is substantive, not merely formal.

2. Applicability of the second proviso to sub-section (3) of section 34 of the Income-tax Act, 1922:

The court discussed the scope and applicability of the second proviso to sub-section (3) of section 34, which pertains to saving the limitation period for reassessment. The court concluded that the direction given by the Appellate Assistant Commissioner to assess Aruna Devi was outside the scope of this proviso. The court reasoned that Aruna Devi was not intimately connected with the assessments under appeal of Sankarlal Jajodia, and thus, the second proviso could not save the bar of time.

3. Validity of reassessments on Mrs. Aruna Devi:

The court found that the reassessments made on Mrs. Aruna Devi were invalid because the procedure prescribed by section 24B(3) was not followed. The court emphasized that the legal representative must be given a substantive opportunity to contest the assessment, which was not done in this case.

4. Jurisdiction of the Income-tax Officer to make reassessments on Mrs. Aruna Devi based on directions given in the appeals of Sri Sankarlal Jajodia:

The court held that the Income-tax Officer did not have jurisdiction to make reassessments on Mrs. Aruna Devi based on the directions given in the appeals of Sri Sankarlal Jajodia. The court reasoned that Aruna Devi was not intimately connected with the assessments under appeal of Sankarlal Jajodia, and therefore, the direction to assess her was outside the scope of the second proviso to section 34(3).

5. Whether the legal representative is a different person from the deceased for the application of section 24B(3):

The court clarified that for the purposes of section 24B(3), the legal representative is not considered a different person from the deceased. The court held that the legal representative must be given an opportunity to contest the assessment, and the procedure prescribed by section 24B(3) must be followed.

6. Whether the original assessments made on Sri Sankarlal Jajodia have abated:

The court concluded that the original assessments made on Sri Sankarlal Jajodia had abated because the procedure prescribed by section 24B(3) was not followed. The court emphasized that the legal representative must be given a substantive opportunity to contest the assessment.

7. Validity of assessment on an indeterminate group of persons as legal representatives:

The court found that the assessment on an indeterminate group of persons as legal representatives was not valid. The court emphasized that the legal representative must be given a substantive opportunity to contest the assessment, which was not done in this case.

8. Validity of assessments to income-tax and excess profits tax:

The court held that the assessments to income-tax and excess profits tax were invalid because the procedure prescribed by section 24B(3) was not followed. The court emphasized that the legal representative must be given a substantive opportunity to contest the assessment.

Conclusion:

The court answered all the questions in favor of the assessee and against the revenue, concluding that the assessments were invalid due to the non-compliance with the prescribed procedure under section 24B(3) and the improper application of the second proviso to section 34(3). The court awarded costs to the assessee.

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