1966 (3) TMI 4 - HC - Income Tax

ITO made an order of assessment treating the income as an income from other sources - Held that service of a notice prescribed in sub-s. (2) of s. 24B of the IT Act, 1922, is not a condition precedent to the commencement of proceedings for exercising jurisdiction to assess the estate of the deceased

Summary

Issues:
1. Assessment of income of deceased Government Pleader.
2. Requirement of serving notice under section 24B(2) of the Indian Income-tax Act, 1922.
3. Classification of income as 'income from other sources.'

Analysis:

Assessment of Deceased Government Pleader's Income:
- Mr. A. A. Mandagi, a deceased Government Pleader, had his income assessed posthumously by the Income-tax Officer.
- His son, Mr. N. A. Mandagi, produced a return disclosing the income earned during the assessment year 1956-57.
- Initially, the Income-tax Officer treated the income as 'income from other sources' under section 12 of the Income-tax Act, 1922.
- The Appellate Assistant Commissioner upheld this assessment.
- However, the Appellate Tribunal set aside the assessment, stating that the notice under section 24B(2) was a prerequisite for the Income-tax Officer's jurisdiction.
- The Tribunal also recognized the income as derived from a profession rather than 'other sources.'

Requirement of Notice under Section 24B(2):
- The key issue was whether the Income-tax Officer could assess the deceased's income without serving notices on all legal representatives as required by section 24B(2).
- The Appellate Tribunal emphasized the necessity of serving notices on all legal representatives for a valid assessment.
- Legal representatives' proper representation before the Income-tax Officer was deemed essential under section 24B.
- Previous judicial interpretations, including the High Court of Madras, supported the view that all legal representatives must be involved in such assessments.

Classification of Income:
- The second question revolved around whether the income of the deceased Government Pleader should be classified as 'income from other sources.'
- The Court determined that the income earned by Mr. A. A. Mandagi was derived from his profession as a Government Pleader, not from 'other sources.'
- The Court concluded that the income was not appropriately assessed under the head of 'other sources.'

Conclusion:
- The Court ruled that the Income-tax Officer could not proceed with the assessment without serving notices on all legal representatives, as mandated by section 24B(2).
- Additionally, the income of the deceased Government Pleader was correctly classified as income derived from his profession, not 'other sources.'
- The Commissioner was directed to bear the costs of the reference, including the advocate's fee.