1971 (8) TMI 86 - HC - Income Tax

Income From Other Sources Whether the professional fees received after the assessee s death is taxable under the head income from other sources - it seems that preconditions for issuing the impugned notices as contemplated in section 147 of the Act were there - Application dismissed

Issues Involved:

1. Validity of notices issued under Section 148 of the Income-tax Act, 1961.
2. Assessment of income for the deceased for the assessment year 1965-66.
3. Application of Section 176(4) of the Income-tax Act, 1961.
4. Refund of excess tax realized by the revenue.

Issue-wise Analysis:

1. Validity of Notices Issued Under Section 148 of the Income-tax Act, 1961:

The petitioner challenged the validity of two notices issued under Section 148 of the Income-tax Act, 1961, on the grounds that there was no material to enable the Income-tax Officer to believe that the income of the deceased for the assessment year 1965-66 had escaped assessment. The petitioner argued that since the deceased was not alive during the relevant year, there could not have been any escapement of income. The court noted that the reasons for starting proceedings under Section 147 were not disclosed by the Income-tax Officer in the first affidavit. However, it was later revealed that the revenue had realized an aggregate sum of Rs. 85,998 from the deceased's debtors, which was liable to tax under Section 176(4) of the Income-tax Act, 1961.

2. Assessment of Income for the Deceased for the Assessment Year 1965-66:

The petitioner contended that the deceased did not have any income during the assessment year 1965-66, as he had passed away before that period. The court examined the applicability of Section 14 and Section 28 of the new Act and concluded that the income received by the revenue from the deceased's debtors in 1965 could not be classified under any specific head of income mentioned in Section 14. However, Section 56 of the new Act provided that any income not chargeable under the specified heads would be chargeable under the head "Income from other sources."

3. Application of Section 176(4) of the Income-tax Act, 1961:

The court analyzed Section 176(4) of the new Act, which states that any sum received after the discontinuance of a profession due to the death of the person carrying on the profession shall be deemed to be the income of the recipient and charged to tax accordingly in the year of receipt. The court held that the sum of Rs. 85,998 realized by the revenue was deemed to be the income of the deceased and was chargeable to tax under the head "Income from other sources." The court noted that the legal existence of the deceased was extended beyond the date of death to the date of realization of money from his debtors.

4. Refund of Excess Tax Realized by the Revenue:

The petitioner sought a refund of Rs. 26,230.59, which was realized by the revenue in excess of the amount legally due. The court did not provide a detailed analysis of this issue but implicitly rejected the petitioner's claim by dismissing the application and discharging the rule nisi.

Conclusion:

The court dismissed the application, holding that the preconditions for issuing the impugned notices under Section 147 of the Income-tax Act, 1961, were met. The court concluded that the income realized by the revenue from the deceased's debtors was chargeable to tax under the head "Income from other sources" as per Section 176(4) of the new Act. The application was dismissed, and all interim orders were vacated, with each party bearing their own costs.

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