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TMI Blog1957 (8) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... return he filed copies of a balance sheet and profit and loss account, said to have been prepared by a firm of auditors during the lifetime of his father. On the examination of the books of account, however, the Income-tax Officer found substantial omissions in the return and when he brought them to the notice of Sri Sukumar Mukherjee, he submitted a revised return in which a sum of ₹ 56,000 was added to the previously declared income. The Income-tax Officer was not satisfied that the entire income had been disclosed and upon a further examination of the accounts, he made an assessment on an income of ₹ 79,106. The assessment was made on Sri Sukumar Muhherjee, described as the legal representative of the late Bibhuti-bhusan Mukherjee, proprietor of Mill Stores and Belting Company. No question with regard to the validity of that assessment arises in these proceedings. The Income-tax Officer, however, also thought that Sri Sukumar Mukherjee had deliberately furnished inaccurate particulars of the income with respect to which he had been required to file a return and in that view, he initiated a penalty proceeding under section 28 of the Act. The plea taken by Sri Sukumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that view dismissed. On further appeal, the Income-tax Appellate Tribunal, before whom the same contention was repeated, rejected it on the same grounds and they upheld the imposition of the penalty. The Tribunal placed it on record that the appellant's counsel had not pressed the legal objection very seriously. "Wisely", observed the Tribunal, "the learned counsel for the appellant did not lay too much stress on the above legal grounds raised by him." Apparently, Sri Sukumar Mukherjee did not share the Tribunal's view, of the wisdom of his counsel and by an application made under section 66(1) of the Act, he required the Tribunal to refer to this court five questions of law. The Commissioner of Income-tax in his reply submitted that one of the questions was a question of law and did arise out of the appellate order. The Tribunal, agreeing in that view, referred the question in the following form : "Whether the Appellate Tribunal was right in their interpretation of section 24B(2) read with section 28(1) and in confirming the levy of penalty on the applicant who concealed particulars of income of his father in the return filed by him (applicant) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alled upon to enquire and decide what the actual fact was. I may, however, point out that the statement contained in the assessment order appears really to be incorrect, as noted by someone, because according to the statement of Sri Sukumar Mukherjee himself, made in the present case and according to the finding of the Income-tax Officer, as contained in his order imposing the penalty, a notice under section 22(2) was served for the first time upon the son and no notice had previously been served on the father. In the statement of facts annexed to his application for a reference, Sri Sukumar Mukherjee refers to the fact that his father died on the 16th of June, 1943. Then he proceeds to make the following statement: "Thereupon, a notice under section 22(2) for the aforesaid year was issued in the name of the proprietor of Mill Stores & Belting Co., on nth September, 1943, and it was served on 13th September, 1943." That is a statement of Sri Sukumar Mukherjee himself. Then as to the Income-tax Officer, he states in his order under section 28 as follows: "Moreover, the assessee had actually died on 16th June, 1943, before the issue (11th September, 1943) and servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause he had furnished the return only in the capacity of a legal representative and, therefore, he-could not come within the ambit of the section. That indeed is the question referred to this court and I cannot understand how we can be invited to travel outside it and engage in an enquiry as to questions based on allegations of fact which are completely opposed to the statements made by Sri Sukumar Mukherjee himself and completely inconsistent with the basis on which he raised the question which he caused to be referred to this court. I may now turn to the question which actually arises in the case and which has actually been referred. Its answer depends on the true construction of sections 24B(2) and 28(1)(c), the relevant terms of which I may conveniently read at this stage. Section 24B(2) reads as follows: "Where a person dies before the publication of the notice, referred to in sub-section (1) of section 22 or before he is served with a notice under sub-section (2) of section 22 or section 34, as the case may be, his executor administrator or other legal representative shall, on the serving of the notice under sub-section (2) of section 12 or under section 34, as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome of the deceased person, but the question is whether the effect of section 24B(2) is to convert it into income of the legal representative himself for assessment purposes. On that narrower question, the provision to be construed is the provision to the effect that the Income-tax Officer may proceed to assess the income as if the legal representative were the assessee. Dr. Pal contended that while a fiction had undoubtedly been introduced, it was a fiction of a very limited character and went no further than making the legal representative the nominal assessee for the purposes of the process of assessment. In other words, the effect of the section in Dr. Pal's contention was that the income of the deceased person was to be assessed in the hands of his legal representative and the assessment was to be in the name of the latter, but the income would none the less remain the income of the deceased predecessor-in-interest. According to him, the provision that the assessment could be made as if the legal representative were the assessee did not mean or involve that the income was to be assessed, as if it was income of the legal representative himself. Mr. Meyer, who appeared f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee." What is thus assessed under the Act is the income of the assessee and it is not the scheme of the Act that the income of one person shall be taxed as the income of another, remaining all the time the income of the other person. Dr. Pal contended that while it was true that in general, the scheme of the Act was that a person was to be assessed on his own income, a fiction had been introduced for application in certain cases, whereunder a person might be assessed on income which was not his but another person's income and that it was precisely for that reason that it had become necessary to provide that the assessment was to be made as if the former were the assessee. In my view, the true effect of the fiction to which Dr. Pal referred is exactly the opposite. One of the sections by which the fiction has been introduced is section 24B(2). Two other sections may be named, namely, section 42(1) and section 42(2). Under section 42(1), an agent shall be deemed to be for all the purposes of the Act the assessee in respect of the income-tax payable by his principal in certain cases and, under section 42(2), a resident person shall be similarly deemed to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s out of and is limited to the necessity of assessing the income. The owner of the income is dead and he cannot be required any longer to perform any of he duties which are required to be performed by a living assessee. Only the income left unassessed has to be assessed. Not so, however, is the case where an agent or a resident person is treated as the assessee in respect of the tax payable by the principal or a non-resident person, because if he is to be treated as the assessee, it is necessary to provide not only that the income should be assessed in his hands, but also that the Act will look to him for the performance of the other duties which it lays on assessees. For example, an assessee has to make payments under section 18A of the Act in respect of the current year's income and unless it was provided in sections 42(1) and 42(2), which are concerned with the representation of living persons, that the agent or the resident person would be treated as the assessee for all the purposes of the Act, the other obligations of the person represented, apart from the obligation to be assessed to tax in a particular assessment proceeding would not be covered. The omission of the expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or in section 23(3) or section 23(4) or section 24B(2). The argument that, since section 24B(2) says only that the Income-tax Officer may proceed to assess the total income of the deceased assessee, therefore, the power to institute proceedings under section 28 and to impose a penalty is excluded is not, in my view, a tenable argument at all. The result of our examination of section 24B(2) therefore is first, that not only must the legal representative be treated as if he were the assessee, but the income of the deceased person, must also be treated as if it were his income and, secondly, that whether or not the Income-tax Officer has really any power to institute proceedings for the imposition of a penalty against a legal representative, there is nothing in section 24B(2) which excludes that power. For ascertaining whether the power exists in law, one must examine section 28 itself to which I may now refer. The whole argument with respect to section 28(1)(c) was based on the expression "his income". If, as I have already held, the effect of section 246(2) is to make the income of the deceased person the income of the legal representative for the purposes of assessment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24B(2), because, if for the purposes of a notice under section 22(2), the income, though the income of another person assessed in the hands of the legal representative, is treated and described as his income, in the notice, and default can be committed in regard to furnishing a return thereof, I cannot see why, even if the expression bears the same meaning in section 28, the legal representative committing a default cannot be treated as having committed it in respect of his income. Even if the meaning of the expression "his income" in the vocabulary of section 28(1) be, as applied to the case of a legal representative, the income of another person assessed in his hands, it is, nevertheless, so far as the legal representative is concerned, his income, because unless it were so, there could not have been any default with respect to the notice served under section 22(2), requiring the legal representative to furnish a return of "your income." We need not, however, try to arrive at that result from the language of the notice under section 22(2), because, in my view, the effect of section 24B(2) is decisive of the question. For the reasons given above, the answer t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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