Case: Estate Of Late, Rangalal Jajodia Vs. Commissioner Of Income-Tax Madras

Rangalal Jajodia (hereinafter referred to as the deceased) filed income-tax returns for the years 1942-43 and 1943-44 as well as his excess profits tax returns for the corresponding chargeable accounting periods ending 31 December, 1941 and 31 December, 1942 before the Income-tax Officer, Excess Profits Tax Officer, Madras, Special South Circle. On receipt of the returns the officer issued the requisite statutory notices to the assessee for production of accounts and also other evidence in support of the returns under Sections 22 (4) and 23 (2) of the Act and under the corresponding provisions of section 30 of the Excess Profits Tax Act, 1940. Rangalal Jajodia complied with the aforesaid notice. But before the assessments to the income-tax and excess profits tax could be made Rangalal Jajodia died on 11 January, 19464. Rangalal Jajodia was survived by Shankar Lal Jajodia son by a predeceased wife, Aruna Devi, the second wife and children by the second wife. Rangalal Jajodia had made a will on 16 April, 1945 whereby Aruna Devi and one Ram Kumar Bhuwalka were executrix and executor respectively. Shankarlal Jajodia was disinherited under the will. Shankarlal Jajodia however performed the funeral obsequies for the deceased. The Revenue on the basis of that information issued notice to Shankar Lal Jajodia asking him to show cause why the assessment of the deceased should not be made on him as the legal representative. Shankarlal Jajodia objected to the course stating that he was not the legal representative end that his stepmother Aruna Devi and Ram Kumar Bhuwalka as the executrix and executor respectively were the proper persons on whom proceedings were to be taken. The Revenue called for a copy of the will which however was not produced The assessment was completed on 28 February. 1947 on the materials describing the assessee as the estate of late Shri Rangalal Jajodia by legal heirs and representatives, Shri Shankarlal Jajodia, son of Rangalal Jajodia. Shrimati Aruna Devi, wife of Rangalal Jajodia and her children5. The assessment orders were served on Shankarlal Jajodia who appealed to the Appellate Assistant Commissioner contending that he was not the legal representative. At the hearing of the appeals on 30 April, 1952 Shankarlal Jajodia produced a copy of the will. The Appellate Assistant Commissioner set aside the assessment and directed the Revenue Officer to make a fresh assessment on the executors in accordance with section 24B of the Act. Pursuant to the direction of the Appellate Assistant Commissioner the Revenue Officer informed the executors and Ram Kumar Bhuwalka of his proposal to make assessment on them as the legal representatives of Rangalal Jajodia. Ram Kumar Bhuwalka who had refused to act as an executor intimated the fact to the Revenue Officer. Aruna Devi the executrix accepted the notice but requested the Revenue Officer to furnish her with copies of the returns notes of examination and correspondence between the deceased and the Revenue to enable her to make representations. The Revenue Officer however took the view that under section 24B of the Act it was not necessary to go through all the formalities once again and that the assessments were required to be done only for the purpose of inviting objections, if any, to the locus stand) of Aruna Devi as the legal representative of the deceased. On the said view the Revenue Officer completed the income-tax and excess profits tax assessments on the estate of late Rangalal Jajodia by executors Mrs. Aruna Devi and another. The assessments were made on 29 October. 1952 more than four years after the end of assessment years 1942-43 and 1943-44 respectively6. The executrix Aruna Devi appealed against the assessments contending before the Appellate Assistant Commissioner that the assessments were barred by limitation and that the previous Appellate Assistant Commissioners direction to make assessments on her was invalid. It was also contended that reasonable opportunities were not given to Aruna Devi before the assessments were made. The Appellate Assistant Commissioner on 16 April, 1955 held that the assessments were validly made on a valid direction by the previous Appellate Assistant Commissioner. He however set aside the assessments directing the Revenue Officer to complete them after giving the executrix a fresh opportunity to object to the assessment. Aruna Devi appealed to the Appellate Tribunal. The Tribunal rejected the appeals on the ground that the assessments had been set aside by the Appellate Assistant Commissioner with the direction to give sufficient opportunities to her. On a reference taken by Aruna Devi to the High Court, the High Court held that the Tribunal ought to have properly disposed of the appeals on all the contentions raised therein. Pursuant to the order of the High Court the Tribunal heard the appeals on merits on 9 June, 1961 and held that the re-assessment made by the Revenue Officer on Aruna Devi, the executrix was valid and that the assessments were saved from the bar of limitation by the second proviso to Section 34 (3) of the Act. The Tribunal also held that the assessments were validly made under Section 24B (3) of the Act7. The High Court on reference under Section 66 (1) of the Act held that the second proviso to Section 34(3) applied to save re-assessment from the bar of limitation but that in the present appeals, the first assessments which were made on Shankarlal Jajodia were set aside on appeal because these were not made on the real legal representatives of the deceased and therefore no direction or finding could be made by the Revenue Authority in any such appeal as would remove the bar of limitation on the re-assessment later made on the executor who was to be regarded as an entirely different assessee. The High Court also held that the direction or finding given by the Appellate Assistant Commissioner for making the assessment on the executors was unnecessary for the disposal of the appeals filed by Shankarlal Jajodia and therefore the direction and the findings were outside the scope of the second proviso to section 34 (3) of the Act8. As to section 24B sub-clause (3) of the Act, the High Court held that the section applied to the assessments in the present appeals but the High Court negatived the contention of the Revenue that the assessments made on the executrix were made in proper compliance with the procedure prescribed under section 24B (3) of the Act. The High Court held that it was a condition precedent to the validity of assessment to be made on the legal representatives that the procedure prescribed for making the assessment on the deceased assessee was to be repeated as regards the assessment on the legal representative irrespective of the fact that such procedure was followed during the lifetime of the deceased.

Reasoning:
are therefore of opinion that the second proviso to Section 34(3) of the Act applies to the present appeals because first the proceedings against Rangalal Jajodia commenced on filing of returns before the income-tax authorities; secondly, the assessment proceedings continued after the death of Rangalal Jajodia against the legal representatives Shankarlal Jajodia and Aruna Devi; thirdly, the assessment proceedings on being set aside and not cancelled pursuant to the appeal filed by Shankarlal Jajodia on the ground that notice was not given to Aruna Devi were continued, and, fourthly, the setting aside of the assessment was only on the ground that notice was not given to Aruna Devi and therefore the finding and direction was vital to the assessment proceedings. The High Court was in error in holding that the assessment proceedings were barred by limitationThe other question is as to the applicability of section 24B of the Act Counsel on behalf of Aruna Devi repeated the contentions advanced in the High Court that section 24B does not cover the entire field of procedure to be followed in assessing the income of the deceased person. The High Court held that section 24B of the Act applied but Aruna Devi should have been given opportunities to object to the assessment by repeating the entire procedure of section 24B of the Act as during the lifetime of the deceased. Counsel for the Revenue did not impeach the conclusion of the High Court that in relation to Aruna Devi the provisions of section 24B of the Act were to be followed de novo.We are of opinion that the High Court correctly held that section 24B of the Act applies to the present case. The third sub-section of section 24B clears with a case of a person dying after having furnished a return Further, in the present case the Income-tax Officer had reason to believe the return to be incorrect or incomplete, and he called upon Rangalal to furnish evidence The Act further confers Power on the Revenue officer to make the assessment and determine the tax payable by the deceased on the basis of the assessment and for that purpose to issue appropriate notice which would have had to be served upon the deceased had he survived and in that behalf to require from the executor, administrator or other legal representative of the deceased person any accounts, documents or other evidence which he might under the provisions of sections 22 and 23 require from the deceased person. These provisions adequately answer the contention of the appellant Aruna Devi