1930 (10) TMI 16 - HC - Income Tax

Assessment of deceased's estate under Income-tax Act ruled impermissible by court

Commissioner Of Income-Tax Versus Ellis C. Reid

The court held that making an assessment under Section 23(4) of the Income-tax Act after the assessee's death was not legal as the Act does not provide ... - Issues Involved:1. Legality of making an assessment under Section 23(4) of the Income-tax Act after the assessee's death.2. Validity of serving a demand notice under Section 29 of the Act on the administrator of the deceased's estate and recovering tax from the estate by coercive process under Section 46 of the Act.Detailed Analysis:1. Legality of Making an Assessment Under Section 23(4) After the Assessee's DeathThe primary issue revolves around whether an assessment can be made under Section 23(4) of the Income-tax Act after the death of the assessee. The court examined the relevant sections of the Act to determine the legality of such an assessment.Section 2(2) defines 'assessee' as a person by whom income-tax is payable, implying a living person. Section 3 is the charging section and does not suggest that liability to tax ceases upon death. However, the court noted that there are no provisions for collecting tax from the estate of a deceased person until Sections 22 and 23 are considered.Section 22(2) requires a person to furnish a return of income, and Section 23(4) allows for an assessment 'to the best of his judgment' if the person fails to make a return. The court observed that the term 'assessee' refers to a living person, and making an assessment on a deceased person would require a significant departure from the language of the statute.The court further noted that Section 27 provides a right to the person assessed under Section 23(4) to request a fresh assessment if they had a reasonable cause for default. This right is not easily extendable to the estate of a deceased person.Section 29 requires the Income-tax Officer to serve a notice of demand on the assessee, which again implies a living person. The court found it problematic to interpret 'assessee' as both the deceased and his administrator within the same section.Ultimately, the court concluded that the Act does not provide for assessing the estate of a deceased person and that doing so would require straining the language of the statute. The court held that the assessment made under Section 23(4) after the assessee's death was not legal.2. Validity of Serving a Demand Notice Under Section 29 on the AdministratorGiven that the assessment under Section 23(4) was deemed illegal, the second issue concerning the validity of serving a demand notice under Section 29 on the administrator of the deceased's estate and recovering tax from the estate by coercive process under Section 46 did not arise.The court emphasized that the Income-tax Act does not expressly provide for the collection of tax from the estate of a deceased person. The term 'assessee' consistently refers to a living person who has earned income. The court found no basis to extend this definition to include the legal representative of a deceased person.The court also highlighted that fiscal statutes must be interpreted strictly in favor of the subject, meaning that the treasury cannot tax without express legislative permission. Since the Act does not explicitly authorize the recovery of tax from the estate of a deceased person, the court held that the Commissioner must fail in this case.Conclusion:The court answered the first question in the negative, declaring the assessment under Section 23(4) after the assessee's death illegal. Consequently, the second question did not arise. No order as to costs was made.