Deemed dividend and estate taxation: reassessment was invalid because notional income belonged to the deceased shareholder, not the administrator.

Deemed dividend under section 23A was treated as notional income attributable only to the registered shareholder, not to the administrator of a deceased shareholder's estate. Income of the deceased could be assessed only under section 24B to the extent tax was payable by the deceased and recoverable from the estate, while post-death estate income was assessable in the administrator's own right. Because the department reopened the administrator's assessment for a later year to add the deceased shareholder's deemed dividend, the notice under section 34(1)(b) and the reassessment were invalid. The amount could not be brought to tax as the administrator's income.

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Issues: Whether the notice under section 34(1)(b) of the Income-tax Act, 1922 and the consequent reassessment were valid where deemed dividend under section 23A was sought to be added in the hands of an administrator of a deceased shareholder's estate.

Analysis: The deemed dividend under section 23A was a notional income which, if at all, could be attributed only to the registered shareholder. The court distinguished between assessment of income of the deceased under section 24B, which is confined to tax payable by the deceased and recoverable out of the estate, and assessment of income of the estate arising after death, which is taxed in the hands of the administrator in his own right. Here the department reopened the administrator's assessment for the assessment year 1948-49 under section 34(1)(b), although the alleged deemed dividend related to the deceased shareholder and could not be treated as the administrator's income. If any reassessment was possible at all, it had to be directed to the escaped income of the deceased under the proper statutory route, not by adding the amount to the administrator's subsequent estate income.

Conclusion: The notice under section 34(1)(b) and the reassessment were invalid, and the deemed dividend could not be assessed in the hands of the administrator.

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