Successor business tax liability under assessment process begins with notice, not only the final order.

Section 26(2) of the Income-tax Act, 1922 was construed to permit assessment of a successor in business where succession occurred after notice under Section 22(2) had already initiated the assessment process and the predecessor died before filing a return. The word "assessment" was read broadly as covering the entire assessment process, not only the final order under Section 23. On that construction, the provision was not limited to cases of inter vivos succession or to situations where a completed assessment under Section 23 was already possible; the successor was therefore liable to be assessed.

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Issues: (i) Whether a successor in business was assessable under Section 26(2) of the Income-tax Act, 1922, where the predecessor had been served with a notice under Section 22(2) but had died before filing a return. (ii) Whether the expression "at the time of making an assessment under Section 23" confined Section 26(2) to cases where the predecessor could already have been assessed under Section 23.

Issue (i): Whether a successor in business was assessable under Section 26(2) of the Income-tax Act, 1922, where the predecessor had been served with a notice under Section 22(2) but had died before filing a return.

Analysis: The relevant facts showed that the predecessor had carried on the business, that the appellant succeeded to it, and that the business was continued after succession. The finding that the business had not been discontinued was treated as a proper appreciation of the evidence and not as a legal misdirection on onus or on the effect of outstanding loans. Section 26(2) was applied on the footing that succession in such capacity had occurred during the assessment process already initiated by notice under Section 22(2).

Conclusion: The appellant was liable to be assessed under Section 26(2) and this issue was decided against the appellant.

Issue (ii): Whether the expression "at the time of making an assessment under Section 23" confined Section 26(2) to cases where the predecessor could already have been assessed under Section 23.

Analysis: The word "assessment" was construed broadly as covering the whole process of assessment, not merely the final order. Once notice under Section 22(2) had been served, the assessment process had begun and continued until an order was made. On that construction, Section 26(2) was capable of applying even though the predecessor had died before a final assessment order was passed. The argument that the provision applied only to inter vivos succession was rejected.

Conclusion: Section 26(2) was not so confined, and this issue was decided against the appellant.

Final Conclusion: The succession provision applied on the facts, the assessment was validly made on the successor, and the appeal failed.

Ratio Decidendi: For the purpose of succession liability under the Income-tax Act, "assessment" includes the ongoing process of assessment after notice has been issued, and a successor in business may be assessed where succession occurs during that process.

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