1966 (3) TMI 4 - HC - Income Tax

Court invalidates assessment due to improper notice service; Income deemed from profession, not 'other sources'; Commissioner to cover costs.

The Court held that the Income-tax Officer's assessment of the deceased Government Pleader's income was invalid as notices were not served on all legal ... ITO made an order of assessment treating the income as an income from other sources - Held that service of a notice prescribed in sub-s. (2) of s. 24B of the IT Act, 1922, is not a condition precedent to the commencement of proceedings for exercising jurisdiction to assess the estate of the deceased Issues:1. Assessment of income of deceased Government Pleader.2. Requirement of serving notice under section 24B(2) of the Indian Income-tax Act, 1922.3. Classification of income as 'income from other sources.'Analysis:Assessment of Deceased Government Pleader's Income:- Mr. A. A. Mandagi, a deceased Government Pleader, had his income assessed posthumously by the Income-tax Officer.- His son, Mr. N. A. Mandagi, produced a return disclosing the income earned during the assessment year 1956-57.- Initially, the Income-tax Officer treated the income as 'income from other sources' under section 12 of the Income-tax Act, 1922.- The Appellate Assistant Commissioner upheld this assessment.- However, the Appellate Tribunal set aside the assessment, stating that the notice under section 24B(2) was a prerequisite for the Income-tax Officer's jurisdiction.- The Tribunal also recognized the income as derived from a profession rather than 'other sources.'Requirement of Notice under Section 24B(2):- The key issue was whether the Income-tax Officer could assess the deceased's income without serving notices on all legal representatives as required by section 24B(2).- The Appellate Tribunal emphasized the necessity of serving notices on all legal representatives for a valid assessment.- Legal representatives' proper representation before the Income-tax Officer was deemed essential under section 24B.- Previous judicial interpretations, including the High Court of Madras, supported the view that all legal representatives must be involved in such assessments.Classification of Income:- The second question revolved around whether the income of the deceased Government Pleader should be classified as 'income from other sources.'- The Court determined that the income earned by Mr. A. A. Mandagi was derived from his profession as a Government Pleader, not from 'other sources.'- The Court concluded that the income was not appropriately assessed under the head of 'other sources.'Conclusion:- The Court ruled that the Income-tax Officer could not proceed with the assessment without serving notices on all legal representatives, as mandated by section 24B(2).- Additionally, the income of the deceased Government Pleader was correctly classified as income derived from his profession, not 'other sources.'- The Commissioner was directed to bear the costs of the reference, including the advocate's fee.