ESTATE OF LATE RANGALAL JAJODIA vs. COMMISSIONER OF INCOME-TAX, MADRAS

CIVIL APPEAL No. 2332/1966Supreme Court[1971] 2 S.C.R. 80719 November 1970Bench: 5 JudgesAuthor: J.C. SHAH, G.K. MITTER, K.S. HEGDE, A.N. GROVER, A.N. RAY B10 pages
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What were the facts?

Rangalal Jajodia filed income-tax and excess profits tax returns for assessment years 1942-43 and 1943-44. He died before assessments were completed. He was survived by his second wife, Arona Devi, their children, and a son, Shankarlal Jajodia, from a previous marriage. His will appointed Arona Devi and Ram Kumar Bhuwalka as executors and disinherited Shankarlal. The Revenue initially assessed Shankarlal as the legal representative. On appeal, the Appellate Assistant Commissioner (AAC) set aside the assessment and directed a fresh assessment on the executors under Section 24B. The Income-tax Officer completed the assessment on October 29, 1952, over four years after the assessment years ended. The AAC again set aside the assessment, directing the officer to give the executrix a fresh opportunity to object. The Tribunal upheld the AAC's order. The High Court held the first assessment invalid as Shankarlal was not a legal representative, and while Section 24B applied, the procedure was not followed de novo. The Supreme Court considered whether Section 34(3) 2nd proviso saved the assessments from limitation and if Section 24B applied.

What did the Supreme Court hold?

The Supreme Court held that the second proviso to Section 34(3) of the Act applied to the present appeals, thus saving the assessments from the bar of limitation. The Court reasoned that proceedings commenced with the filing of returns, continued after the assessee's death against legal representatives (Shankarlal and Arona Devi), and were continued after being set aside due to lack of notice to Arona Devi, making the finding and direction vital to the assessment proceedings. The Court clarified that 'any person' in the proviso refers to someone intimately connected with the assessment year, and Arona Devi, being an assessee, met this criterion. The Court also correctly held that Section 24B of the Act applied to the case, particularly sub-section (3) dealing with a person dying after furnishing a return. The Court noted that the Income-tax Officer had reason to believe the return was incorrect and had called for evidence, and the Act empowered the officer to make assessments and require documents from legal representatives. The Court set aside the High Court's judgment regarding limitation and allowed the Revenue's appeals (C.As. Nos. 2336-2339 of 1966), while upholding the High Court's conclusion on Section 24B and dismissing the appeals by Arona Devi (C.As. Nos. 2332-2335 of 1966).

What were the issues?

1. Whether Section 34(3) 2nd proviso of the Income-tax Act, 1922, saves the assessments in the present case from the bar of limitation, and what is the scope of 'any person' in this proviso? - Assessee (Arona Devi): Contended that 'any person' in the proviso cannot refer to a stranger, and Arona Devi was a stranger to the initial assessment proceedings. - Revenue: Argued that the proviso applies as the assessment proceedings continued against legal representatives and the setting aside of the assessment was vital to the proceedings. 2. Whether Section 24B of the Income-tax Act, 1922, applies to the case, and if so, what procedure is to be followed? - Assessee (Arona Devi): Contended that Section 24B does not cover the entire procedure for assessing a deceased person's income. - Revenue: Did not impeach the High Court's conclusion that Section 24B provisions were to be followed de novo in relation to Arona Devi.

Which sections of the Income-tax Act were involved?

Section 34(3),Section 24B,Section 22,Section 23

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A B c D E F G ESTATE OF LATE RANGALAL JAJODIA v. COMMISSIONER OF INCOME-TAX, MADRAS November 19, 1970 897 [.J •. c. SHAH, G. K. MITTER, K. s. HEGDE, A. N. GROVER. AND A. N. RAY, JJ.] Income-tu Act, 1~22, ss. 34(3) 2.nd Proviso and 248-Ass•ss11 dying IMf<WI compllllon of assusm1nt-Assessm1nt complet1d by l.T.O. ott OIHll#s legal repr~s•ntatlv•s Including dlllnherlt•d son-A.A.C. slltlntr alld1 OIHmntnt and directing l.T.O. to make fresh assusment on execu- tors under asseuu's will-Case wheMer covered by s. 34(3) 211d proviso for purpo.re of extending 1imitatlo1>-Proc1dure for 're-assessment-App/I. C'ability of a. 248. R 11led bis income-tax and excess profits tax returns before the Jncome- tax Oftlcer/Ex.cess Profits Tax Officer for the assessment years 1942-43 and 11)43-44 and the corresponding chargeable ·accountiilg periods. He complied with the statutory notices issued to him by ·the said Revenue Offic:u but died before the assessments could be made. He was survived by A.· his second wife, his children by her, and by S, his son by a pre- clece•sed wi'fe. In his will A and another person B were named as execu- tors and S was disinherited. S performed the ob

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