THE ADDITIONAL INCOME-TAX OFFICER, SALEM vs. E.ALFRED

CIVIL APPEAL No. 282/1960Supreme Court1961 INSC 29820 October 1961Bench: 3 JudgesAuthor: S.K. DAS, J.L. KAPUR, M. HIDAYATULLAH8 pages
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What were the facts?

The deceased, Ebenezer, died intestate during his year of account ending March 31, 1946. His son, E. Alfred (the respondent), was assessed under Section 24B(2) of the Income-tax Act, 1922, after a notice under Section 22(2) was issued. A notice of demand was issued under Section 29. The respondent appealed to the Appellate Assistant Commissioner. During the pendency of the appeal, the Income-tax Officer imposed a penalty of Rs. 250 under Section 46(1) for defaulting in tax payment. After the appeal was disposed of, a fresh notice of demand was issued. Upon further default, a second penalty of Rs. 10,000 was imposed. The respondent challenged these penalties via a writ petition, which the High Court allowed, quashing the penalty orders.

What did the Supreme Court hold?

The Supreme Court held that the fiction created by Section 24B(2) of the Income-tax Act, 1922, does not cease to apply after the assessment is made. When a person is deemed to be something else, they are to be treated as such for all logical consequences. The definition of 'assessee' as a person by whom income-tax is payable includes a legal representative who is liable to pay tax out of the deceased's estate. Therefore, the respondent, as a legal representative assessed under Section 24B(2), remained an 'assessee' for the purpose of payment and default. Consequently, he was liable to penalties under Section 46(1) for non-compliance with the demand notices. The distinction drawn by the High Court between 'assessee' and 'other person' in Section 29 was found to be inapplicable if the legal representative is indeed an assessee by fiction. The appeal was allowed, and the High Court's order was set aside.

What were the issues?

1. Whether the fiction created by Section 24B(2) of the Income-tax Act, 1922, under which a legal representative is assessed as an assessee, ceases to apply after the assessment is made, thereby precluding the imposition of a penalty under Section 46(1) on the legal representative for default in payment. Assessee's Contention (as per High Court's reasoning): The High Court held that the fiction in Section 24B(2) was for the limited purpose of assessment and did not extend to collection. Therefore, after the assessment, the legal representative was not an assessee for the purposes of Section 46(1) but an 'other person'. Revenue's Contention (as per Supreme Court's reasoning): The revenue contended that the fiction under Section 24B(2) continues beyond the assessment, making the legal representative an 'assessee' for all purposes, including the imposition of penalties under Section 46(1) for default in payment.

Which sections of the Income-tax Act were involved?

Section 22(2),Section 24B(2),Section 29,Section 46(1),Section 23,Section 30,Section 45

AI-generated summary — verify with the full judgment below

r (I) 8.C.R. SUPREME COURT REPORTS 143 THE ADDITIONAL INCOME-TAX OFFICER, SALEM v. E.ALFRED (S: K. DAS, J. L. KAPUR and M. HmAYATULLAH, JJ.) Income Tax-Tax of deceat<ed pci·•on payable by representa- tive-Legal repreaentatfre tUSease. by .fiction-Failure to pay assessed tax-PenaUy, if could be impowl-lncome-tax Act, 1.922 (11of1922), ss. 22, (2), (23), 248 (2), 29, 30, 46 (1). One E died intestate during his year of account lea\ing behind him his son A the respondent and eight daughter,, After notice under s. 22 (2) of the Income Tax Act was issued, A was assessed under s. 24 B (2) of the Act and notice of de- mand was issued under s.

29.

The respondent a ppe,aled to the Appellate Assistant Commissioner, but during the pendencv of the appeal a penalty was imposed upon him under s. 46 (I) of the Act by the Income-tax Officer as the respondent had defaulted in payment of tax on the due date. After the appeal was disposed of a notice of demand was again issued to th~ respondent to pay the tax. On respondent's default, a second penalty was imposed upon him. Respondent challen1?ed this order l;>y writ. The High Court quashed the order inter alia holding that s

The order continues below.

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