COMMISSIONER OF INCOME TAX vs. SUHASBHAI VADILAL

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ITR/268/1983HC GujaratGJHC24011736198326 November 1996Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE R.BALIA3 pages
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What did the High Court hold?

The High Court answered Questions 1 and 2 in the affirmative. It held that under Section 168(1) of the Income Tax Act, 1961, the income of a deceased person's estate is chargeable to tax in the hands of the executor, which includes any person administering the estate. Section 168(3) clarifies that the executor continues to be assessed until the estate is distributed. The Court noted that the Supreme Court, in Navnitlal Sakarlal vs. C.I.T. (193 ITR 16), had reversed the Gujarat High Court's decision in C.I.T. vs. Navnitlal (125 ITR 67). Since it was admitted that the administration of the estate had not been completed, the income of the estate was chargeable to tax in the hands of the executor and not in the assessee's individual capacity. Therefore, the income of the estate could not be assessed as part of the assessee's total income. As Question 3 was based on the now-reversed decision of the Gujarat High Court, it was not necessary to answer it. The reference was disposed of accordingly.

What were the facts?

The assessee, Shri Suhasbhai Vadilal, was assessed for AY 1967-68 and 1968-69. The Income Tax Officer (ITO) reopened the assessment under Section 147(a) of the Income Tax Act, 1961, alleging the assessee had not disclosed his share of income from the estate of Smt. Bhuriben Lallubhai. The deceased had executed a will in 1959, naming the assessee as a beneficiary. Although no executor was appointed, the assessee was voluntarily administering the estate. The ITO added Rs. 11,889 for AY 1967-68 and Rs. 9,843 for AY 1968-69, representing the assessee's share of the estate's income. The Commissioner of Income-Tax (Appeals) confirmed these additions. The Income Tax Appellate Tribunal (ITAT) allowed the assessee's appeals, holding that the administration was not complete and it was improper to include the estate's income in the assessee's hands.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the inclusion of the assessee's share in the estate of Smt. Bhuriben Lallubhai is not justified in law? (Question of law) 2. Whether the finding of the Appellate Tribunal that administration was not complete, and hence the inclusion of the share income of the estate at the assessee's hands was not justified and correct in law? (Question of law) 3. Whether the Appellate Tribunal has been right in law in distinguishing the decision of Gujarat High Court in the case of Navnitlal Sakarlal, and it was not proper to include the share income of the estate in the assessee's hands? (Question of law) Assessee's contentions: The assessee contended that the administration of the estate was not complete, and therefore, the income of the estate should not be included in his individual hands. The Tribunal allowed the appeals, agreeing with this contention. Revenue's contentions: The revenue contended that the assessee was voluntarily administering the estate and that the case was distinguishable from the Gujarat High Court's decision in C.I.T. vs. Navnitlal Sakarlal. The ITO and CIT(A) added the share income to the assessee's total income.

Which sections of the Income-tax Act were involved?

Section 147(a),Section 168(1),Section 168(3),Section 256(2)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE NO. 268 OF 1983

The Commissioner of Income-Tax Gujarat-I, Ahmedabad .. Applicant

Versus

Shri Suhasbhai Vadilal .. Respondents

Date of Decision : 26th November 1996

For Approval and Signature

THE HONOURABLE MR. JUSTICE R.K. ABICHANDANI

THE HONOURABLE MR. JUSTICE RAJESH BALIA

Mr.M.J.Thakore for Mr.Manish R. Bhatt for the applicant Mr.J.P.Shah for the respondent

1.

Whether Reporters of Local Papers may be allowed to see the judgement?

2.

To be referred to the Reporter or not?

3.

Whether Their Lordships wish to see the fair copy of Judgement?

4.

Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder?

5.

Whether it is to be circulated to the Civil Judge?

Coram : R.K. Abichandani and Rajesh Balia, JJ 26th November 1996

Oral Judgement (Per R.K. Abichandani, J)

1.

The Income Tax Appellate Tribunal, Ahmedabad Bench A has referred to this Court the following questions for its opinion under Section 256(2) of the Income Tax Act:

1.

"Whether, on the facts and in the circumstances of the case, inclusion of the share of the assessee in the estate of Smt. Bhuriben Lallubhai is not justified in law?"

2.

"Whether, the finding of the Appellate Tribunal that administration was not complete and hence the inclusion of the share income of the estate at the assessee's hands was not justified and correct in law?"

3.

"Whether, the Appellate Tribunal has been right in law in distinguishing the decision of Gujarat High Court in the case of Navnitlal Sakarlal and it was not proper to include the share income of the estate in the assessee's hands?"

2.

In this case, the original assessment was made on 27.2.1971 and the total income was determined at Rs.1,32,180/-. The case was reopened under Section 147(a) Rs.11,889/-, being one half share of the income of the estate of Bhuriben to the income of the assessee for the year 1967-68. By another order dated 22.3.1976, the Income Tax Officer for the same reasons added Rs.9,843/to the income of the assessee for the assessment year 1968-69. The C.I.T. (Appeals) confirmed the assessment

rejecting the two appeals of the assessee on 9.11.1978. The Tribunal holding that the assessee was the executor inasmuch as he was looking after the affairs of the estate and further that the administration was not complete, allowed both the appeals of the assessee, holding that it was improper to include the share of the income of the estate in the assessee's hands.

3.

Under Section 168(1) of the said Act, it is inter *****

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