Question: Whether Income declared in return by Mistake can be taxed ?
If a particular income is not chargeable to tax in hands of a person as per law, then same cannot be taxed merely on reason of such person inadvertently filing return declaring some income
The judgment of the Hon’ble Supreme Court in ITO v. Ch. Atchaiah  218 ITR 239 (SC) for the proposition is that only the right person is to be assessed.The crux of the judgment is that if a wrong person has been assessed, then the ITO must assess correct person.
Question: When the Person dies without executing any will How will the income of the deceased be taxed ?
Where a person died intestate (without executing any will) and dispute cropped amongst family members income of deceased for year of his death is to be bifurcated into two parts, viz.,
1) up to date of his death which is to be taxed in hands of legal representatives and
2) from date of his death till year ending or up to date of complete distribution to beneficiaries, whichever is earlier, in hands of executors
IN THE ITAT DELHI BENCH ‘SMC-I’
B.D. Gupta & Sons
Income Tax Officer, Ward-31(2), New Delhi
IT APPEAL NO. 5636 (DELHI) OF 2014
JULY 31, 2015
• One B.D. Gupta expired intestate in 1970. Before his death, he had income under the head ‘Income from house property’ and business. Litigation cropped up amongst the family members of on the question of distribution of his properties. The High Court finding that immovable properties and business were acquired by B.D. Gupta with his own funds and not with the funds of HUF, determined the undisputed share of all the family members at 60 per cent. It was directed that undisputed share of 60 per cent be given to the respective parties. The remaining 40 per cent was held to be disputed. Some Administrator was appointed.
• The Family settlement took place in the year 2004 and it is from such date that the shares of the beneficiaries came to be defined.
• If a particular income is not chargeable to tax in the hands of a person as per law, then the same cannot be taxed merely on the reason of such person inadvertently filing return declaring some income. No income can be logically considered as taxable in the hands of HUF of deceased.
• The Family settlement shall not be considered to have retrospective effect as during period anterior to such settlement, there were no defined shares of the beneficiaries.
• Income of a deceased for the year of his death is to be bifurcated into two parts, viz., up to the date of his death which is to be taxed in the hands of legal representatives and from the date of his death till the year ending or up to the date of complete distribution to the beneficiaries, whichever is earlier, in the hands of the executors.
It is observed that simply because the assessee inadvertently filed return of income in the capacity of HUF would not make HUF liable to any tax unless income actually belongs to HUF