Income Tax Appellate Tribunal - Ahmedabad
Vinod C Gnadhi L/H Of Late Chandrakant ... vs Assessee on 6 November, 2012
आयकर अपीलीय अिधकरण,
अिधकरण, अहमदाबाद Ûयायपीठ ''A'', अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD,
"A" BENCH
सव[ौी ौी जी.
जी.सी.
सी.गुƯा,ा माननीय उपाÚय¢,
उपाÚय¢, एवं अिनल चतुवद
ȶ ȣ,
ȣ, लेखा सदःय के सम¢ ।
BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND
ANIL CHATURVEDI, ACCOUNTANT MEMBER)
IT(SS)A No.594/Ahd/2012
[Block Period - 1.4.1986 to 1.8.1996]
Late Shri Chandrakant A. Gandhi बनाम/Vs. The ACIT, Cir.3
By L/H. Shri Vinod C. Gandhi Ahmedabad.
119, Brahmpuri ni Pole, Patasa Pole
Gandhi Road, Ahmedabad 380 001.
PAN : AJUPG 6416 F
(अपीलाथȸ / Appellant) (ू×यथȸ / Respondent)
िनधा[ǐरती कȧ ओर से/ :
Assessee by Shri S.N. Divetia
राजःव कȧ ओर से/ :
Revenue by Shri O.P. Batheja, Sr.DR.
सुनवाई कȧ तारȣख/ :
Date of Hearing 26th September, 2013
घोषणा कȧ तारȣख/ :
Date of Pronouncement 04.10.2013
आदे श / O R D E R
PER G.C. GUPTA, VICE-PRESIDENT: This appeal by the
assessee for the block period 1.4.1986 to 1.8.1996 is directed
against the order of the CIT(A)-XXI, Ahmedabad, dated
6.11.2012.
IT(SS)A No.594/Ahd/2012
2. The only issue in this appeal is regarding validity of penalty
levied under section 158BFA(2) of the I.T.Act, 1961. The
ground no.2.1 is a legal issue raised by the assessee, and is being
taken up first for disposal. The ground no.2.1 of the assessee is
as under:
"2.1 The impugned order passed by the AO on the
deceased assessee - late Shri Chandrakant A. Gandhi is
bad in law and illegal because his son Shri Vinod C.
Gandhi was brought on record as his legal heir and
representative."
3. The learned counsel for the assessee submitted that the
penalty order passed under section 158BFA(2) of the Act was on
the dead person, late Shri Chandrakant A. Gandhi. He submitted
that the fact that the assessee has expired was brought to the
notice of the AO time and again, and still the AO passed penalty
order in the name of dead assessee. He referred to the show
cause notice issued by the AO dated 1.3.2011 in the name of the
dead assessee. He referred to the copy of the rectification
application dated 17.2.2011 filed by the son of the deceased
assessee with the AO intimating that the assessee, Shri
Chandrakant A. Gandhi has expired. He submitted that law is
settled on this issue that the penalty imposed on dead person is
null and void. The learned DR has opposed the submissions of
the learned counsel for the assessee. He submitted that not
mentioning the name of son of late assessee as legal heir of his
father is merely a clerical and typographic mistake, which does
not render the order imposing the penalty as null and void. He
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IT(SS)A No.594/Ahd/2012
submitted that the AO has allowed opportunity of hearing to the
assessee, and that the clerical error has not resulted in any
adverse effect on the proceedings within the meaning of section
292B of the Act. He relied on the following decisions:-
i) Smt. Swaran Kanta Vs. CIT, 44 TAXMAN 68
(PUNJ. & HAR.);
ii) CIT Vs. Jagat Novel Exhibitors P. Ltd., 18
taxmann.com 138 (Delhi);
iii) Smt. Tapati Pal Vs. CIT, 124 TAXMAN 123
(Cal);
iv) ACIT Vs. Nageshwar Prasad, 63 ITD 29
(PAT.)(TM);
in supported the case of the Revenue. He relied on the order of
the AO and the CIT(A).
4. We have considered rival submissions and have perused the
orders of the authorities below. We find that the order imposing
penalty under section 158BFA(2) of the Act has been passed in
the name of the assessee late Shri Chandrakant A. Gandhi. We
find that son of late Shri Chandrakant A. Gandhi was not
impleaded as a legal heir in the order imposing penalty on the late
assessee. We find that it is well settled that no penalty can be
legally imposed on dead person, and the order imposing penalty
on a deceased person shall be null and void. The decisions relied
upon by the learned DR are clearly distinguishable. In
Smt.Swaran Kanta Vs. CIT (supra), the facts were that the
assessee has filed its return of income on 4.9.1975, and during the
pendency of the assessment proceedings, he died on 7.3.1997.
However, in the assessment proceedings his widow was
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IT(SS)A No.594/Ahd/2012
impleaded and notice was issued to her as legal heir of the
assessee. The assessment was finalised in the presence of widow
of the assessee on 10.3.1978, and in these facts, the Hon'ble High
Court held that merely by virtue of mistake the name of the
deceased was written at the top of the assessment order, which
was simply a clerical error which has no adverse effect on the
proceedings within the meaning of section 292B of the act.
However, the Hon'ble High Court in the same para-3 of its order
has made it clear that "no doubt, an order passed on a dead
person is null and void but in the case in hand, order was not
passed on the dead person but on the legal heir of the deceased."
The Hon'ble High Court further observed that the situation would
have been different, if the ITO had not impleaded the legal heir
and if he had not given any hearing to the legal heir, and in that
event, it could have been said that the order was passed on the
deceased. We find that in the case before us, Shri Vinod C.
Gandhi, son of the deceased assessee was never impleaded as a
legal heir of his deceased father. We find that Revenue has not
placed any material before us to suggest that any order bringing
the legal heir of the deceased assessee on record, was passed by
the AO, even in the order sheet maintained by him, and intimated
to the legal heir of the assessee. The facts of the case before us
are clearly at variance with the facts of the case before the
Hon'ble High Court. In the case before the Hon'ble High Court,
during the pendency of the assessment proceedings, the widow of
the deceased assessee was impleaded as a legal heir, and
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IT(SS)A No.594/Ahd/2012
thereafter, a finding has been recorded that the ITO followed the
procedure correctly as provided by section 159 and completed the
proceedings. The Hon'ble Court found that title of the order,
which was not happily worded, would not make the assessment
order invalid. In the case before the Hon'ble High Court, it was
specifically recorded by the Hon'ble High Court that the order
was not passed on the dead person, but on the legal heir of the
deceased. No such facts are present in the case before us. There
is nothing on record to suggest that at any point of time, during
the pendency of penalty proceedings, the legal heir of the
deceased assessee was impleaded and brought on record. We
find that in the facts of the case of the assessee, the decision of
Hon'ble Punjab & Haryana High Court, rather supports the case
of the assessee. In these facts of the case, we conclude that it was
not merely a clerical mistake, but since the order imposing the
penalty was passed on the dead person, the same is null and void,
and penalty is liable to be cancelled on this ground alone.
5. In the case of CIT Vs. Jagat Novel Exhibitors (P) Ltd.,
(supra), relied upon by the ld. DR, the issue before the Hon'ble
High Court was different, and the issue was that regarding object
and purpose behind section 292B is that technical pleas on the
ground of mistake, defect or omission in summons/notice should
not invalidate assessment proceedings, when no confusion or
prejudice is caused due to non-observance of technical
formalities. In this case, before the Hon'ble High Court the plea
of the assessee was that the notice was issued under section 148
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IT(SS)A No.594/Ahd/2012
were defective as the words "Private Limited" were missing.
However, the address mentioned on all notices was correct. In
these facts, the Hon'ble High Court held that the provision of
section 292B shall apply and the object and purpose behind
section 292B is to ensure that the technical plea on the ground of
mistake, defect or omission in summons/notice would not
invalidate the assessment proceedings, when no confusion or
prejudice is caused due to non-observance of technical
formalities. In the case before us, the issue is totally different,
and the issue is whether the order imposing penalty could validly
be passed on the deceased assessee, and in view of the fact that
legal heir was never brought on record.
6. In the case of Smt.Tapati Pal Vs. CIT (supra) relied upon
by the learned DR, the facts were that one Dr.G.C. Nandi, died
on 28.7.1985 and the assessments were completed on 25.3.1986
on the legal heir Smt.Tapati Pal, and the penalty proceedings
were also initiated against legal representative. The Hon'ble
High Court approved the order of the Tribunal holding that the
legal heir is fully responsible for default committed by the
deceased as laid down by section 159, and the assessee is liable
to be taxed and be treated as deemed assessee after death of her
father and under the provisions of section 159, there was nothing
wrong in initiating penalty proceedings against assessee after the
death of her father. In this case, the assessment proceedings were
completed on legal heir of the deceased person itself, and the
penalty proceedings under section 271(1)(c) of the Act were
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IT(SS)A No.594/Ahd/2012
initiated against the legal heir, Smt. Tapati Pal, and therefore, in
our view, the facts of this case are in total variance with the facts
of the case before us.
7. In the case of ACIT Vs. Nageshwar Prasad (supra), relied
upon by the ld. DR, the issue was that whether the penalty
proceedings can validly be initiated and penalty can be levied on
legal heirs when return of income was filed by the deceased
during his life time, and when inaccurate particulars as to his
income were furnished by the deceased in the said return. We
find that in this case, before ITAT, Patna Bench, the penalty
proceedings were initiated and penalty was levied on the legal
heirs, and therefore, the Tribunal found that there is no infirmity
in the order imposing penalty, although, the original return of
income was filed by the deceased. In the case before us, penalty
proceedings were never initiated or penalty levied on the legal
heirs of the deceased, and in fact, the legal heirs were not brought
on record by the AO before levy of impugned penalty. The facts
of the case of the assessee before us are entirely different from
the facts of the case before the Hon'ble High Court, and
therefore, the case relied upon by the ld. DR is of no help to the
case of the Revenue.
8. In the case before us, the legal heir was never impleaded or
brought on record. The show cause notice for penalty was not
issued, as legal heir of the deceased, and therefore, it cannot be
said that non-mentioning of the name of the legal heir and writing
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IT(SS)A No.594/Ahd/2012
of name of the deceased at the top of the penalty order is merely a
clerical error. In our considered view, where legal heirs of the
deceased was brought on record and was impleaded in the
proceedings as legal heir, and only mistake is in writing of the
name of the deceased on the top of the order passed by the AO,
the same shall be simply a clerical error and shall have no
adverse effect on the proceedings within section 292B of the Act.
However, if the AO has failed to bring the legal heirs on record
and the legal heirs has not been impleaded, it cannot be said that
it is merely a clerical error to be saved by the provision of section
292B of the Act, and such an order passed on the dead person
shall be null and void, and has to be quashed. In this case, the
facts of the case leaves to only conclusion that the order imposing
penalty was passed on the deceased, and therefore, is null and
void, and the penalty on the dead person is liable to be cancelled
on this ground alone and accordingly, we cancel the penalty
levied under section 158BFA(2) of the Act.
9. The assessee has taken other grounds of appeal on merits of
the case as under:
"1.1 The order passed u/s.250 confirming the penalty of
Rs.9,04,473/- levied u/s.158BFA(2) on 18.3.2011 for block
period by ACIT, Cir.3, Ahmedabad is wholly illegal,
unlawful and against the principles of natural justice.
1.2 The ld.CIT(A) has grievously erred in law and or on
facts in passing the impugned order without considering
fully and properly the submissions made and evidence
produced by the appellant.
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IT(SS)A No.594/Ahd/2012
3.1 The ld.CIT(A) has grievously erred in law and on
facts in upholding that the appellant had willfully evaded
the undisclosed income and the explanation offered was not
satisfactory.
3.2 That in the facts and circumstances of the case as
well as in law, the ld.CIT(A) ought to have upheld that the
appellant had committed default u/s.158BFA(2) by willfully
evading the undisclosed income.
3.3 The ld.CIT(A) has grievously erred in holding that
the appellant had committed default u/s.158BFA(2) and
thereby levied penalty of Rs.9,04,473/-"
10. The learned counsel for the assessee submitted that even on
merits of the case, the assessee is not liable to penalty as only
source of income of the assessee is agriculture, assessed by the
department over number of years, year after year, and no other
source of income can be established by the department.
Accordingly, even if the some deposit is found to be not
satisfactorily explained by the assessee, the same could not be
assessed as undisclosed income of the assessee. He submitted
that ITAT, Ahmedabad in the quantum appeal of the assessee has
allowed only the credit of its agricultural income declared in the
income-tax return for the block period, and credit of earlier years
(prior to block period) income was not allowed to the assessee.
He submitted that ITAT has directed the AO to compute
undisclosed income by taking the figure of savings from
agricultural income at 40% for some years, 60% for some other
years and 80% in succeeding years. He submitted that the basis
of determining the saving figures of the assessee for the block
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IT(SS)A No.594/Ahd/2012
period is merely on estimate, and that no penalty under section
158BFA(2) was imposable, where the part of the addition has
been sustained on merely estimate basis. He submitted that
imposition of penalty in the facts of the case of the assessee is not
mandatory as held by Hon'ble Apex Court in Hindustan Steel
Ltd. Vs State of Orissa, 83 ITR 26 (SC).
11. The learned DR vehemently opposed submissions of the
learned counsel for the assessee. He submitted that five diaries
were seized having business transaction with one L.T.Shroff of
the assessee, and the Tribunal has restricted the addition to the
extent of Rs.15,07,455/- by holding that the same as not
agriculture income of the assessee. He submitted that the
proviso to section 158BFA(2) makes the levy of penalty
mandatory, once the assessed income is found to be more than
returned income. He relied on series of decisions in support of
his case viz. (i) CIT Vs. Becharbhai P. Parmar, 341 ITR 499
(Guj), Kandoi Bhogi Lal Mool Chand Vs. DCIT, 341 ITR 271
(Guj), Meenaben J. Bhansali Vs. ACIT,
IT(SS)A.No.55/Ahd/2009 (ITAT, Ahmedabad), CIT Vs. Heera
Construction Co. (P.) Ltd. 337 ITR 359 (Ker), (iv)
Smt.Madhuben R. Barot Vs. ACIT, 18 taxmann.com 227 (Ahd),
(v) CIT Vs. Smt.Anju R. Innani, 191 TAXMAN 350 (Bom) in
support of the case of the Revenue.
12. We have considered rival submissions and have perused the
copies of various documents and case laws filed by both the
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IT(SS)A No.594/Ahd/2012
parties. We find that the assessee is liable to succeed on merits
of the case also. The assessee has only source of agricultural
income, and no other source of income could be established by
the department. Accordingly, even if certain part of the
assessee's explanation with regard to deposits with some
financial entity is not proved, since the assessee has only
agriculture income, unproved part of the deposits could be
arguably claimed to be out of agriculture income only.
Moreover, we find that the Tribunal in the quantum appeal of the
assessee has allowed the benefit of credit of agriculture income of
the assessee relating to the block period only. The claim of the
assessee is that the credit for the amount available with the
assessee, out of savings from agriculture income of past many
years, as on the first date of block period, was not allowed by the
Tribunal. We find that in the quantum appeal of the assessee, the
Tribunal has directed to take the savings from the agriculture
income at 40% for period upto the assessment year 1992-93 and
at 60% for the assessment years 1993-94 and 1994-95 and in the
subsequent years at 80% of the agricultural income was directed
to be taken as savings of agriculture income of the assessee, and
the AO was directed to give credit to the assessee accordingly.
We find that the total undisclosed income under section 158BD
was determined at Rs.36,47,355/- by the AO and after allowing
appeal-effect by the ITAT, the same was reduced to
Rs.15,07,455/-. We find that the facts of the case may justify the
part of the addition to the extent of Rs.15,07,455/-, sustained by
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IT(SS)A No.594/Ahd/2012
the Tribunal, but in our view, are not sufficient to justify the
imposition of penalty under section 158BFA(2) of the Act. It is
well settled now that the assessment proceedings and penalty
proceedings are different and independent to each other. The
addition or part of the addition could be sustained on the
preponderance of probabilities, but in penalty proceeding, some
proof is required, to impose penalty on the assessee. We find that
the savings of the assessee from agriculture income have been
determined by the Tribunal by fixing certain percentage ranging
from 40% to 80% for different years involved in the block period,
and that is by way of estimation only. In CIT Vs. Dr.Giriraj
Agarwal Giri, (2012) 253 CTR (Raj) 109, Hon'ble Rajasthan
High Court held that where the additions are based on estimation
only, it can be said to be correct and it can be incorrect also, and
therefore, the penalty was wrongly imposed by the AO under
section 158BFA(2) of the Act and no substantial question of law
is involved in the present case. In Shri Yogesh M. Shah Vs.
DCIT, IT(SS)A.No.605/Ahd/2011 vide their order dated
7.9.2012, Ahmedabad Tribunal cancelled the penalty levied
under section 158BFA(2) by holding that the conduct of the
assessee does not seem to be mala fide and that explanation filed
by the assessee in this regard was found to be bona fide. It is
well settled that the penalty proceedings are penal in nature, and
onus of proving the assessee to be guilty is on the Revenue in
order to impose the penalty on the assessee. We are not
impressed with the argument of the learned DR that in
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IT(SS)A No.594/Ahd/2012
accordance with the provision of section 158BFA, the imposition
of penalty is mandatory. In Hindustan Steel Ltd. Vs. State of
Orissa, 83 ITR 26 (SC), the Hon'ble Supreme Court held as
under:
"An order imposing penalty for failure to carry out a
statutory obligation is the result of a quasi-criminal
proceeding, and penalty will not ordinarily be imposed
unless the party obliged, either acted deliberately in
defiance of law or was guilty of conduct contumacious or
dishonest, or acted in conscious disregard of its obligation.
Penalty will not also be imposed merely because it is lawful
to do so. Whether penalty should be imposed for failure to
perform a statutory obligation is a matter of discretion of
the authority to be exercised judicially and on a
consideration of all the relevant circumstances. Even if a
minimum penalty is prescribed, the authority competent to
impose the penalty will be justified in refusing to impose
penalty, when there is a technical or venial breach of the
provisions of the Act or where the breach flows from a
bona fide belief that the offender is not liable to act in the
manner prescribed by the statute."
We find that very purpose of allowing opportunity of hearing to
the assessee implies that authorities may refuse to impose the
penalty, where there is technical or venial breach of provision of
the Act and the conduct of the assessee is bona fide, and any
other interpretation shall render the provision of allowing
opportunity of hearing to the assessee as futile. In this case,
before us, the only source of income being agriculture and that
the credit for past savings from agriculture income, prior to the
block period, having not been allowed in the quantum
proceedings, and figure of addition having been determined on
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IT(SS)A No.594/Ahd/2012
estimate basis, applying the average rate of 40%, 60% and 80%
for working out the figures of savings from agricultural income in
different years of block period, and the part of the addition
having been sustained by the Tribunal on estimation only, we
hold that penalty imposed under section 158BFA(2) is liable to
be cancelled on merits also and is accordingly cancelled, the
grounds of the appeal of the assessee is allowed.
13. In the result, the appeal of the assessee is allowed.
Order pronounced in Open Court on the date mentioned hereinabove.
Sd/- Sd/-
(अिनल चतुवȶदȣ / ANIL CHATURVEDI) जी.
जी.सी.
(जी सी.गुƯा/G.C.
ा GUPTA)
लेखा सदःय /ACCOUNTANT MEMBER उपाÚय¢ /VICE-PRESIDENT
Copy of the order forwarded to:
1) : Appellant
2) : Respondent
3) : CIT(A)
4) : CIT concerned
5) : DR, ITAT.
BY ORDER
DR/AR, ITAT, AHMEDABAD -14-