Income Tax Appellate Tribunal - Ahmedabad
Chandrikaben J.Panchal L/H Of Late ... vs Income Tax Officer,Ward-1,, Mehsana on 29 November, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "A" BENCH AHMEDABAD
BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER,
AND SHRI S. S. GODARA, JUDICIAL MEMBER.
ITA No.2048/Ahd/2012
(Assessment Year:2009-10)
Smt. Chandrikaben J. Panchal
Late Shri Jayantilal C. Panchal
(Prop. Padmavati Construction)
4A, Jankalyan Society, Opp.
Swaminarayan Society, Mehsana Appellant
Vs.
Income Tax Officer,
Ward - 1, Mehsana Respondent
PAN: ABIPP5921A
आवेदक क ओर से / By Assessee : Shri M. J. Shah, A.R.
राज
व क ओर से / By Revenue : Shri Deepak Sutaria, Sr. D.R.
सन
ु वाई क तार ख/Date of Hearing : 23.09.2016
घोषणा क तार ख/Date of
Pronouncement : 29.11.2016
ORDER
PER S. S. GODARA, JUDICIAL MEMBER
This assessee's appeal for assessment year 2009-10 arises against the CIT(A), Gandhinagar's order dated 15.06.2012, in appeal no. CIT(A) ITA No.2048/Ahd/2012 (Smt. Chandrikaben J. Panchal vs. ITO) A.Y. 2009-10 -2- /GNR/13/2011-12, in proceedings under section 143 R.W.S. 147 of the Income Tax Act, 1961; in short "the Act".
2. The assessee's two folded substantive grounds raised in the instant appeal inter alia challenge validity of reopening taken recourse to by the Assessing Officer and upheld in the lower appellate proceedings. Her latter ground pleads that the CIT(A) has erred in directing the Assessing Officer to make income addition @ 3% of the contract works stated to have neither been executed nor performed at assessee's behest.
3. We now come to former issue of validity of the impugned reopening first. This appellant is legal heir of the deceased assessee Shri Jayantilal C. Panchal. He was a civil contractor. He filed return on 29.09.2009 stating income of Rs.2,06,020/-. The same stood processed. The Assessing Officer thereafter formed reasons to believe that the assessee's taxable income liable to be assessed had escaped assessment on account of difference of rs.19,24,461/- in total receipts declared vis-à-vis the corresponding figures in TDS certificates of Rs.81,10,880/- and Rs.1,00,35,341/-; respectively. He thus issued Section 148 notice dated 22.10.2010. Page 23 of the paper book reveals that the original assessee had already left for his heavenly abode on 15.07.2010 i.e. much before the issuance of reopening notice. This appellant then filed her reply dated 10.03.2011 intimating the Assessing Officer about the original assessee's death. The Assessing Officer completed re- assessment in question making addition of the above stated amount of Rs.19,24,461/-.
4. The appellant filed appeal. Her first and foremost substantive ground challenged validity of the above re-opening on the ground that Section 148 ITA No.2048/Ahd/2012 (Smt. Chandrikaben J. Panchal vs. ITO) A.Y. 2009-10 -3- notice had been issued in the name of a dead person/assessee. The CIT(A) declines the same as follows:
"4.3 I have gone through the facts of the case, the submission of the appellant and the report of the AO on the issue. There is no dispute that the notice was issued in the name of the deceased person to whom the income belong originally and the AO was not person to whom the income belong originally and. the AO was not knowing about that unfortunate death of the person while issuing the notice. The fact that there was a news item in the local newspaper does not mean that the AO had prior knowledge. It is also true that no fresh notice u/s 148 rws 147 .has been .issued in the name of the legal heir even thereafter. However, .the proceedings continued and apparently subsequent notices u/s 142(1) etc was issued in the name of the legal heir only and the assessment framed through her only.
I agree that infirmity has been committed but it is curable. In similar circumstances the Third Member Bench of Hon'ble ITAT, Amritsar in the case of Ashok Kumar 80 ITD 33 has held so and set-aside the matter back to the AO. The Accountant Member in his order had approved the action of the first appellate authority in restoring the matter back to the file of the Assessing Officer asking him to reprocess the same de novo but after, bringing .the other legal heirs on record. This direction was in conformity with the judgment of the Supreme Court in CIT v. Jai Prakash Singh [1996] 219 ITR 737. The CIT(A) cannot order for fresh adjudication after the amendment in the powers of the first appellate authority. Therefore, it is held that the proceedings are not ab initio invalid and as in practice all opportunity of being heard has. been provided to the legal heir; the subsequent assessment is-held valid. .The decision of Hon'ble Supreme Court in the case of Estate of Late Rangalal jajodia [1971] 79 ITR 505 (SC) 'in .which case it was decided that it is a curable defect and the question of limitation does not arise is relied upon. As far as the reasons for reopening are concerned these have been reproduced in the assessment order and opportunity has been given in the assessment proceedings on this specific- issue.
The decision of Hd.n'ble Delhi High Court in the case of R. C. Jain deceased; 273 ITR 384 cited by the appellant is not applicable to the present facts as the department was particularly informed about the death of the person before the invalid notice was issued. Therefore, it is decided that the reasons have been properly recorded, the proceedings are not ab-initio void and the reassessment order is validly framed. The grounds are decided accordingly."
5. We have heard both the parties vehemently argued in favour of their respective stands. There is hardly any dispute by now that the original assessee expired on 15.07.2010 even before issuance of section 148 notice dated 22.12.2010. There is further no quarrel that this appellant brought the same to Assessing Officer's knowledge as stated in para 3.1 of the re-
ITA No.2048/Ahd/2012 (Smt. Chandrikaben J. Panchal vs. ITO)A.Y. 2009-10 -4- assessment order. We notice in these facts that a co-ordinate bench of this tribunal in IT(SS)A No.441/Ahd/2011 Hasmukhbhai Barot vs. ACIT decided on 13.08.2015 quashes an identical reopening as under:
"7. We have considered rival contentions and gone through the record carefully. We find that the AO had issued notice under Section 158BD on 21.6.2004 upon Shri Kantilal B. Barot. Copy of the notice is available at page no.25. His legal heir, Shri Hasmukhbhai K. Barot, has pointed out to the AO vide letters dated 6.6.2004 and 23.6.2006 that Shri Kantilal B. Barot was expired on 27.12.2001. Thus, it is an established fact that notice under section 158BD was issued upon a deceased person. The question before us, whether this inherent defect in the notice can be legalized with the help of section 292BB. The learned counsel for the assessee submitted that section 292BB was considered by the Special Bench of the ITAT in the case of Kuber Tobacco Vs. DCIT, 117 ITD 273 wherein it has been observed that this provision is prospective in nature. It was brought in statute w.e.f. 1.4.2008 and hence, it was not effective when the notice under section 158BD was issued. Therefore, the department cannot get any benefit from this section. Apart from this, we find that Third Member of the ITAT in the case of Sikandar Lal Jain (supra) has made lucid enunciation the law on this issue, and hence, the notice issued upon a deceased person would not be valid one for initiating the proceedings. The discussion made in the order is worth to note, as under:
"12. Now coming to the second issue whether the notice issued in the name of a dead person is a valid notice or not. Can the proceedings be initiated against a dead person ? The facts of the case clearly speak that the notice under section 148 was issued in the name of the assessee who has already expired on 17-11-2002. Shri Sikandar Lal Jain, the assessee, has submitted the return up to the assessment year 2002-03. His return for assessment year 2003- 04 was filed on 26-3-2004 by his wife Smt. Uma Rani Jain as his legal heir. The said return was processed by the Assessing Officer on 2- 7-2004 and refund was granted in the name of Smt. Uma Rani Jain as legal heir of the assessee. Thus, the fact regarding the death of the assessee was very much in the record of the Assessing Officer. Under these facts, the Assessing Officer initiated the proceedings in the name of Shri Sikandar Lal Jain by recording the reasons as well as issuing of the notice under section 148 dated 21-3-2005. For a valid initiation of the proceedings under section 147, in my opinion, issuance of a valid notice within the limitation period as well as recording of the reasons is essential. The service of the notice on the assessee is also necessary. A reading of sections 147, 148 and 149 makes it clear that the notice has to be issued to the assessee. Issuance of the notice to the assessee, as I have already held, is essential for valid proceedings. The assessee is defined under section 2, sub-section (7) which lays down as under :
"(7) "assessee" means a person by whom any tax or any other sum of money is payable under this Act, and includes--ITA No.2048/Ahd/2012 (Smt. Chandrikaben J. Panchal vs. ITO)
A.Y. 2009-10 -5-
(a) every person in respect of whom any proceeding under this Act has
been taken for the assessment of his income or assessment of fringe benefits or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person ;
(b) every person who is deemed to be an assessee under any provision of this Act;
(c) every person who is deemed to be an assessee in default under any provision of this Act;"
From the reading of this section, it is apparent that 'assessee' means a person by whom any tax or any sum of money is payable under this Act and also includes even every person who is deemed to be an assessee under any provision of the Income-tax Act. The person is defined under section 2, sub- section (31) which includes an individual. 'Individual' means a single human being distinct from a group of human beings. Now, the question arises whether the person who has already expired, can be regarded to be a human being so as to fall within the definition of 'individual'. Notice in this case is not issued in the name of the legal representatives of the assessee but issued in the name of an individual who has already expired on 17-11-2002. Therefore, it cannot be said that there was an individual in existence in the name of Shri Sikandar Lal Jain in whose name notice is issued as on the date when the proceedings under section 147 was initiated or the notice under section 148 was issued. Under the 1922 Act, the word "individual" did not necessarily refer to a natural human being but also included a juristic person like a Hindu idol, but under the 1961 Act definition, there is a separate appropriate specification "every artificial juridical person.....". Similar view has been taken by the Hon'ble Andhra Pradesh High Court in the case of Deccan Wine & General Stores v. CIT [1977] 106 ITR 111, in which it was categorically held that an individual under the Income-tax Act, 1961 means only a human being. The issuance of a valid notice is a foundation for the validity of the re-assessment. There is a clear cut distinction between the precedent and procedure. The defect in the procedure will not normally amount to lack of jurisdiction. The notice prescribed under section 148 for the purpose of initiation of reassessment proceedings is not a mere procedural requirement, but is a condition precedent to the validity of reassessment. If no notice is issued or if the notice issues is shown to be invalid, the proceed- ings initiated by the Assessing Officer would be invalid and void. The assessment framed on the basis of such invalid proceedings will be invalid. A notice issued to a dead person, in my opinion, cannot be regarded to be a notice issued to an individual as he cannot be a person to be an assessee. In consequence thereof, it cannot be regarded to have been issued to an assessee. No doubt, under section 2, sub-section (7) of the Income-tax Act, his legal representatives being different human beings from Shri Sikandar Lal Jain, are deemed to be the assessee in view of the provisions of section 159 of the Income-tax Act. Section 159(1) stressed that where a person dies, his legal ITA No.2048/Ahd/2012 (Smt. Chandrikaben J. Panchal vs. ITO) A.Y. 2009-10 -6- representatives shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased. Similarly, section 159(2) also empowers the Assessing Officer to take the proceedings against the legal representatives which he should have taken against the deceased if he had survived. Section 159(2) nowhere authorizes the Assessing Officer to take the proceedings against the individual who has already expired, that is why the legal representative under section 2(7) are regarded to be assessee. It emanates that the assessee in the case of a deceased person will be the person who are regarded to be the legal heirs of the deceased as they can be regarded to be the human being. The notice under section 148 has to be issued on the assessee,i.e.,individual (human being). A person who has already expired cannot be regarded to be a human being as on the date when the notice was issued in this case. Only legal heir can be regarded to be the individual. In view of the clear mandates of the provisions of section 2(7) and sub-sections (1), (2) and (3) of section 159, I am of the opinion that the notice issued in the name of a dead person is not a valid notice. In the absence of issuance of a valid notice, the proceedings initiated under section 147 cannot be said to be valid one. Since both the parties have argued this issue extensively relying on a number of case laws claimed to be in their favour, I am bound to discuss all these case laws before giving any final verdict and accordingly these cases are discussed in the following paragraphs as under:
....."
8. During the course of hearing, section 159 of the Income Tax Act, was also brought to our notice. This section provides a mechanism for putting tax liability upon the legal representative, who inherited the property of the deceased.
9. This aspect has also been considered by the Tribunal in the case of Sikandar Lal Jain extracted (supra). Third Member has held that section 159(2) nowhere authorize the AO to take proceeding against the individual who has already expired, that is why the legal representative under section 2(7) are regarded to be assessee. This aspect can also appreciated by an example, viz. an assessee died leaving behind four legal representatives. The AO issued notice on the deceased. One of the legal representatives participated in the proceedings and the AO passed assessment order. All the four legal representatives had inherited property of the deceased. Can tax liability imposed upon the deceased assessee will be recovered from the rest of the legal representatives, who inherited the property, but did not participate in the proceeding, because they had not received any notice ? Section 292BB will not help the AO in this situation. Therefore, considering from all angles, we find that notice issued by the AO upon the deceased is defective notice and no valid assessment order could be passed.
Respectfully following the order of the ITAT in the case of Sikandarlal Jain (supra), we allow the first ground of appeal and quash the assessment order.
Consequently, we do not deem it necessary to consider other grounds of appeal, in view of the above discussion."
ITA No.2048/Ahd/2012 (Smt. Chandrikaben J. Panchal vs. ITO)A.Y. 2009-10 -7-
6. Ld. Departmental Representative fails to indicate any distinguishing features in facts of the two cases. We accordingly draw support from the above extracted co-ordinate bench's decision to quash the impugned reopening leaving behind the latter ground (supra) as rendered infructuous.
7. This appellant succeeds in the instant appeal.
[Pronounced in the open Court on this the 29th day of November, 2016.] Sd/- Sd/-
(N. K. BILLAIYA) (S. S. GODARA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad: Dated 29/11/2016
True Copy
S.K.SINHA
आदे श क त ल
प अ े
षत / Copy of Order Forwarded to:-
1. राज
व / Revenue
2. आवेदक / Assessee
3. संबं धत आयकर आयु!त / Concerned CIT
4. आयकर आयु!त- अपील / CIT (A)
5. )वभागीय ,-त-न ध, आयकर अपील य अ धकरण, अहमदाबाद /
DR, ITAT, Ahmedabad
6. गाड3 फाइल / Guard file.
By order/आदे श से,
उप/सहायक पंजीकार
आयकर अपील य अ धकरण, अहमदाबाद ।