Income Tax Appellate Tribunal - Ahmedabad
Late Shri Navinchandra Sakalchand ... vs Ito, Ward-5(2)(3)., Ahmedabad on 11 March, 2020
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'A' अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No. 415/Ahd/2018 ( नधा रण वष / Assessment Years : 2012-13) Late Shri Navinchandra बनाम/ Income Tax Officer Sakalchand Dalal Vs. Circle 5(2)(3), Legal Heir Dipak N. Dalal Ahmedabad 5, Shalimar, Krishna Society, Panchvati, Ahmedabad 380006 Gujarat थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAUPD3656R (अपीलाथ /Appellant) .. ( यथ / Respondent) अपीलाथ ओर से /Appellant by : Shri S. N. Divatia, A.R. यथ क ओर से / Shri Deelip Kumar, Sr.D.R. Respondent by :
सन ु वाई क तार ख / Date of 10/02/2020 Hearing घोषणा क तार ख /Date of 11/03/2020 Pronouncement आदे श/O R D E R PER WASEEM AHMED - AM:
The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax(Appeals) - 5, Ahmedabad (CIT(A) in short) dated 04/12/2017 relevant to Assessment Year (AY) 2012-13.
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2. The Assessee has raised following grounds of appeal:
"1.1 The appellant, being dissatisfied with CIT(A) order dated 4-12-2017, confirming quantum addition of Rs. 1,51,01,302 in respect of long term capital gain on sale of fully let-out property (having undemarcated plot area of 4292 sq. mtrs.
alongwith different super-structures thereupon admeasuring 2030.10 sq. mtrs.), presents this appeal 2.1 It is submitted that the AO has no valid jurisdiction u/s 148 as
(i) Notice u/s 148 was issued on 28-1-2015 in name of deceased assessee viz; Shri Navinchandra Sakalchand Dalai (who had expired on 3-11- 2013)
(ii) There was prima facie no new material or information, particularly as registered sale deed is always within public domain right at the time of processing ROI
(iii) In any case, FMV of property sold as at 1-4-1981 has not been subject matter of "reasons recorded" u/s 148 3.1 The CIT(A)/the AO failed to appreciate that
(i) The appellant was imperfect owner of property on several counts, entire property sold was in occupation of old tenants / subtenants/sub- lessees (since last more than 20 years) /encroachers, the property sold suffered from mandatory limitations and several adversities, have imperfect titles, subject to several riders such as pending vacation and civil suits, illegal encroachments, Urban Land Ceilings (and Regulations) Act, 1976 (ULCJ acquisition of land area of 5023 sq. mts., Gujarat HC granting injection against the appellant/the buyer to maintain status quo in ULC matter and SLP there against still pending before SC.
(ii) ULC Authority could not demarcate its acquired land area and hence the buyer effectively bought the property (4292 sq. mtrs.) without identification
(iii) There were illegal occupants also, encroachments by anti-socials, one false "Possession Note" obtained from Makarba Panchayat, one room put up by watchman of deceased tenant, liquor sale, gamblings etc. from the property etc.
(iv) The VO allowed meagre 15% deduction in aggregate for tenants, pending disputes, imperfect title etc. which reduction is not commensurate with facts and circumstances.
(v) The AO furnished to the appellant valuation report (as of date of sale] dated 23-3-2016 by the VO as part of assessment order dated 30-3- 2016 u/s 143(3) r.w.s. 147
(vi) The CIT(A) has erred, without appreciation of law and facts, in holding that report of VO is on a very sound basis.
4.1 It is submitted that in specific facts of the case, "Rent capitalization method"
(rent receivable of appr. Rs.142,020 per annum), is reasonable and fair method of valuation, though the VO worked out FMV by employing "Land and Building"
method estimating land FMV at Rs.140.13 lacs and of super structures at Rs.135.95 lacs, total FMV Rs.276.09 lacs which is factually incorrect, since the I T A N o . 4 1 5 / Ah d / 1 8 [ La t e S h r i N a v i n c h a n d r a Sakalchand Dala l vs. ITO] A.Y. 2012-13 - 3 -
super-structures have been renovated / put up by respective tenant occupiers, the appellant did not own the superstructures and in any case the superstructures have been highly overvalued 5.1 It is submitted that the AO ought to have examined the buyer regarding sale consideration paid and his justification, to record status of property, its location, size, shape, surrounding locality, encroachment status, illegal activities, civil suits, ULC proceedings, additional stamp duty paid etc. and present position of the property bought to meet the end of Justice and if necessary to afford the appellant opportunity of rebuttal or cross-examination of the buyer.
6.1 It is submitted that the appellant has been 92 years old, he was under lots of stress, tension and anguish undergoing aforesaid crucial problems beyond his capabilities. The appellant, as advised, therefore made distress sale in utmost hurry at best available price, after negotiating hard with the buyer at fag end of his life."
3. The assessee in the 2nd ground of appeal has challenged the validity of the assessment framed under section 147 of the Act on the ground that the notice under section 148 of the Act was issued upon the dead person.
4. The brief facts of the case are that the assessee namely Shri Navinchandra S Dalal (now deceased assessee) filed his return of income dated 28-03-2013 declaring total income at Rs. 64,570/- which was processed under section 143(1) of the Act dated 06-05- 2013. The AO subsequently found that the sale consideration Rs. 1.34 crore shown by the assessee in the income tax return on the basis of sale deed was less than the value adopted for the purpose of for stamp duty amounting to Rs. 3,30,35,360/-. Accordingly, the AO was of the view that the assessee was required to adopt the sale consideration as adopted for the purpose of the stamp duty in pursuance to the provisions of section 50C of the Act. But the assessee has not done so. As a result the income of the assessee has escaped assessment. Thus the AO issued notice under section 148 of the Act upon the assessee dated 28.01.2015.
5. The legal representative of the deceased assessee namely Shri Deepak N. Dalal in response to such notice submitted that the I T A N o . 4 1 5 / Ah d / 1 8 [ La t e S h r i N a v i n c h a n d r a Sakalchand Dala l vs. ITO] A.Y. 2012-13 - 4 -
original return filed dated 28.03.2013 should be treated as the return filed under section 148 of the Act.
6. The assessee before the AO challenged the validity of the proceedings initiated under section 148 of the Act for various reasons. But the AO disregarded the contentions of the assessee and framed the assessment under section 147 of the Act, in the name of legal representative namely Shri Deepak N. Dalal vide order dated 30-03-2016 determining the total income at Rs. 1,51,65,870/- only.
7. However, the assessee 1st time before the learned CIT (A) contended that the notice under section 148 of the Act, was issued in the name of the dead person. Therefore, the AO should have issued the fresh notice under section 148 of the Act in the name of the legal representatives. However, the learned CIT (A) disregarded the contention of the assessee by observing that the intimation about the death of the assessee was never communicated to the AO. As such, the AO in the absence of sufficient information, has rightly issued notice under section 148 of the Act in the name of the deceased assessee and framed the assessment in the name of legal representative.
8. Subsequently, the learned AR before us submitted as under:
"2. 1 The b rie f fa cts gi vi ng rise to t hi s ap peal a re that t he said a ppea l was filed b y him i n hi s r epr ese nta ti ve ca pa city a s t he le gal heir o f the decease d fat her S hti Na vi ncha ndra Sa ka lchand Da lai w ho ha d e xpi red on 03- 11- 2013. The d ecea sed fat her had tw o so ns- m ys el f and yo unge r one- Di lip a nd o ne da ug hte r- Har s hila . M y fathe r used t o s ta y wit h m y bro ther d uri ng t he tim e whe n he die d a nd he lo o ked a ft er ma na ge d his all fi na ncia l & ot her m atter s.
2. 2 The de ceas ed fat he r ha d fil ed or igi na l I TR on 28- 3- 2013 declar ing t otal i ncom e o f Rs . 64, 570/- . Late r o n t he AO i ss ue d noti ce u/ s 148 o n 28- 1- 2015 on a cco unt o f d i ffere nce i n s tamp d ut y va lue and sale dee d. Si nce t he s aid noti ce was i ss ue d on t he pre se nt app ella nt a s the LR o f the de ce as ed asse s see, he com p lied wi th i n g oo d fa it h and co op erate d i n t he a sse ss me nt pr o cee di ng s, t ho ugh he wa s st ri ctl y I T A N o . 4 1 5 / Ah d / 1 8 [ La t e S h r i N a v i n c h a n d r a Sakalchand Dala l vs. ITO] A.Y. 2012-13 - 5 -
spea ki ng not the LR in view o f no a sset i nhe rite d by hi m or int erme dd led i n t he estate of t he de ceased a nywa y no r l oo ke d afte r/ma na ged fi na nci al affa irs o f t he de ceased pri or t o hi s d eath. He nce t he AO co mpl et ed r e-a ss es sme nt u /s 143( 3) r.w . s . 147 on 30- 3- 2016 o n t he tota l i ncome o f Rs . 1, 51,65, 870/ - a fte r ma ki ng ad dit io n of Rs. 1, 51, 01, 302/ - i nvo ki ng s ec 50C.
2. 3 Mea nw hil e t he a ppe lla nt cam e t o know t hat hi s br ot her S h Dili p Dala i ha d s old i mm ovable pr ope rl y Vasa na w hi ch was clai m ed as recei ved o n i nher ita nce fr om the fat he r und er hi s WI LL e xe cute d on 26- 1- 2013 and he ha d i nher ite d all t he e state left b y m y de cea sed fathe r. On comi ng t o know t he same , t he app ell ant addr es sed lett er dt. 11- 8- 2016 t o I TO Wa rd - 5( 2)93) A'ba d na rrat i ng all fa ct s wit h e vi de nce and req ue sted A O to i mp lead his br ot her Sh Di lip Dal ai as LR o f the decease d a nd co nti nue the p ro cee di ng s a g ainst hi m a nd a ls o re co ve r the dema nd fro m hi m be ca use t he ap pel lant ha d no t re ce ive d any pro per ty fr om his fat her. The a ppe lla nt agai n informed AO vid e l e tter s dt. 5-3- 2018 a nd 17- 3- 2018 t o ta ke up t he pr oceedi ngs for r ecover y agai nst hi s br ot her . How ever no rep l y or acti on wa s taken i n this dire ct io n b y AO . The re fo re t he app ella nt has raise d in t hi s co nte nti on i n the pr ese nt pr o cee di ngs.
2. 4 The app ella nt co nte nds tha t t he p res nt pr oceed ings s hould be rest ore d back t o t he fi le of AO fo r t he fol lo w ing r eas o ns :
(i) Fir s tly , t he A O has fa ile d to a pp re ci ate that i n o rde r to co nt i nue a ny pr o ceed i ng s aga i nst the de ce ased , t he no ti ce ha s to be iss ue d t o al l t he i egal he irs /re pre se nta tives a s hel d i n ca se o f Cho o ha rm al Wa d hu r am ( 8 0 IT R 3 GO) (G uj) w her ei n it i s he ld that :
"W he re a per s on die s l ea vi ng mo re t ha n one le ga l repr ese nta ti ve s, t he I TO m ust pr oceed t o as ses s the tota l income of t he as se sse s b y se r vi ng no ti ce under s . 22( 2) o r s. 34, as t he cas e ma y b e, o n all the lega l re pre se ntat i ve s. If t he not i ce i s ser ve d on onl y o ne legal r epre se nta ti ve , the re wo ul d be no co mpl ete re pre se ntat i on o f the e stat e or , to use t he wo rd s o f Sal mo nd , "of t he per so n o f t he de cea sed ". O ne o nl y o ut of se vera l lega l rep res e ntat i ves w o uld no t r epre se nt t he whol e int ere st o f the de ce ased a nd i f t he w hole intere st o f t he decease d i s not repr e se nted be fo re t he I TO , it i s d i ffi cult t o se e ho w t he I TO ca n pr oceed t o a ss es s t he tota l i nco me o f the asse ss ee. The a sse ss ment must on pri nci ple a nd a ut ho rit y be made o n t hose w ho r epr ese nt t he w hole i nte rest o f t he asse ss ee --hi s e nti re e state --a nd as ses sm ent on o nl y one o f t he m who pa rtia ll y re pre se nt s t he e state o f t he deceas ed, ca nnot b e regar ded as s uffi ci ent to bi nd t he e stat e of t he de cea sed "
(ii) Sec o nd ly , W it ho ut pr ejud ice to the ab ove, it is s ubm itte d that when t he p res ent appe lla nt w ho wa s i s sued no tice u/ s 148 b ut he ob je cte d spe ci fi cal ly t o his be i ng pr o cee ded against on t he g ro und that the re wa s ot her LR and he had i nheri ted the e nti re e sta te of the decease d, he to o s ho uld b e br o ug ht o n re cor d to com plet e the asse ss me nt a nd fur ther pr o cee di ng s. W he n the AO ha s ig nore d thi s ob je cti o n and com plet ed the pr oceed ings , t he sa me are vit iate d unle ss it is co ve red b y t he e xcept io n. The fai lure t o imp lead a ll t he LRs is not irre g ular it y but i lle gal i ty and vi tiate t he a ss e ssm ent.
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In CIT v Ja i Pra kas h Sin gh 's (2 19 I T R 7 37)(S C) , it w as he ld that the fact o f t he d eath o f t he a sse ss ee and the na me s o fte n legal r epr ese nta ti ve s were i nti mate d to t he ITO and sti ll t he asse ss me nt wa s co mple ted w it ho ut b ri ng ing al l the leg al repr ese nta ti ve s on r ecord a nd wit ho ut ser vi ce o f noti ce up o n all of t hem . O n app eal , i t was co nte nd ed tha t the as se ss me nt wa s wholl y i nvali d a nd wi thout juri sd icti on. B ut the cont enti on wa s rejected o n t he gr o und t hat t he re wa s a n i rreg ulari ty and no t a null it y a nd t he a ss es s ment wa s set a si de a nd a fr esh a ss es sme nt was or dere d a fte r ser vice o f not i ce o n a ll the l egal repr ese nta ti ve s. The Tr ib unal co ncurre d i n the de ci si o n o f the appel late a ut hor it y. O n a re fe re nce, it wa s hel d t hat si nce t he ent ire bo d y o f lega l repr ese nta ti ve s o f t he de cea sed a ss es see was not ser ve d and one o f t he le gal r epr ese ntat ives w ho was ser ve d, was no t pr o ved t o ha ve re pre se nte d the ot her le gal repr ese nta ti ve s, the a sse ss me nt wa s nul l a nd vo id a nd t hat fres h asse ss me nt co uld have bee n o rde red o nl y i f law per mitt ed a nd the re wa s no bar , (iii ) Th ir d ly, i t is su bmi tted th a t in cas e the fa il ur e to is s ue no ti ce on a ll t he LR s as ir reg ul arit y, t he e ntire a sse ss me nt i s l ia ble t o be set a si de a nd t he AO s ho uld b e di re cted to ma ke fre s h as ses s ment afte r is s ui ng no ti ce t o appe lla nt' s br ot her who ha s be be q ueat hed all the e state o f t he de cea sed fat he r. The a ppel la nt had ti me & agai n req ue sted t o ta ke pr oceedi ng s agai nst his b r ot her b ut neit he r any ord er was pa ss ed o n sa id a ppl ica ti ons no r a ny i nquir y wa s ma de t o a s cer tai n who had re ce ived the estate o f t he de ceas ed .
(iv) Las tl y, i t is subm itted t hat dir ecti on m ay be g i ve n to A O to iss ue not ice a nd im ple ad sa id s on- Sh Dil ip Dalai a s LR w hich is ma teria l and re le va nt for t he p ur po ses of a sse ss me nt u/s 159( 4) a nd it i s not for ex cl ud ing i ncom e fro m o ne pe rs o n and i ncl ude in t he i ncom e o f ano ther . The pe rs o n to be asse ss ed i s one - de cea sed b ut the pro ce edi ngs are co nti nued aga inst s uch LR who i nheri ts the a ss ets o f the de cea sed . "
9. On the other hand the learned DR vehemently supported the order of the authorities below.
10. We have heard the rival contentions of both the parties and perused the materials available on record filed before us. From the preceding discussion we find that admittedly the notice under section 148 of the Act, was issued in the name of the deceased assessee. Thus the notice issued under section 148 was defective which is not curable as it goes to root of the matter. Similarly the assessment framed in the name of deceased or non-existent entity is also invalid. This view has been also confirmed by the various courts including the Hon'ble Apex court.
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11. However, the difficulties arises before the revenue that how it comes to know before issuing a notice that, whether an assessee is existing and non-existing. What is the remedy for the Revenue if the notice is issued in the name of deceased assessee due non availability of information. In this regard Hon'ble Calcutta High Court in the case of CIT vs. Shaw Wallace Distilleries Ltd reported in [2016] 70 taxmann.com 381 has held that if the legal representative does not divulge the information to the AO about the non-existence or not brought the fact before AO during the assessment proceeding. Then such proceeding should be treated as valid.
12. Whereas the Hon'ble Gujarat High Court in the case of Chandreshbhai Jayantibhai Patel vs. ITO reported in [2019] 101 taxmann.com 362 held that notice issued in the name of deceased assessee will remain invalid as the issue of notice is jurisdictional issue and the same is not curable under section 292B. However the Hon'ble court clarified that the only remedy available to Revenue is to issue a fresh notice in the name of legal representative if the notice not bared by the time.
13. Coming to the present fact of the case it is also undisputed fact that the AO never had any clue about the death of the assessee as well as there was no intimation from the side of the legal representative of the assessee about such fact. Moreover, the assessee never challenged the validity of the proceedings under section 147 of the Act before the AO on the ground that the notice was issued upon the dead person. However, we find that the assessment was framed in the name of the legal representative as evident from the assessment order dated 30.03.2016 which is available on record. Thus it is transpired that the AO was very I T A N o . 4 1 5 / Ah d / 1 8 [ La t e S h r i N a v i n c h a n d r a Sakalchand Dala l vs. ITO] A.Y. 2012-13 - 8 -
much aware during the assessment proceedings under section 147 of the Act about the death of the assessee.
14. Now the question arises whether the AO has available time limit to issue fresh notice under section 148 when he comes to know the fact that the assessee is deceased? In this the provision of section 149 (1) reads as under:
149. (1) No notice under section 148 shall be issued for the relevant assessment year,--
(a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause
(c);
(b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year;
15. On perusal of the provision of the clause (b) of sub-section 1 of the section 149, we note that the AO has available time of six years from the end of relevant assessment year i.e. 31.03.2013 which ends as on 31.03.2019. Admittedly, the assessee died dated 03-11-2013 and the notice was issued upon him under section 148 of the Act dated 28.01.2015. In this connection we note that the AO was not aware about the death of the assessee at the relevant time when he issued notice under section 148 of the Act. Therefore, in our considered view the notice issued by the AO under section 148 of the Act cannot be held as invalid in view of the fact that the AO during the relevant time was unaware of such vital fact. Therefore, the AO cannot be faulted for issuing notice in the name of the deceased assessee under section 148 of the Act in the present given facts and circumstances. But the AO during the proceedings became aware of the fact about the death of the assessee, hence he framed the assessment in the name of legal representative but without issuing the notice under section 148 of the Act to them (legal representatives) despite having the time for I T A N o . 4 1 5 / Ah d / 1 8 [ La t e S h r i N a v i n c h a n d r a Sakalchand Dala l vs. ITO] A.Y. 2012-13 - 9 -
doing so. However, the pertinent fact is that the legal representative never raised any question about the issuance of notice to the other legal representatives during the assessment proceedings but raised 1 s t time before the 1 s t appellate authority. Therefore, non-implication of all the legal heirs can amount to a procedural defect which will not make the assessment invalid. In holding so we find support and guidance from the order of the Hon'ble Supreme Court in the case of CIT Vs. Jai Prakash Singh reported in 219 ITR 737 wherein it was held as under:
In the instant case, I did not raise an objection before the ITO that unless and until notices to all the other legal representatives were sent, assessment orders could not be made. He raised this question for the first time in the appeals preferred by him before the AAC and thereafter before the Tribunal. It appeared rather curious that J, who had voluntarily filed the returns of income, should raise this issue; no other legal representative of the deceased had come forward with such a plea.
The High Court was not right in holding in these circumstances that the assessment orders made were null and void. They were not. At worst, they were defective proceedings or irregular proceedings, as had been rightly held by the AAC and the Tribunal.
The principle emerging from the decision in Estate of Late Rangalal Jajodia v. CIT [1971] 79 ITR 505 (SC), is that an omission to serve or any defect in the service of notices provided by procedural provisions does not efface or erase the liability to pay tax, where such liability is created by distinct substantive provisions. Any such omission or defect may render the order made irregular depending upon the nature of the provision not complied with, but certainly not void or illegal.
The appeals were, accordingly, allowed and the judgment of the High Court was set aside.
In view of the above, we do not find any merits in the ground of appeal raised by the assessee. Hence we dismiss the same. However, it is also pertinent to note that the provisions of section 159 of the Act require to implicate all the legal heirs in the proceedings initiated under section 147 of the Act. The provisions of section 159 of the Act reads as under:
Legal representatives.
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159. (1) Where a person dies, his legal representative shall be liable to pay any sum12 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.
In view of the above, we set aside the entire assessment framed under section 147 of the Act to the AO to frame the same afresh in the name of all the legal heirs as per the provisions of law.
16. As we have set aside entire proceedings to the file of the AO for fresh assessment, we refrain ourselves from adjudicating the issue on merit. Hence, the assessee succeeds on the technical issue raised by him for the statistical purposes.
17. In the result the appeal of the assessee is allowed for the statistical purposes.
This Order pronounced in Open Court 11/03/2020
Sd/- Sd/-
(RAJPAL YADAV) (WASEEM AHMED)
VICE PRESIDENT ACCOUNTANT MEMBER
Ahm e da ba d : Da t e d 1 1/ 0 3/ 2 02 0
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. 0वभागीय 3त3न*ध, आयकर अपील य अ*धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड9 फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपील य अ*धकरण, अहमदाबाद ।