Madhya Pradesh High Court
Commissioner Of Income Tax vs Kumari Prabhawati Gupta & Ors. on 15 February, 1996
Equivalent citations: (1997)142CTR(MP)72
JUDGMENT
BY THE COURT :
This is an IT reference under s. 256(2) of the IT Act (hereinafter referred to as the Act) and the following questions of law have been referred by the Tribunal for answer of this Court, which are as under :
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessment order passed by the ITO was ab initio void for omission to include the legal heirs of the deceased in the assessment order ?
(2) Whether the Tribunal was right in setting aside the order of the AAC and in not passing further order directing the ITO to proceed with the assessment against the legal representatives of the assessee ?"
2. The brief facts giving rise to this reference are thus : The assessee, late H. C. Gupta died on 28th October, 1976 and ITO, Jabalpur, completed the assessment for the year 1970-71 on 24th March, 1977, at an income of Rs. 45,000 without impleading the legal representatives of the assessee. Aggrieved against the order of the ITO, Smt. Sunderbai Gupta, widow of deceased assessee, filed an appeal before the CIT (A) with the contention that the assessment was void ab initio since passed against the dead person and, therefore, it should be quashed. The CIT (A) held that the assessment was completed on 24th March, 1976 when the assessee did not appear before the ITO and nothing more remained to be done except passing the assessment order. Thus, the CIT (A) upheld the order of the ITO. Thereafter, an appeal was preferred before the Tribunal and the Tribunal quashed the assessment order and held that the assessment order was ab initio void as passed against a dead person. It was observed that the assessment had not been completed on 24th March, 1976. It was also observed that in fact, on 23rd March, 1976 the ITO required the assessee to furnish certain information and the case was fixed for hearing on 24th March, 1976. The next date, i.e., on 24th March, 1976, the ITO had recorded that none appeared and assessed the income of the deceased assessee at Rs. 45,000. Therefore, it was held that the case was not fixed on 24th March, 1976 for final disposal, but no proceedings took place and as such it cannot be said that the proceedings were concluded and only the assessment order remained to be passed. Therefore, the Tribunal held that the proceedings were incomplete hence, under the provisions of s. 159(2) of the IT Act, it was incumbent on the ITO to have brought the legal heirs of the deceased assessee on record, but it was not done. Therefore, the Tribunal found that the order passed by the ITO is ab initio void and the order passed by the CIT(A) in appeal filed by the assessee is also bad for remanding the case back to ITO for de novo assessment. Hence, the Tribunal allowed the appeal. Thereafter, the Revenue approached this Court for calling the reference under s. 256(2) of the IT Act, and on that basis, reference was called and the aforesaid questions of law were framed for answer of this Court.
3. We have heard the learned counsel for the parties and perused the records. It is an admitted fact that the assessee died before the proceedings for assessment were completed. Since the proceedings had not been completed and it was yet to be completed; therefore, it was incumbent under s. 159(2) of the Act on the ITO to have brought legal representative of deceased on record and proceeded from the stage where it was left at the time of death of deceased. According to the findings of the Tribunal, the proceedings had not been completed before the death of the assessee, therefore, the Tribunal has rightly held that the assessment should be completed under s. 159(2) of the Act. In this view of the matter, we are of the opinion that the view taken by the Tribunal is correct and both the questions are answered against the Revenue and in favour of the assessee.
4. Learned counsel for the Revenue has submitted that no order has been passed by the Tribunal for assessing the liability of the legal representative of the deceased assessee though the Tribunal in its para 4 of the order has very clearly observed :
"In such circumstances, the natural justice demands that the assessment should go back to the ITO to give sufficient opportunity to the legal representative of the deceased for stating their case."
Therefore, the Tribunal was mindful of the fact that in such a situation, case has to be remanded; though the Tribunal has not very specifically mentioned that part presumably that the Tribunal may have credited this much to the ITO that he will initiate the action under s. 159(2) of the Act. Be that as it may, if it is now possible under the law, then it is open for the ITO to proceed according to law under s. 159(2) of the Act. This reference is answered against the Revenue and in favour of the assessee.