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Facts
A search and seizure under Section 132 of the Income Tax Act was conducted on the Sachdeva Group, including the deceased assessee, Nimit Kumar. The Revenue sought to hold his wife, Ms. Ira Wasson, liable as the legal heir for additions made under Sections 144/147 for alleged undisclosed income under Section 69A. Ms. Wasson contested this, stating she did not inherit any estate from her husband.
Held
The Tribunal held that the Assessing Officer (AO) wrongly assumed Ms. Ira Wasson as the legal representative without establishing that she inherited or represented the estate of her late husband, as required by Section 159 of the Act and the Code of Civil Procedure. The decision of the CIT(A) in favour of the assessee was upheld.
Key Issues
Whether the Revenue correctly established the liability of the deceased assessee's wife as a legal representative without proving she inherited any estate of the deceased, as per Section 159 of the Income Tax Act and the Code of Civil Procedure.
Sections Cited
132, 144, 147, 69A, 159, 2(29), 2(11), 159(6), 161, 162, 167, 269SS, 269ST, 271D, 271E
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘E’ BENCH,
Before: SHRI SATBEER SINGH GODARA, & SHRI NAVEEN CHANDRA
The above captioned four appeals by the Revenue are directed against four separate orders of the ld. CIT(A) - 23, New Delhi dated 04.08.2023 for A.Ys 2014-15 to 2017-18 respectively.
Since these four appeals pertain to same assessee and involve common issues, they were heard together and are disposed of by this common order for the sake of convenience and brevity.
At the very outset, the ld. counsel for the assessee vehemently stated that the issues involved in these appeals are squarely covered in favour of the assessee and against the Revenue by the decision of the co-ordinate bench in the case of wife of the assessee Smt Ira Wasson in to 3131/DEL/2024 order dated 10.01.2025.
Per contra, the ld. DR fairly conceded to the same.
We have heard the rival submissions and have perused the relevant material on record. The facts in brief is that a search and seizure u/s 132 of the Act was conducted on 31.08.2017 in the case of Sachdeva Group. The case of Sh. Nimit Kumar was also covered u/s 132 of the Act.
Shri Nimit Kumar expired on 07.11.2016. Therefore, Ms. Ira Wasson the Page 2 of 9 to 3089 /DEL/2023 DCIT Vs. Nimit Kumar Sachdeva [A.Ys 2014-15 to 2017-18] wife of Late Sh. Nimit Kumar was held as legal heir of the assessee and subsequent notices and assessments were completed in her name u/s 144/147 where additions were made u/s 69A. Smt Ira Wasan contested the addition on the ground that she was not the legal representative of Nimit Kumar Sachdeva. We find that the CIT(A) has decided the issue as follows:
14. In Ground No.2(for all A.Y.s), appellant challenged the action of Assessing Officer in respect of bringing on record, Ms. Ira Wasson as legal representative of Late Sh. Nimit Kumar. The appellant had submitted that the AO had wrongly made addition and raised demand on Ms. Ira Wasson ignoring the fact that she did not receive anything from her late husband as such as per provisions of section 159(6) of the IT Act, no demand shall be raised against her. During the course of appellant proceedings, AR of the appellant filed reply. In para 2 to 9 of appellant's reply reproduced above, the relevant portion on the issue is perused.
15. On perusal of assessment order, considering the submissions made by appellant and material available on record, it is evident Ms. Ira Wasson was assumed as legal heir being wife of Late Sh. Nimit Kumar but the same fact was never established during the assessment proceedings. However, it has not been brought on-record as to how she was the legal heir of the appellant.
As per provisions of section 2(29) of I.T Act, "legal representative has the meaning assigned to it in clause (11) of section 2 of the Code of civil Procedure, 1908 (5 of 1908)". 17. As per section 2(11) of Code of Civil Procedure, 1908, the legal representative is defined as under:- "(11) "legal representative" means a person who in law represents the estate of a deceased person, and includes any person who intermeddles with the estate of the deceased and where a party sues or is sued in a representative character the person on whom the estate devolves on the death of the party so suing or sued;
Page 3 of 9 to 3089 /DEL/2023 DCIT Vs. Nimit Kumar Sachdeva [A.Ys 2014-15 to 2017-18]
The Assessing Officer has not brought on record any evidence to show that Ms. Ira Wasson inherited or represents the estate of her late husband Shri Nimit Kumar. Just because Ms. Wasson was the wife of Shri Nimit Kumar, the Assessing Officer has assumed her to be the legal representative of the deceased.
In this case, during the course of assessment proceedings, Ms. Ira Wasson raised objection to her being assessed as legal representative of Late Shri Nimit Kumar. 21. On perusal of the objection of the appellant, it is seen that the appellant has stated before the Assessing Officer that she did not receive the estate of her husband. However, the Assessing Officer did not accept the fact brought before her by the appellant. The Assessing Officer further failed to establish that the appellant had received any estate of her late husband. 22. In her reply, the Assessing Officer has discussed the provisions of the Hindu Succession Act and accordingly held that the appellant was the successor of her husband. The appellant may be the heir of Late Shri Nimit Kumar. But for the purposes of income-tax, the tax can be levied on legal representative whose definition is contained in Civil Procedure Code. However, the legal representative is to be decided on the basis of provisions of 2(11) of Code of Civil Procedure and not as per the Hindu Succession Act. 23. As per the Hindu Succession Act, the appellant has the right to claim over the estate of her late husband. As per the Code of Civil Procedure, the appellant can be made legal representative only if she has actually received any estate of her late husband. 24. Thus, the Assessing Officer has not discussed or established as to how the appellant in the absence of any evidence to show that the estate devolving to her is legal representative within the meaning of section 2(29) of the Act. 25. It is clearly mentioned in para 6 of assessment order that all the deposits (on which basis additions have been made) were accepted on behalf of M/s Ronnie Finance Limited. Ms. Ira Wasson was neither a director nor any shareholder in M/s Ronnie Finance Limited (NBFC entity
Page 4 of 9 to 3089 /DEL/2023 DCIT Vs. Nimit Kumar Sachdeva [A.Ys 2014-15 to 2017-18] of late Sh. Nimit Kumar). Further, Ms. Ira Wasson didn't Inherited any estate of Late Sh. Nimit Kumar in terms of section 159 of the Act.
Section 159 of the Act is reproduced as under:- "159. Legal representatives (1) Where a person dies, his legal 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. (2) For the purpose of making an assessment (including an assessment, reassessment or re-computation under section 147) of the income of the deceased and for the purpose of levying any sum in the hands of the legal representative in accordance with the provisions of subsection (1),-be (a) any proceeding taken against the deceased before his death shall deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased; (b) any proceeding which could have been taken against the deceased if he had survived, may be taken against the legal representative; and (c) all the provisions of this Act shall apply accordingly. (3) The legal representative of the deceased shall, for the purposes of this Act, be deemed to be an assessee. (4) Every legal representative shall be personally liable for any tax payable by him in his capacity as legal representative if, while his liability for tax remains undischarged, he creates a charge on or disposes of or parts with any assets of the estate of the deceased, which are in, or may come into, his possession, but such liability shall be limited to the value of the asset so charged, disposed of or parted with. (5) The provisions of sub- section (2) of section 161, section 162 and section 167 shall, so far as may be and to the extent to which they are not inconsistent with the provisions of this section, apply in relation to a legal representative.
Page 5 of 9 to 3089 /DEL/2023 DCIT Vs. Nimit Kumar Sachdeva [A.Ys 2014-15 to 2017-18] (6) The liability of a legal representative under this section shall, subject to the provisions of subsection (4) and sub- section (5), be limited to the extent to which the estate is capable of meeting the liability."
Till date, the Assessing Officer has not brought on record any evidence/finding that could establish that any portion of deceased person's estate was acquired or devolved or inherited by the Appellant.
In the case of CIT vs Dalumal Shyamumal (2005) 276 ITR 62 (MP), it was held that "Where an assessee dies, pending any assessment proceedings, it is the duty of the Assessing Officer to ensure compliance of section 159(2) (l.e. bring the legal representative on record) before passing the orders. Hence, the assessment order passed by the Assessing Officer without bringing the legal representative on record was not justified."
In the case of the CIT v Prabhawati Gupta (1998) 231 ITR 188 (MP), it was held that "In case of death of the assessee before proceedings for assessment are completed, legal representatives must be brought on record otherwise the assessment is void ab initio.' 30. In the case of C. Naveen Kumar vs. ITO reported in [2019] 108 taxmann.com 219 (Madras) the court has held that, wherein assessee did not inherit anything from his father and, moreover, he had nothing to do with his father's bank account, as such, it was held that having regard to provisions of section 159, impugned assessment order passed under section 144, read with section 147 on ground that there were huge deposits in said account in relevant year prior to death of his father, was not sustainable.
In view of the above discussion and judicial pronouncement, it is held that the Assessing Officer was not justified in holding Ms. Ira Wasson as the legal heir of Late Shri Nimit Kumar. On this account only, the addition made by Assessing Officer is liable to be deleted. Accordingly, ground no 2 (for all the impugn
In the course of hearing before us, the ld DR could not controvert the fact that the AO could not establish that Smt Ira Wasan is the Legal
Page 6 of 9 to 3089 /DEL/2023 DCIT Vs. Nimit Kumar Sachdeva [A.Ys 2014-15 to 2017-18] Representative of Nimit Kumar Sachdeva u/s 159 of the Act. We are of the considered view that there is no reason to interfere with the decision of the CITA().We further find force in the contention of the ld. counsel for the assessee that the assessee’s case is covered in favour of the assessee by the decision of the co-ordinate bench in assessee’s wife’s case [supra] which reads as under:
We find for a fact that the amount of loan/deposit/sum was taken and accepted by the company M/s Ronnie Finance Company Ltd. We find that the MCA (Ministry of Corporate Affairs) Portal shows that the concerned entity had three directors i.e. (i). Shri Nimit Kumar Sachdeva, (ii). Smt. Shelly Narang and (iii). Smt. Usha Rani Sachdeva. It is not disputed that neither the assessee was a shareholder nor director in the concerned entity M/s Ronnie Finance Company Ltd. The AO has not brought anything on record to show that the assessee was involved in any way with the business dealings of M/s. Ronnie Finance Limited. In the instant facts of the case, there is no dispute that the violation of section 269SS and 269ST was committed by the said company. The assessee in the instant case, cannot be held liable for the acts/omissions on the behalf of her deceased husband i.e. "Late Nimit Kumar Sachdeva", who was only a director in the said company. Furthermore, the assessee, neither as legal heir of her husband nor in her individual capacity, inherited any estate or any other valuable article on account of her late husband. We also find that during course of the assessment proceedings and the penalty proceedings, the assessee was never apprised with any tangible/incriminating material, through which serious allegations had been made in the present case.
Further, we find that the provisions of Section 159(6) of the Act, provides that the liability of a legal representative is limited to the extent of assets acquired by the legal representative. In the instant case, the Revenue has not made a case that the assessee received any estate from Page 7 of 9 to 3089 /DEL/2023 DCIT Vs. Nimit Kumar Sachdeva [A.Ys 2014-15 to 2017-18]
her late husband. The action of the Revenue, therefore, to fasten the assessee with the liability of the business dealings conducted by the M/s. Ronnie Finance Limited is neither legally permissible nor just. Accordingly, we do not find any reason to interfere with the well-reasoned decision of the Id. CIT(A) and direct the AO to delete the penalties levied u/s 271D and 271E for the above impugned AYs. Ground raised by the Revenue in all the appeals is dismissed.
In the result, all the eight appeals of the Revenue in to 3131/DEL/2024 stand dismissed.
Respectfully following the same, we dismiss the grounds raised by the Revenue in all the four years under consideration.
In the result, appeals of Revenue in to 3089 stand dismissed.
Order pronounced in open court on 21.07.2025.