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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SANDEEP SINGH KARHAIL & SHRI GAGAN GOYAL
The present appeal has been filed by the legal heir on behalf of the assessee challenging the impugned order dated 14/09/2020, passed under section 250 of the Income Tax Act, 1961 (‘the Act’) by the learned Commissioner of Income Tax (Appeals)–2, Thane [‘learned CIT(A)’], for the assessment year 2011–12.
Late Anil Sitaram Vagal Through its L/H (wife) Smt. Ashwini Anil Vagal ITA no.1945/Mum./2020
The primary grievance in this appeal is against the completion of the assessment in the name of the deceased assessee without bringing on record his legal heirs.
The brief facts of the case as emanating from the record are: For the year under consideration, the assessee filed his return of income on 08/08/2011, declaring a total income of Rs. 1,62,400. The return was selected for scrutiny and notice under section 143(2) of the Act was issued on 01/08/2012, which was served on the assessee on 09/08/2012. Subsequently, a questionnaire along with notice under section 142(1) of the Act was issued on 12/06/2013. In response to the said notice, assessee’s wife submitted that the assessee expired on 17/04/2013. In the said letter, assessee’s wife further submitted that she has no knowledge of the business activities of her deceased husband and as such will not be in a position to reply to the queries much less produce any document as required under the aforesaid notice. The Assessing Officer (‘AO’) vide assessment order noted that the assessee earned capital gains on the sale of ancestral property, which was not offered to taxation. The AO further noted that in view of non-compliance of statutory notices, the assessment was concluded ex parte under section 144 of the Act. Accordingly, vide order dated 14/03/2014 passed under section 144 of the Act, in the name of assessee, the AO computed the long-term capital gains of Rs. 23,14,361, and added the same to the total income of the assessee.
In its appeal before the learned CIT(A), the assessment order was inter- alia challenged on the basis that the same has been passed in the name of the Late Anil Sitaram Vagal Through its L/H (wife) Smt. Ashwini Anil Vagal ITA no.1945/Mum./2020 deceased person. The learned CIT(A), vide impugned order, after considering the remand report filed by the AO, dismissed the appeal filed by the legal heir of the assessee, inter-alia, by observing as under:
“6.0 Ground No. 1 has challenged the legality and validity of order passed by Ld. AO. 6.1 I have carefully considered the submissions of the appellant, the observations of the AO in the assessment order; case laws relied upon by the appellant and the facts of the case. 6.2 During the course of appellate proceedings, the AR of the appellant has argued that notice u/s 143(2) was issued by the AO in the name of appellant, who died subsequently and no fresh notice was issued in the name of Legal heir and thus, he claimed that the notice issued originally to appellant is illegal and invalid. A remand report was called for from the AO to verify the veracity of the claims of the appellant. After perusing the fact of the remand report it is found that the AO had issued notice u/s 143(2) on 01.08.2012 and the same was served upon appellant on the 09.08.2012. The appellant expired on 17.04.2013. Hence, the Ld. AO has issued notice u/s 143(2) in the name of appellant when the appellant was alive. Hence, there is no irregularity on the part of AO. The AO has validly assumed jurisdiction by issuance of notice u/s 143(2). Hence, it is held that the notice u/s 143(2) is valid and thus, subsequent proceedings of AO of passing the assessment order by assuming the jurisdiction is also legal and valid, Hence, ground no. 1 of appeal raised by the appellant is dismissed. 7.0 Ground Nos. 2 and 7 of the appeal are inter-connected and related to not providing adequate opportunities of being heard to the appellant during the course of assessment proceedings. 7.1 I have considered the contentions of the Ld. AO in the assessment order, submissions of the Appellant and perused the material available on record. 7.2 During the course of assessment proceedings, the AO has issued notice u/s 142(1) alongwith questionnaire to the appellant. In response to the same, the appellant's wife informed about the death of appellant and she also stated that she was unaware of any business activities carried out by appellant and she also stated that she is not in a position to reply AO's queries and she may not be able to produce any document in terms of notice. 7.3 Hence, from the above, it is seen that AO has issued notice to appellant and has allowed opportunity of being heard. If the appellant's wife is ignorant of law then she must have taken someone's advice. Ignorance of Law is not an excuse to escape any transaction to come under the purview of taxation. The AO also was helpless in such situation and left with no option but to determine capital gain on sale property and to pass the order. Hence, the undersigned do Page | 3
Late Anil Sitaram Vagal Through its L/H (wife) Smt. Ashwini Anil Vagal ITA no.1945/Mum./2020 not find any fault on the part of AO to allow opportunity of being heard before passing the assessment order. Despite that, the undersigned has made all efforts to allow appellant to present his case and allow proper opportunity of being heard. Since proper opportunity of being heard was given to appellant during the course of appellate proceedings, during the course of remand proceedings, the appellant's grievance about not allowing proper opportunity of being heard is not tenable. Hence, these grounds of the appeal of the appellant are dismissed.”
Being aggrieved, the present appeal has been filed by the legal heir on behalf of the assessee.
During the hearing, the learned Authorised Representative submitted that the AO proceeded to conclude the assessment in the name of the deceased assessee without bringing on record the legal heir, despite being informed about the fact that the assessee has expired.
On the other hand, the learned Departmental Representative vehemently relied upon the orders passed by the lower authorities.
We have considered the rival submissions and perused the material available on record. In the present case, scrutiny proceedings in the case of the assessee were initiated vide notice dated 01/08/2012, issued under section 143(2) of the Act. Thereafter, notice under section 142(1) of the Act was issued along with the questionnaire. In response thereto, assessee’s wife vide letter dated 26/06/2013, informed the AO that the assessee expired on 17/04/2013, due to renal failure. Assessee’s wife also expressed her inability to respond to queries and produce the documents as required vide aforesaid notice. It is evident from the record that thereafter neither the legal heir of the assessee was brought on record nor the AO issued statutory notices on the Page | 4
Late Anil Sitaram Vagal Through its L/H (wife) Smt. Ashwini Anil Vagal ITA no.1945/Mum./2020 legal heir seeking any information. The above aspect becomes more evident from the fact that the assessment was concluded ex parte under section 144 of the Act and in column 11 at page 1 of the assessment order ‘no attendance’ is mentioned against the date(s) of hearing. Further, the AO also proceeded to pass the assessment order dated 14/03/2014, under section 144 of the Act in the name of the deceased assessee, despite being informed vide letter dated 26/06/2013, about the fact that the assessee expired on 17/04/2013. Thus, the very fact that the assessment has been concluded in the name of a deceased person renders the assessment order to be null and void. Further, it cannot be disputed that the assessee died before the proceedings for assessment were completed. Therefore, it was incumbent under section 159(2) of the Act on the AO to bring the legal heir of the deceased assessee on record and proceed further. Since the same was not done by the AO, therefore the assessment order is void ab initio. Accordingly, the assessment order passed in the name of the deceased assessee is set aside. As we have quashed the assessment order for this short reason, we see no reason to deal with other issues raised in this appeal or on merits. Those aspects of the matter are, as of now, academic and infructuous.
In the result, the appeal by the assessee is allowed. Order pronounced in the open Court on 02/01/2023