Loading judgment…
Facts
The assessee's original return for AY 2018-19 was filed and an assessment was completed under Section 143(3) with an addition. The assessee filed an appeal before CIT(A) and subsequently expired. Despite being informed of the death, the PCIT issued a revisionary notice under Section 263 and passed an order in the name of the deceased.
Held
The Tribunal held that the revisionary proceedings and order passed under Section 263 against a deceased person, without impleading the legal heir, are void ab initio and violative of natural justice. It was also noted that the issue was already pending before the CIT(A).
Key Issues
Whether revisionary proceedings under Section 263 initiated and concluded against a deceased person, without impleading legal heir, are void ab initio and whether parallel proceedings on an already pending issue are permissible.
Sections Cited
263, 143(3), 68, 115BBE, 271AAC
AI-generated summary — verify with the full judgment below
Order PER LALIET KUMAR, J.M: This appeal by the assessee, through legal heir Shri Kartikeya Bhardwaj, is directed against the order dated 23.03.2024 passed by the Principal Commissioner of Income Tax (PCIT), Chandigarh-1, under Section 263 of the Income Tax Act, 1961 for the assessment year 2018-19.
At the outset the Registry has pointed out that the present appeal is barred by limitation by 02 days.
After considering the condonation application filed by the assessee in the present appeal, we condone the delay for which sufficient cause is shown, and admit the appeal for adjudication. + 4. In the present appeal Assessee has raised the following grounds:
1. On the facts and circumstances of the case as well as in law, the Learned PCIT has erred in invoking revisionary powers u/s 263 of the Income Tax Act, 1961, without appreciating the facts & circumstances of the case.
2. On the facts and circumstances of the case as well as in law, the Learned PCIT has erred in directing the Ld. AO to conduct a fresh assessment, without appreciating the facts & circumstances of the case.
2 3. On the facts and circumstances of the case as well as in law, the Learned PCIT has erred in passing the order against a deceased assessee. 4. The appellant craves leave to add, amend, alter or delete the said ground of appeal
5. Briefly the facts of the case are that the return of income for AY 2018-19 was filed by the original assessee, Late Shri Kul Prakash Bhardwaj, on 30.10.2018 declaring an income of Rs.22,75,100/-. The case was selected for scrutiny and the assessment was completed under Section 143(3) on 09.04.2021 by making an addition of Rs.2,00,00,000/- under Section 68 of the Act, which was taxed at the normal rate.
6. Aggrieved, the assessee filed an appeal before the CIT(A) on 05.05.2021. Unfortunately, the assessee passed away on 23.06.2021, which fact was duly communicated to the Income Tax Department by the legal heir.
7. Despite being in possession of the death information and ongoing appellate proceedings before the CIT(A), the PCIT issued a notice under Section 263 on 09.01.2024 in the name of the deceased and eventually passed a revisionary order dated 23.03.2024, stating that the AO had erred in taxing the addition under Section 68 at normal rates instead of invoking Section 115BBE and initiating penalty under Section 271AAC.
The Ld. Ld. AR submitted that the order passed under Section 263 is illegal and non-est in the eyes of law, having been passed against a dead person. It was contended that the department was fully aware of the death of the assessee and was in possession of the death certificate as well as the legal heir details.
8.1 It was further submitted that the issue raised in the revisionary order was already a subject matter of appeal before the Ld. CIT(A), and hence, initiation of parallel proceedings under Section 263 was bad in law. The Ld. AR relied on several judicial pronouncements including Alamelu Veerappan v. ITO [2021] 125 taxmann.com 253 (SC) and Savita Kapila v. CIT [2020] 424 ITR 3 392 (Delhi) to submit that proceedings initiated or concluded against a deceased person are void ab initio.
The Ld. CIT-DR supported the order of the PCIT and submitted that the Assessing Officer had failed to apply the provisions of Section 115BBE while taxing the unexplained credits and therefore the order was erroneous and prejudicial to the interest of the Revenue. However, no rebuttal was offered to the factual position that the order was passed against a deceased person or that the issue was already under appeal.
We have heard the rival submissions and perused the materials on record. It is an undisputed fact that the assessee had expired on 23.06.2021 and this fact was duly informed to the department. Despite such knowledge, the PCIT proceeded to issue notices under Section 263 and passed the impugned order in the name of the deceased assessee. This action, in our considered view, is a fatal jurisdictional defect.
10.1 The Hon’ble Supreme Court in the case of Alamelu Veerappan v. ITO (supra) has categorically held that any notice or order issued against a dead person is unenforceable and void. Similar view was taken by the Hon’ble Delhi High Court in Savita Kapila (supra), wherein it was held that continuation of proceedings without impleading the legal heir is a violation of natural justice and renders the order null in law.
10.2 Furthermore, it is a matter of record that the assessee had already challenged the assessment order before the CIT(A), and the issue regarding the addition under Section 68 and its taxability was sub judice. The law is well settled that when a matter is pending before an appellate authority, invocation of Section 263 on the same issue amounts to parallel adjudication, which is impermissible. If the CIT(A) finds that the AO had wrongly applied a lower rate of tax, he is empowered under his co-terminus and enhancement powers to rectify the same by following due process. 10.3 We are unable to comprehend how the PCIT proceeded to record that the assessee had failed to comply with notices, when the very person 4 against whom proceedings were initiated was no longer alive. Such an action strikes at the root of the principles of natural justice and renders the entire proceedings vitiated.
In light of the foregoing discussion, we hold that the revisionary proceedings initiated and the order passed under Section 263 of the Act dated 23.03.2024 are void ab initio, being passed against a deceased person, and are liable to be quashed. Accordingly, the impugned order is quashed and the appeal of the assessee is allowed.
In the result, appeal of the Assessee is allowed.