Loading judgment…
Facts
A block assessment against Dr. Raj Mehrotra, resulting in an undisclosed income addition, was initially dismissed by the ITAT but later remanded by the High Court. During the remanded proceedings, the appellant, Dr. Raj Mehrotra, passed away, and his legal heir failed to file the requisite Form-36 for substitution despite multiple opportunities, rendering the appeal procedurally unmaintainable.
Held
The ITAT dismissed the appeal as not maintainable because the legal heir failed to file the revised Form-36 as required under Rule 26 of the IT(AT) Rules, 1963, for substitution after the appellant's death. However, the legal heir was granted liberty to seek restoration of the appeal upon fulfilling the necessary procedural requirements.
Key Issues
Whether the appeal was maintainable before the ITAT when the original appellant had passed away and the legal heir failed to file the required revised Form-36 for substitution.
Sections Cited
158BC, 132, 260A, 132(1), 158BG, Rule 26 (ITAT Rules), Rule 47 (IT Rules)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW BENCH ‘A’, LUCKNOW
Before: SHRI KUL BHARAT & SHRI ANADEE NATH MISSHRA
order dated 29/09/1997 was passed u/s 158BC of the Income Tax Act (“the Act”, for short) for block assessment years in pursuance to search u/s 132 of the Act conducted in the case of the assessee on 25/09/1997 at the assessee’s residence. In the aforesaid assessment order, the assessee’s total income was assessed at Rs.8,18,965/- including an amount of Rs.1,69,280/- as undisclosed income. The assessee filed appeal against the aforesaid assessment order in Income Tax Appellate Tribunal (“ITAT”, for short) . Vide earlier order dated 18/09/2014, Coordinate Bench of ITAT Lucknow Bench in the appeal of the assessee was dismissed, thereby confirming the addition made in the aforesaid assessment order. The assessee filed appeal u/s 260A of the Act in Hon'ble Allahabad High Court. Vide order dated 19/02/2015, Lucknow Bench of Hon'ble Allahabad High Assessment Year:1997 2 Court set aside the aforesaid order dated 18/09/2014 of ITAT and remitted the matter back to the Income Tax Appellate Tribunal. It is in this background that we heard this appeal. During appellate proceedings in Income Tax Appellate Tribunal; in pursuance of the aforesaid order dated 18/09/2014 of Lucknow Bench of Hon'ble Allahabad High Court, hearings were fixed from time to time in ITAT. At the time of hearing on 03/04/2024, Shri Rajat Mehrotra, son of Dr. Raj Mehrotra attended the hearing and informed that Dr. Raj Mehrotra, who filed this appeal, has deceased. He filed a copy of death certificate of (Late) Dr. Raj Mehrotra. Shri Rajat Mehrotra requested for time to substitute the name of appellant with legal heir of (Late) Dr. Raj Mehrotra. Registry was directed by Registrar to provide Form-36 along with the enclosures and other necessary papers to Shri Rajat Mehrotra, as requested by him. The hearing was adjourned to 15/07/2024. On 15/07/2024, none was present from the assessee’s side. On subsequent hearing fixed on 05/11/2024, 19/12/2024, 16/01/2025 and on 10/02/2025 also there was no representation from the assessee’ side. In view of the foregoing, this order is now passed on the basis of material available on record, after hearing the learned Departmental Representative. (A.1) Grounds of appeal are as under: “1.1 BECAUSE the search operation can not be said to have been validly authorised in the case of the appellant, as there existed no material which could lead to the formation of belief about the satisfaction of any of the conditions mentioned in Section 132(1) of the Income-tax Act, 1961 and consequently the block assessment order dated 29.9.97 is wholly illegal and without jurisdiction.
1.2 BECAUSE in any case no valid notice as envisaged in sub- section (a) of Section 158 BC was issued to the appellant and the assessment order dated 29.9.97 flowing from such notice is wholly without jurisdiction.
Assessment Year:1997 3 1.3 BECAUSE the notice dated 29.11.1996 as has been referred to in para 2 of the impugned order is liable to be treated as 'no notice' in the eyes of law as it was not only vague in its tenor and import but also wholly illegal.
2.1 BECAUSE on a due consideration of overall facts and circumstance of the case, the learned CIT could not have said to have given his 'approval' as envisaged under Section 158 BG of the I.T.Act, 1961 and consequently the impugned order is liable to be declared as a nullity.
2.2 BECAUSE the so-called approval given by the learned CIT, to the Assessing Officer, without giving the appellant any opportunity of being heard is wholly illegal and also unjustified on the facts of the case.
WITHOUT PREJUDICE TO THE AFORESAID
BECAUSE the Learned Assessing Officer has erred in law and on facts in holding that –
“The assessee is found to be suppressing his receipts by about 50%.” and after allowing 15% margin for free and/or concessional tests, in working out the suppressed receipts for the assessment year 1996-97 at Re.1,69,375/- and treating the same as undisclosed income of the appellant for block period.
BECAUSE the appellant had maintained meticulous details of all his incomings which were fully supported by the receipts issued in normal course of business and merely because of patients did not turn up to collect such receipts, no adverse inference can be drawn against the appellant, so as to hold that there is suppression of professional receipts.
BECAUSE during the course of extensive assessment proceedings the appellant had submitted detailed reconciliation of all the tests found to be entered in the technicians hand- book, with the collections from the patients and in view of the fact that no discrepancy or defects was found in such reconciliation/information submitted before the learned Assessing Officer, there was no justification for holding that the Assessment Year:1997 4
appellant was found to be suppressing his professional receipts by about 50%.
BECAUSE in any case and after giving due margin to the fact that the 'tests' that were found to be entered in the technicians hand-book included tests –
a) carried out for verification of auto-analyser which is a continous process; b) for quality control of reagents; c) for re-verification of the programme, for setting up of new tests in RA-50 - Auto analyser and tests falling in the 'free group’ of which a detailed list was submitted before the learned Assessing Officer, the professional receipts as shown by the appellant should have been accepted and no addition was called for either on facts or in law.
BECAUSE in view of the other evidences as well as circumstantial, particularly the fact that no unaccounted assets, investments or expenditure was found during the course of extensive search operation, the learned Assessing Officer should have accepted the appellant's version of professional receipts which is stood fully reflected in the return that had been filed before the commencement of search operation and no addition should have been made.
BECAUSE in any case and without prejudice to the contentions raised in the foregoing grounds, the addition made by the learned Assessing Officer suffers from arbitrariness, whims, surmises and conjectures and the same deserves to be deleted.
BECAUSE in any case the estimate of income as made by the learned Assessing Officer is much too high and excessive.”
(B) As mentioned earlier, copy of death certificate of (Late) Dr. Raj Mehrotra, who filed this appeal, was filed by his son on 03/04/2024. However, so far revised Form-36 has not been filed by the legal heir of (Late) Dr. Raj Mehrotra despite adequate opportunities provided in this regard, as is evident from proceedings since 03/04/2025 when son of (Late) Dr. Raj Mehrotra, i.e. Shri Rajat Mehrotra attended. In this regard, the Assessment Year:1997 5 statutory provisions as contained in Rule 26 of Income Tax (Appellate Tribunal) Rules, 1963; are reproduced below for the ease of reference:
“Where an assessee whether he be an appellant or the respondent to an appeal dies or is adjudicated insolvent or in the case of a company being wound up, the appeal shall not abate and may, if the assessee was the appellant, be continued by, and if he was the respondent be continued against, the executor, administrator or other legal representative of the assessee or by or against the assignee, receiver or liquidator, as the case may be:
Provided that:
(i) The assessee files a revised Form No. 36 duly filled up giving revised name of the party duly verified in the same manner as required by rule 47 of Income-tax Rules, 1962; (ii) The revised Form No. 36 shall specify the appeal number as originally assigned or, in the event of non-availability of such number on the date of filing the appeal shall be mentioned in the covering letter to enable the Registrar to place fresh Form No. 36 in the original file.”
(B.1) As is obvious from the perusal of aforesaid legal provisions, the appeal filed by (Late) Dr. Raj Mehrotra could be continued by the executor/legal representative of (Late) Dr. Raj Mehrotra if a revised Form- 36, duly filled up, giving revised name of the party, duly verified in the same manner as required by Rule 47 of Income Tax Rules, 1962 was filed by the Executor/ Legal representative of (Late) Dr. Raj Mehrotra. However, so far the revised Form-36, as aforesaid, has not been filed despite reasonable opportunity as discussed earlier. (B.2) Learned Departmental Representative was asked by Bench, at the time of hearing on 10/02/2025, whether the appeal of the assessee was maintainable. She submitted that the appeal was not maintainable unless and until revised Form No.36 was filed by legal representative of (Late) Dr. Raj Mehrotra; as required under Rule 26 of Income Tax (Appellate Tribunal) Rules, 1963 [“IT(AT)”, Rules, for short].
Assessment Year:1997 6 (B.2.1) In view of the discussion in foregoing paragraphs (B), (B.1) and (B.2) of this order; we are of the considered opinion that the appeal is not maintainable at present; because revised Form No. 36 has not been filed, as required under Rule 26 of IT(AT) Rules, after the death of (Late) Dr. Raj Mehrotra, who had filed this appeal. Accordingly, the appeal is dismissed as not maintainable.
(C) However, by way of abundant caution, we wish to clarify that the executor/legal representative of (Late) Dr. Raj Mehrotra will be at liberty to approach ITAT for restoration of appeal if requirements under Rule 26 of the I.T. Rules, as mentioned above, are fulfilled. If such request is received, the same will be decided on merits in Income Tax Appellate Tribunal in the light of relevant facts and circumstances and applicable law.
(D) In the result, the appeal of the assessee is dismissed as not maintainable.
(Order pronounced in the open court on 12/02/2025)