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Facts
The assessee filed their return of income for AY 2017-18. The assessee passed away during the assessment proceedings. The Assessing Officer (AO) was informed of the death and the legal heir was identified. However, the AO proceeded to pass the assessment order in the name of the deceased assessee, which was later confirmed by the CIT(A). The assessee's appeal to the Tribunal centers on the validity of this assessment order.
Held
The Tribunal held that an assessment order passed against a deceased person, without properly substituting the legal heir, is a nullity and void ab initio. Citing various High Court and Tribunal decisions, the Tribunal found that the assessment order was not a procedural irregularity but a fundamental flaw.
Key Issues
Whether the assessment order passed in the name of a deceased person, despite the Assessing Officer being informed of the death and the legal heir, is valid.
Sections Cited
250, 145(3), 69A, 115BBE, 159(3), 143(2), 142(1), 148A(d)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R
PER BIJAYANANDA PRUSETH, AM:
This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 16.02.2024 by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] for the assessment year (AY) 2017-18.
The grounds of appeal
raised by the assessee are as follows: “1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of assessing officer in passing the assessment order in the name of the dead person which is invalid.
2. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of assessing officer in rejecting the books of accounts of the assessee u/s 145(3).
3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of assessing officer in /AY.2017-18 Nayanaben Gordhandas Jatwani making addition of Rs.37,53,000/- u/s 69A on account of alleged unexplained cash deposits made in the bank.
4. On the facts and circumstances of the case as well as on the subject, the learned CIT(A) has erred in confirming the action of assessing officer in taxing the addition by taking the rate @ 77.25% by attracting S. 115BBE instead of taxing as per normal rate.
5. Even otherwise on the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of assessing officer in taxing the income u/s 115BBE @ 77.25% in a retroactive manner by applying the duly substituted S. 115BBE inserted retrospectively instead of taxing it at 35.54% as per the old provisions of S. 115BBE.
6. It is therefore prayed that the above addition made by the assessing officer and confirmed by the CIT(A) may please be deleted and in case any addition is confirmed it should be taxed at normal rate or unaccounted provision of S. 115BBE.
7. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”
The facts of the case in brief are that the assessee (Late Shri Gordhandas Odhavdas Jatwani – PAN: AAYPJ7363F) filed his return of income for AY.2017-18 on 31.03.2018, declaring total income of Rs.15,58,950/-. The case was selected for complete scrutiny and notice u/s 143(2) was issued on 30.03.2018. In response to the notices issued u/s 143(2) and 142(1), no substantive details or documents were filed by the assessee. The Assessing Officer (in short, ‘AO’), at para 5 of the assessment order, has given a table wherein it is clear that assessee was given opportunity of hearing on eight occasions starting from 30.08.2018 to 31.11.2019. There was no response to the first six notices. The assessee requested for adjournment in response to show cause notice dated 17.11.2019, which was granted. However, on the final date of hearing on 30.11.2019, there was only partial response. The /AY.2017-18 Nayanaben Gordhandas Jatwani assessee vide letter dated 21.11.2019 informed the AO that the assessee died on 29.03.2019 and Smt. Nayanaya G. Jatwani (PAN: AAYPJ7362E), wife of the assessee may be taken on record as the legal representative (in short, ‘LR’) of the assessee. Following such information, order u/s 159(3), dated 24.11.2019 was passed and served via ITBA putting on record that as the notice u/s 143(2) was issued and duly served upon the assessee on 30.08.2018 before his demise, the same is valid. Smt. Nayanaben G. Jatwani was put on record as LR of the assessee u/s 159(3) of the Act. Thereafter, show cause notice was issued to the assessee, calling for explanation and details. Regarding cash deposit of Rs.86,65,000/-, assessee submitted that Rs.37,33,000/- was deposited by assessee in his bank account maintained with Kotak Mahindra Bank and Rs.49,12,000/- was the cash deposited by the partnership firm M/s Hotel Ashoka International in its bank account maintained with ICICI Bank. It was mentioned that there was cash deposit of Rs.42,000/- only apart from the cash deposited during demonetization period. The cash deposited by the assessee was out of opening balance of Rs.30,25,121/- as on 01.04.2016. The remaining amount was from cash withdrawal from the partnership firm. The cash balance as on 01.11.2016 before deposit in the bank account was Rs.39,15,121/-. The assessee had filed online response to explain cash deposit of Rs.37,33,000/-, explaining the above facts. No further query was raised by the Department thereafter. The AO considered the explanation of the assessee and observed that cash deposit and cash usage are not normal /AY.2017-18 Nayanaben Gordhandas Jatwani transactions of the assessee. Hence, the deposit made during demonetization were nothing but unexplained amounts. The AO also found defects in the cash book furnished by the assessee. He noted that there was no verifiable evidence in support of the opening balance of Rs.30,25,121/-. There were withdrawals of Rs.15,000/- each in every month. There were no substantial cash in flow during the year. The assessee was a partner in the firm and was not carrying out any business during AY.2016-17. The assessee also did not furnish any evidence to support claim that cash was received by him from the partnership firm during the year. The AO rejected the cash book u/s 145 of the Act for the reasons given at para 10.4 of the assessment order. Therefore, AO invoked provisions of section 69A and added the entire amount of cash deposited of Rs.37,53,000/- to the total income u/s 69A of the Act.
Aggrieved by order of AO, assessee filed appeal before the CIT(A). The CIT(A) has passed the order in the name of Naynaben Gordhandas Jatwani. The assessee challenged validity of the assessment by arguing that the AO was informed about the death of the assessee but AO passed the order in the name of dead person mentioning the PAN of the dead person. The CIT(A) has decided this issue at para 7.2 of the appellate order. He observed that though the order was passed in the name of deceased assessee, the same is stated to be passed in respect of the L/H. The CIT(A) also mentioned that order u/s 159(3) was passed by AO on 24.11.2019 according representative assessee status to the L/H. As per section 159(2)(a) of the Act, for the purpose of /AY.2017-18 Nayanaben Gordhandas Jatwani making an assessment, any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative (LR) and may be continued against the LR. In the instant case, proceedings were initiated prior to the death of assessee. Therefore, proceedings have been carried on after passing order u/s 159(3) of the Act wherein LH has been accorded the representative assessee (RA) status. The CIT(A) observed that order passed in the name of deceased person appears to be due to constraint arising due to functionalities in the ITBA system. He directed the AO to rectify the order and change the name in terms of order u/s 159(3) of the Act. He, however, rejected contention of appellant to cancel the assessment order. Regarding the merits of the addition, the CIT(A) confirmed the addition by observing that the onus on the assessee to explain the source of the cash found in his possession has not been discharged. He observed that verification by erstwhile AO is not a sound claim because verification prior to assessment proceedings cannot be supersede the statutory assessment proceedings. The CIT(A) confirmed addition u/s 69A as well as levy of tax at higher rate u/s 115BBE of the Act.
Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The learned Authorized Representative (ld. AR) of the assessee submitted a paper book containing pages 1 to 74. The ld. AR has argued against validity of assessment as well as merits of the case. He submitted that though in the order u/s 159(3), it was clearly stated that scrutiny assessment /AY.2017-18 Nayanaben Gordhandas Jatwani proceedings emanating from issue of notice u/s 143(2) was determined to be completed against the LR, still the order was passed in the name of deceased person and tax and interest liability was created on the dead person and not the LR of the assessee. The CIT(A) accepted that order was passed in the name of dead person but the same was passed due to constraint from functionalities in the ITBA system. He directed AO to make changes in the name as per order u/s 159(3) of the Act. The ld. AR submitted that even the order u/s 159(3) was passed in the name of dead person and it was uploaded on profile of dead person. Therefore, both the orders u/s 159(3) as well as 143(3) were passed in the name of dead person and uploaded on the profile of dead person. No tax and interest liability were raised in the name of LR. The ld. AR relied on the following decisions and requested that the order passed by the AO may be quashed: (i) Inox Wind Energy Ltd. vs. ACIT, 148 taxmann.com 289 (Gujajarat), (ii) Vikram Bhatnagar vs. ACIT, 147 taxmann.com 254 (Delhi), (iii) Smt. Lalita Babaria L/h. of Late Shri Mohanlal Mithabhai Babaria vs. ITO, (Surat – Trib.) and (iv) Chandravadan Shah L/h Chhotalal Tarachand Shah vs. ITO, ITA No.745/Srt/2024 (Surat – Trib.). 6. On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the revenue supported the order of the lower authorities. He submitted that the AO has duly followed the procedure u/s 159(3) of the Act. The CIT(A) has accepted that order was passed in the name of a dead person, but on account of constraint due to functionalities of ITBA, order was passed /AY.2017-18 Nayanaben Gordhandas Jatwani in the name of the dead person. He relied on the decision in the cases of Rudra Gouda vs. ACIT, 93 taxmann.com 383 (Karnataka) and Vijay Garg vs. ITO, 146 taxmann.com 231 (Delhi).
In the short rejoinder, the ld. AR of the assessee submitted that the decisions relied upon by the ld. Sr. DR are not applicable to the facts of the appellant.
We have heard both the parties and perused the materials available on record. We have also deliberated the decisions relied upon by both parties. The facts have already been discussed earlier in this order and hence not repeated. It may briefly be recapitulated that notice u/s 143(2) was issued on 30.08.2018 when the assessee was alive. Subsequently, the assessee passed away on 29.03.2019. The intimation regarding death of assessee was given to the AO vide letter dated 21.11.2019 and the AO was requested to take Naynaben Gordhandas Jatwani (PAN: AAYPJ7362E), wife of the assessee as LR of Gordhandas Odhavdas Jatwani on record. The AO, after receiving the information about the death of the assessee, passed an order u/s 159(3) of the Act on 24.11.2019, which was in the name of the deceased assessee, namely, ‘Gordhandas Odhavdas Jatwani’. The PAN was also that of Late Gordhandas Odhavdas Jatwani. Thus, the AO has passed both orders u/s 159(3) and 143(3) of the Act in name of the deceased assessee. The tax and interest liability were also raised in name of the dead person and assessee the stay of demand was also rejected. The ld. AR has relied on the decision of the /AY.2017-18 Nayanaben Gordhandas Jatwani Hon’ble jurisdictional High Court in case of Inox Wind Energy Ltd. (supra) where the Hon’ble High Court held that where amalgamated company brought facts of amalgamation to the notice of the AO, show cause notice cum draft assessment order issued in the name of non-existing company would be void and the same could not be said to be a procedural irregularity curable u/s 299B of the Act. The relevant part of the judgement is reproduced below for ready reference: “22. ………..Amalgamated company had already brought the facts of amalgamation to the notice of the Assessing Officer and yet he chose not to substitute the name of the amalgamated company and proceeded to make the assessment in the name of non-existing company and thereby rendering it void. This surely could not be said to be a procedural difficulty on 23-9-2021. The show cause notice-cum-draft assessment order when was issued in the name of the non-existing company giving a very short period for the company to reply, the very objection was raised by the amalgamated company pointing out that the assessment was in the name of the non-existing company. Repeated objections on the part of the petitioner had fallen on deaf ears and no heed was paid to various correspondences addressed to the respondent department. It is not being disputed that the order of NCLT and all the requisite documents were furnished to the authority by the amalgamated company and it had virtually implored to discontinue the proceedings against the non-existing company.
On the issue of prejudice also, we are convinced that when the proceedings continued against the non-existing company, if fort was held for some time by the amalgamated company to ensure that no further damage is caused, this participation surely cannot be held against it. Moreover, amalgamated company, with all its obligations, would file return of income and also continue the process, but once assessment order is passed against non-existing company, there would be no cure, even for filing of the appeal. Once it is found that the assessment is framed, in the instant case, in the name of the non-existing company, as held hereinabove, that surely does not remain the procedural irregularity, which can be cured under the provision of section 292B of the Act.” 8.1 The Hon’ble High Court quashed the assessment order in the name of the non-existing company. The ratio of the decision is applicable to the facts of /AY.2017-18 Nayanaben Gordhandas Jatwani the present case. We also find that the Co-ordinate Bench in case of Smt. Lalita M. Babaria, in dated 15.01.2021 has also allowed appeal of the assessee by holding as under: “7. We have considered the submission of both the parties and have gone through the orders of the authorities below. There is no dispute that when notice under section 143(2) of the Act was served on 26.09.2012, the assessee was alive. The assessee died on 13.12.2012. copy of Death Certificate is placed on record. Perusal of para 4.1 of the assessment order was well aware about the death of the assessee. The Assessing Officer has not taken any step to substitute the legal heir of the assessee; rather the Assessing Officer proceeded to complete the assessment. It is settled law that assessment order passed against the dead person is nullity; therefore, we accept the primary submissions of ld. AR for the assessee and hold that assessment order passed by the Assessing Officer on the dead person is invalid. Resultantly, the assessment order is quashed. In the result, Ground No.1 raised by the legal representative of the assessee is allowed.”
Facts of the present case are similar to the above case. Therefore, following the decision of Hon’ble Gujarat High Court in case of Inox Wind Energy Ltd. (supra) and the decision of the Co-ordinate Bench in case of Smt. Lalita M. Babaria (supra), the assessment order is liable to be quashed. It may be mentioned that the decisions relied upon by the ld. Sr. DR is not applicable to the facts of the present case. In case of Vijay Garg (supra), the AO himself amended the details in the order u/s 148A(d) of the Act. Further, the decision does not relate to passing order and creating tax liability in name of dead person. The decision of Rudra Gouda (supra) was pronounced before the decision of Hon’ble Supreme Court in case of PCIT vs. Maruti Suzuki Ltd., 107 taxmann.com 375 (SC) and decision of jurisdictional High Court in case of Inox Wind Energy Ltd. (supra). Hence, these decisions are distinguishable and not applicable in the present case. Accordingly, this ground is allowed.