ESTATE OF HEMRAJ KHAJANCHI ,KOLKATA vs. ITO, WARD - 43(1), KOLKATA , KOLKATA

Brief facts of the case are that the assessee in the capacity of Executor of the Will of his father late Shri Hemraj Khajanchi, who expired on 30.10.2009 has filed the return of income onbehalf of the Estate of late Shri Hemraj Khajanchi. Shri Hemraj Khajanchi before his death had made a Will dated 09.03.2009 wherein he had appointed Shri Narendra Kumar Khajanchi as the Executor of this Will. He also had made it clear in the Will that if Shri Narendra Kumar Khajanchi fails to be the executor, then and in that event only Shri Subhas Kumar Khajanchi (brother of shri Narendra Kumar Khajanchi) be the Estate of Hemraj Khajanchi, AY:2011-12 Executor of the Will to carry out his desires as expressed in the Will. Since Shri Hemraj Khajanchi died on 30.10.2009, thereafter the Estate of the late Hemraj Khajanchi had to file its return of income till the date on which complete distribution of assets is made to the beneficiaries/legatees from the estate of late Shri Hemraj Khajanchi. Therefore, the executor on the bona fide belief applied for PAN in the status of Body of Individuals (BOI), though erroneously. After getting PAN as BOI filed the return of income from AY 2010-11 onwards. But it was brought to our notice that from AY 2010-11 he was facing problems while filing electronically the return of income [while data were fed/punched in the status BOI]. According to Ld. AR, while electronically the return of income is uploaded, and the data are fed/punched in the status of assessee as BOI, it automatically (erroneously) showed it as Firm. Thereafter, the Ld. AR drew my attention to page 7 of Volume-I of paper book and it is noted that the status of assessee is shown as Firm. However, the Ld. AR drew our attention to page 14 wherein the computation of total income is reflected as ‘business income’ as Rs.46,741/- whereas in the computation of tax liability on total income on page 15 the calculation has been done automatically by the software wherein it has been shown as nil. Further, it was pointed out by the Ld. AR that when the return of income was processed by the CPC, Bangalore, an error had crept inside which could be evident from the perusal of the intimation u/s. 143(1) of the Act, which is placed in Volume-II of the paper book, from wherein, I note that the status of assessee has been erroneously taken as Firm and at page 2 it shows that the aggregate income of Rs.46,740/- and tax on income at normal rate is shown as Rs.14,022/-, which according to Ld. AR is per se erroneous. The Ld. AR explained that when the return of income was filed, though the business income is shown as Rs.46,740/-, the computation of income has been done automatically by the software as ‘Nil’; and, according to him, when there was a mismatch detected, then the prudent way would have been that the AO ought to have issued notice u/s. 143(1) and 143(2) of the Act and thereafter should have completed the assessment rather than allowing the mistake to carry on. After the AO had given intimation dated 13.01.2012 u/s. 143(1) of the Act, the assessee preferred before AO an application for Estate of Hemraj Khajanchi, AY:2011-12 rectification u/s. 154 of the Act wherein the AO took the status of assessee as AOP. However, the demand has not changed and had remained at Rs.14,022/- which according to Ld. AR, is erroneous and, therefore, the assessee preferred an appeal before the Ld. CIT(A), who confirmed the order of AO. Aggrieved, assessee is before us.

I have heard rival submissions and gone through the facts and circumstances of the case. The facts narrated above are not repeated for the sake of brevity and the facts are not disputed. In order to understand the nuasance of the issue raised, I need to go to the special provisions which deal with the Executors of the Estate of a Deceased person which I find from a reading of sec. 168 of the Act. Section 168 of the Act reads as under:

A bare perusal of the aforesaid position of law states that the income of the estate of a deceased person shall be chargeable to tax in the hands of the executor as per section 168 of the Act. clause (a) to sub-section (1) of section 168 of the Act is unambiguous and states that if there is only one executor to the estate of a deceased person, then the executor will be Estate of Hemraj Khajanchi, AY:2011-12 treated as an individual. clause (b) to sub-section (1) of section 168 comes into play only if there is more than one executor and not otherwise and then the status of the executor would be that of an association of persons (AOP). Here in the instant case, we note that the executor/assessee due to ignorance of law has first of all applied for PAN in the status of BOI and thereafter while filing the return of income electronically faced the glitches/problem in the software, which has automatically taken the status of the executor as that of Firm; and consequently there was mismatch between the return of income as well as 143(1) intimation. In this case, the law is very clear, if there only one executor then the executor shall be treated as an individual and where there is more than one executor the executors shall be treated as an Association of person (AOP). I note that in the rectification application filed by assessee under section 154 before the AO, the AO has taken the status of assessee as that of an AOP which is erroneous. In this case, a careful reading of the Will of late Shri Hemraj Khajanchi dated 09.03.2009, in no uncertain term has chosen Shri Narendra Kumar Khajanchi as the Executor of his will. Only if Shri Narendra Kumar Khajanchi fails to perform the duties of executor, then only Shri Subhas Kumar Khajanchi gets the mandate to execute the will of Late Shri Hemraj Khajanchi. And since Shri Narendra Kumar Khajanchi is discharging his duties as an Executor, the contingency mentioned in the Will of late Shri Hemraj Khajanchi has not risen and so Shri Narendra Kumar Khajanchi is the only Executor of the Will, and, therefore, the status of executor in this case is that he shall be treated as an individual and not as AOP as erroneously classified by AO. It is true that the confusion has arisen to start with because of the ignorant action of the assessee when he applied for the PAN in the status of BOI and thereafter glitches in the software of department as discussed above. However, it has to be kept in mind that there is no estoppel against law. In this case the facts clearly show that the Shri Narendra Kumar Khajanchi is the only executor of the Will and is discharging his duties as an Executor, and therefore has to be treated in the status as an individual as per sec. 168 of the Act and when he is treated as an individual according to applicable tax slab during AY 2011-12 the assessee is having only business income to the tune of Rs.46,741/- which falls below the Estate of Hemraj Khajanchi, AY:2011-12 threshold exemption limit of Rs.1,60,000/- and, therefore, no tax is payable as per law. Thus the appeal of the assessee is allowed.

In the result, the appeal of assessee is allowed.