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Facts
The assessee, Shri Krishan Gopal Gupta, passed away before the reassessment order was finalized. Despite the Assessing Officer (AO) being aware of the death, all subsequent notices and the final assessment order were issued in the name of the deceased. The AO reopened the case based on cash deposits of Rs. 10,17,000/- for which the source was not verified.
Held
The Tribunal held that an assessment order passed against a deceased person, when the AO is aware of the death and has not brought the legal heirs on record, is void ab initio and not merely a procedural irregularity. The service of notice under Section 148 was deemed invalid as it was not served on the legal heirs.
Key Issues
Whether the reassessment proceedings and the assessment order passed against a deceased assessee, without bringing the legal heirs on record and after the Assessing Officer's knowledge of the death, are valid.
Sections Cited
Section 147, Section 148, Section 2(7), Section 292B, Section 159, Section 282B, Section 149, Rule 46A, Section 250(5)
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & DR MITHA LAL MEENA, AM vk;dj vihy la-@ITA No. 2/JP/2024
ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 09-11-2023, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2007-08 wherein the assessee has raised the following ground of appeal. ‘’1. The ld. CIT(A) has erred in law and on facts in repeating the same non curable judicial mistake(already committed by the AO passing reassessment order and issuing other show cause notices in the name of deceased) in sustaining addition of Rs10,00,000/- against deceased being a non-est person in spite 2 LATE KRISHAN GOPAL GUPTA VS ITO, WARD 2(1), JAIPUR of information of his death already discussed in assessment order without bringing his legal heirs on records.’’ 2.1 Brief facts of the case as per assessment order passed are that the assessee did not file return of income for AY 2007-08. As per list of non-filers based on Annual Information Return, the assessee deposited cash of Rs.10,17,000/- in his bank account operated from SBBJ during F.Y. 2006-07. Since the assessee did not file ROI, hence, source of cash deposit was not found verifiable by the AO. Therefore, the case of the assessee was reopened and notice u/s.148 of the Act was issued and served upon the assessee. During the course of reassessment proceedings, the ld. AR of the assessee informed that the assessee died on 29.03.2014. Further, the ld. AR of the assessee filed written submission vide letter dated 24.12.2014. The AO however did not find the same as acceptable. Thus, the AO had accordingly considered cash deposited of Rs. 10,00,000/- as undisclosed income and added to the total income of the assessee. 2.2 Being aggrieved by the order of the AO, the assessee carried the matter before the ld. CIT(A) who dismissed the appeal of the assessee by observing as under:-
9. Findings & Decision: 91 First of all, I have carefully considered the request of the appellant to admit additional evidences under Rule 46A for the purpose of effective adjudication of appeal. On perusal of assessment order, it is found that in this case, first notice 3 LATE KRISHAN GOPAL GUPTA VS ITO, WARD 2(1), JAIPUR u/s.148 of the Act was issued on 11.03.2014. The assessee has died on 29.03.2014. The AR of the assessee attended during the course of assessment proceedings and filed written reply, however, the same does not contain the evidences now submitted by the legal heir/AR of the deceased assessee. The legal heir through the AR of the assessee in this regard has submitted that when the intimation of death of the assessee was made to the AO, the financial transactions entered into by the deceased assessee in a diary lying at his native place of Govindgarh - Alwar was not in his knowledge residing at Jaipur. The legal heir through the AR of the deceased assessee has therefore requested to admit the same as additional evidence under Rule 46A(1)(c) of the I.T. Rules. It is pertinent to mention that as per section 250 (5) of the Act, the CIT(A) has power to allow the appellant to take any additional grounds of appeal, which was not previously taken by them while filing the appeal before the CIT(A). Further, the Rule 46A Income-tax Rules, 1962 empower the CIT(A) to admit additional evidences. The term additional evidence is not specifically defined under the Act. However, the Rule 46A of the Income- tax Rules, 1962 specifies that additional evidence means any evidence, whether oral or documentary, which is being produced before the CIT(A) for the first time and such evidences were not produced before the assessing officer during the course of assessment proceedings. Though the legal heir or the AR of the deceased assessee has not submitted any documentary evidences in support of their contentions and also that there is no authenticity in the eyes of law of the documentary additional evidences submitted viz. diary found from the residence of native place of the deceased assessee, it is seen that the legal heir or the AR of the deceased assessee has produced the additional evidences which were not produced before the AO during the course of assessment proceedings. Therefore, considering the overall facts and circumstances of the case and following principles of natural justice, I admit additional evidences furnished by the appellant for the purpose of adjudication of appeal subject to that the additional evidences viz. diary found should not be taken or assumed as an accepted fact during any legal or appellate proceedings.
4 LATE KRISHAN GOPAL GUPTA VS ITO, WARD 2(1), JAIPUR 9.2 Now, coming to the grounds of present appeal raised by the appellant, I have carefully considered the facts of the case brought out in the assessment order, remand report of the Assessing Officer and submissions made by appellant including rejoinders on the remand report through the Ld. A.R. The issue- wise points for determination, decision thereon and the reasons for the decision along with remand report of the Assessing Officer and the comments / rejoinder thereon of the appellant are as per the succeeding paragraphs: 10. The Ground No. 1 is related to the appellant's plea against AO's action of initiating proceedings u/s. 147 of the Act without service of notice u/s. 148 of the Act either on the deceased assessee or any of his sons treating them as legal heirs of the deceased assessee. The AR of the appellant (legal heir of the deceased assessee) in submission dated 05.07.2016 contends that though in the Order passed u/s.147/144 of the Act appealed against, it has been mentioned that notice dated 11.03.2014 u/s.148 of the Act was issued and was served upon the assessee, but the fact was that it was neither served upon the appellant who was at Haldwani (Uttarakhand) nor upon any of his sons or relatives for the reason that the deceased assessee in his old age of 84 years was at Haldwani in his last days where he expired on 29.03.2014 and therefore, the whole proceedings are void ab-initio. The AR of the appellant in another submission dated 19.03.2019 further contends that the address mentioned in the notice u/s. 148 of the Act and appearing in the assessment order is "Hanu Villa, Nandpuri Ext., Hawa Sarak, 22, Godam, Jaipur where deceased assessee's second son Shri Mahendra Kumar Gupta resides but he had submitted affidavit dated 22.06.2016 affirming that he has not received any notice u/s. 148 of the Act either by post or served in person in the month of March, 2014 or thereafter either upon him or upon his wife and hence, it appears that the notice u/s. 148 of the Act was sent at a wrong address and service of notice at wrong address cannot be termed as a valid service of notice. The appellant in this regard has relied upon the decision in the case of Shubhashri Panicker vs. CIT (2018) 403 ITR 434 (Raj) in which it is held that "notice 5 LATE KRISHAN GOPAL GUPTA VS ITO, WARD 2(1), JAIPUR must be served on the assessee. Burden on Revenue to prove service. Notice sent by speed post to wrong address is no service of notice. Reassessment proceedings are not valid." 10.1 The AO on the above submission of the appellant in a report has submitted that on perusal of the record/AST/AIS, it is revealed that the deceased assessee has quoted two addresses for communication in the AIS/PAN data i.e. (a) Residence address: "Sliri Krishan Gopal Gupta, C/o Shri Mahendra Kumar Gupta, Hanuvilla, Nandpuri Extension, Hawa Saradak, 22 Godown, Jaipur and (b) Office address: Shri Krishan Gopal Gupta, Jhalani Krishi Farm, Rambas, Via Govindgarh, Alwar which do not appear complete & correct address with house number etc in the original PAN data base for proper communication. The AO further submits that the then AO issued the notice u/s. 148 on 11/03/2014 for AY 2007-08 and sent for delivery to the assessee at the given address: "Shri Krishan Gopal Gupta, C/o Shri Mahendra Kumar Gupta, Hanuvilla, Nandpuri Extension, Hawa Saradak, 22 Godown, Jaipur, as discussed above. Further, a copy of notice also issued u/s 148 on 19/3/2014 and sent for delivery to the assessee through postal authority vide Receipt No. RR245816885 dated 24/3/2014 at his another address: "Shri Krishan Gopal Gupta, Jhalani Krishi Farm, Rambas, Via Govindgarh, Alwar, as mentioned above. The AO further reports that the notice u/s 148 was issued and sent for delivery on 11/3/2014 and 19/3/2014 at both the above addresses when the deceased assessee was alive and later on he died on 29/3/2014. In view of the same, the delivery of service of the notice u/s. 148 has been legally and timely made through the postal authority in view of the provisions of Section 282 read with Section 149 of the Act and the guiding principles as laid down by the Hon'ble Supreme Court in the case of M/s GKV Drive Shafts (India) Ltd vs ITO & Ors reported in (2003) 259 ITR 19 wherein it has been held that- "We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income tax Act is issued, the proper course 6 LATE KRISHAN GOPAL GUPTA VS ITO, WARD 2(1), JAIPUR of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the came by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking Order before proceeding with the assessment in respect of the above said five assessment years." 10.2 The AO in support of his report has submitted copy of screen-shot of AIS/PAN based data showing addresses of the deceased assessee as mentioned above. 10.3 The appellant in rejoinder to the AO's report has argued that i) for same cause of action, Id. AO issued two notices dated 11.03.2014 at Jaipur address and again second notice dated 19.03.2014 at Rambas, Alwar address, however, Id. AO did not provide proof (i.e. postal receipt number) of sending notice at Jaipur address and ii) s ince the deceased assessee and all his relatives left the native place at Rambas, Alwar long back (before 2010), the notice sent at that old address must have been returned by the postal authorities as undelivered which the Id. AO is avoiding to give details and did not take further steps i.e. affixture to serve the notice and, where no such further steps were taken by the AO and he proceeded ahead with the proceeding and passed order u/s. 147 of Act, the resultant proceedings cannot be sustained and liable to be set-aside. 10.4 I have considered rival submissions. In this regard, it is pertinent to mention that Section 282B of the Act clearly provides for service by post as one of the accepted modes of service of any communication under the Act. The Revenue has issued the notice u/s. 148 of the Act at both the addresses available with the Revenue as per PAN based data through registered post. The appellant denies for the same on the argument that the deceased assessee in his old age of 84 years was at Haldwani (and not at Jaipur or Alwar at the addresses at 7 LATE KRISHAN GOPAL GUPTA VS ITO, WARD 2(1), JAIPUR which the notices were served upon) in his last days where he expired on 29.03.2014 and even one of the deceased assessee's sons has affirmed in an affidavit that he or his wife has not been served upon such notice. However, it is noted that the assessee till the time of his death had not given any intimation regarding any change of address and the notice was sent through registered post on 24.03.2014 which bears Receipt No. RR245816885 and the service of which has duly been acknowledged by the postal department which is an independent Government agency, accordingly, it is held that notice was properly, duly and effectively issued and served by registered post on the mentioned addresses of the assessee and concluded that notice was properly served on 24.03.2024 on the assessee. Therefore, in view of this, the grounds raised by the appellant about non-service of notice u/s.148 and thereby validity of service of notice u/s.148 are rejected. Hence, this ground raised by the appellant is dismissed.
11. The 2nd Ground of appeal relates to addition made of Rs. 10,00,000/- of the cash deposits made in the bank account of deceased assessee treating the same as made out of undisclosed sources of income. The AR of the appellant in this regard in submission dated 05.07.2016 contends that after receiving assessment u/s. 144/147 of IT Act, deceased assessee's sons residing in Jaipur visited their native place (Govindgarh- Alwar) where they had found an old diary cum cash book, which is in the handwriting of the appellant. In said diary/cash books, the financial transactions of the deceased assessee are recorded. From the diary so found, cash book and ledger account were drawn through computer. Since the cash was available with the deceased assessee from the disclosed sources for which the legal heir were not aware, the sources so appearing in diary/cum cash book, may please be accepted. Thereafter, the AR of the appellant in further submission dated 26.10.2023 has submitted that this ground of appeal is not pressed in view of the decisions of the Hon'ble High Courts referred in respect of ground no.1.
8 LATE KRISHAN GOPAL GUPTA VS ITO, WARD 2(1), JAIPUR 11.1 I have admitted this additional evidence which was not before the AO while finalizing the assessment proceedings. However, it is found that there is no authenticity of the contents of the diary cum cash book so found in the eyes of law and the financial transactions recorded. The appellant has not submitted any details of entries which are either correspondingly matched with the entries of any kind in the bank account or any other authentic books of accounts which can be considered genuine or to arrive at conclusion about the source of cash deposits made by the deceased assessee. Mere filing of statement or hand-written diary cum cash book without matching the details or entries thereof with the books of accounts is not sufficient. The onus was on the appellant to prove genuineness of the transaction and source of cash deposits made in the bank account. There is no details and documentary evidences which establishes the genuineness of the transaction and source of cash deposits made. The material available on record (diary cum cash book) does not reasonably evidence nature and genuineness of the transaction and source of cash deposits made in the bank account. In view of this discussion and bearing in mind the peculiar facts of the present case, I reject this ground of appeal and submissions of the appellant and confirm the addition made of Rs. 10,00,000/-. The appellant while contesting this ground has also contended that in view of the ground no.1 related to non-service of notice u/s. 148 of the Act, the appellant expects favourable decision and therefore the assessment order is void ab-initio, hence, this Ground No.2 has not been pressed. However, in view of the discussion made hereinabove in preceding paras in respect of Ground No.1, the contentions raised by the appellant are rejected and therefore, the ground no.1 is dismissed for reasons cited above, hence, this ground (no.2) of appeal raised by the appellant is also dismissed.
12. In the result, the appeal filed by the appellant as legal heir of the deceased assessee is dismissed.
9 LATE KRISHAN GOPAL GUPTA VS ITO, WARD 2(1), JAIPUR 2.3 Further, the assessee being dissatisfied by the order of the ld. CIT(A) approached before this Bench contending that the order passed against deceased assessee is non-est and liable to be quashed for which the ld. AR filed the following written submission. ‘’Brief facts of case: Notice under section 148 of IT Act was said to have been issued in this case on 11.03.2014 but was never received either by the assessee or by any of his family members. Assessee expired on 29.03.2014 at Haldwani where he was residing with his other son from the year 2013 immediately after death of his wife. The fact of his death was brought to notice of ld.AO who while incorporating the fact death of assessee in his order dated 30.12.2014 under section 147/144 of Act, without bringing the legal heirs of deceased on records, issued the reassessment order and thereafter other statutory notices and order(s) in name of deceased. Even the CIT(A) had also repeated the same mistake and passed order under section 250 in name of the deceased. SOLITARY GROUND OF APPEAL: Ground of Appeal: Ld. CIT(A), has erred in law and on facts in repeating the same non curable judicial mistake (already committed by ld. AO by passing reassessment order and issuing other show-cause notices in name of deceased) in sustaining addition of Rs.10,00,000/- against deceased being a non-est person, in spite of information of his death, already discussed in assessment order, without bringing his legal heirs on records. No notice was served on the assessee as he shifted from Jaipur to Haldwani after death of his wife, where his other son was residing or to other family member. Assessee died on 29.03.2014 (P.B. page No.4) therefore, during the course of assessment proceedings, ld. AO was informed about the death of assessee on 29.03.2014 which was also admitted by him in order under sec. 147/144 of I.T. Act as under {at bottom part of page No.(1)}: “ It was informed that the assessee Sh. Krishna Gopal is died on 29.03.2014. He also informed name of legal heirs of the assessee Sh. (La) Krishan Gopal Gupta”. Thereafter, ignoring the information for the death of the assessee, ld. AO had issued further notices/order in name of deceased on the date of order or thereafter as under: S.No. Notice Notice u/s Paper book page no. dated 10 LATE KRISHAN GOPAL GUPTA VS ITO, WARD 2(1), JAIPUR 1. 30.12.2014 U/s. 274/271 (1)(c) 5 2. 30.12.2014 U/s. 274/271 F 6 3 11.06.2015 271F r.w.s. 274 7 4. 21.07.2015 U/s. 154/155 8 5 31.07.2015 Arrear demand 9 6. 15.09.2015 Order u/s. 154 10 7. 20.11.2015 Reminder for demand 11 It is settled law that assessment order passed against deceased is not sustainable for the reason that deceased cannot be treated as an “assessee” under the provisions of section 2(7) of I.T. Act when the fact of death of assessee was in the knowledge of the Assessing Officer, bringing the legal heirs on records or serving notice under sec. 148 upon them, the reassessment is not valid. Framing of assessment order against non-existing entity is not procedural irregularity of the nature which could be cured by invoking the provisions of sec. 292B of I.T. Act. It is a jurisdictional defect which goes to the root of the matter defect and therefore, there cannot be any assessment order against a ‘dead persons.’ On the identical facts for assessment/reassessment in case of deceased, after considering the provisions of law, the matter was decided recently by Hon’ble “D” bench of ITAT Mumbai in case of Late Shri Motilal Hastimaji Bothra thr. L.H Vs. ITO (ITA No. 2316/Mum./2023) who vide order dated 16.10.2023 for A.Y. 2010-11(P.B. page 12 to 17) held at concluding part of the order as under: 7. “Undoubtedly as per section 159 of the Act, where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased. However, undisputedly in the present case, after the death of the assessee, his legal heir was not brought on the record and no notice was issued in the name of the legal heir. Therefore, the assessment order framed in the name of the deceased assessee is non-est in law and hence quashed. Since the relief granted on this short issue, the other grounds raised in the present case are rendered academic and thus are kept open”. On the facts and considering the provisions of Income tax Act, order passed against deceased is non-est and liable to be quashed, more so when the death of the assessee is within knowledge of the Assessing Officer.
2.4 On the other hand, the ld. DR supporting the order of the ld.CIT(A). We have heard both the parties and perused the materials available on 2.5 record. In this case, it is noted that the AO passed the assessment order being not 11 LATE KRISHAN GOPAL GUPTA VS ITO, WARD 2(1), JAIPUR filing of the return of income for the A.Y. 2007-08. It is noted by him that per list of non-filers based on Annual Information Return, the assessee deposited cash of Rs.10,17,000/- in his bank account operated from SBBJ during F.Y. 2006-07. Since the assessee did not file ROI, hence, source of cash deposit was not found verifiable by the AO. Therefore, the case of the assessee was reopened and notice u/s.148 of the Act was issued and served upon the assessee. During the course of reassessment proceedings, the ld. AR of the assessee informed that the assessee was died on 29.03.2014. Further, the ld. AR of the assessee filed written submission vide letter dated 24.12.2014. The AO however did not find the same as acceptable. Thus, the AO had accordingly considered cash deposited of Rs. 10,00,000/- as undisclosed income and added to the total income of the assessee. In first appeal, the ld.CIT(A) confirmed the action of the AO. The crux of the issue is that the assessee late Shri Krishan Goptal Gupta expired on 29-03-2014 (PB -4) issued by Govt. of Uttrakhand vide its order dated 16-04-2014 before passing the assessment order by the AO dated 30-12-2014. It is also noted that the AO was informed about the death of assessee on 29-03-2014 which was also admitted by the AO in order u/s 147/144 of the Act which is mentioned at bottom part of page 1 of the assessment order. It is also noted that in spite of the information about the death of Late Shri Krishan Gopal Gupta, the AO had issued further notices /order in the name of deceased on the date as mentioned hereinabove. The Bench further 12 LATE KRISHAN GOPAL GUPTA VS ITO, WARD 2(1), JAIPUR observed that that it is settled law that assessment order passed against deceased is not sustainable for the reason that deceased cannot be treated as an “assessee” under the provisions of section 2(7) of I.T. Act when the fact of death of assessee was in the knowledge of the Assessing Officer, bringing the legal heirs on records or serving notice under sec. 148 upon them, the reassessment is not valid. Framing of assessment order against non-existing entity is not procedural irregularity of the nature which could be cured by invoking the provisions of sec. 292B of I.T. Act. It is a jurisdictional defect which goes to the root of the matter defect and therefore, there cannot be any assessment order against a ‘dead persons.’. It is also worthwhile to mention that on the identical facts for assessment/reassessment in case of deceased, after considering the provisions of law, the matter was decided recently by Hon’ble “D” bench of ITAT Mumbai in case of Late Shri Motilal Hastimaji Bothra thr. L.H Vs. ITO (ITA No. 2316/Mum./2023) who vide order dated 16.10.2023 for A.Y. 2010-11(P.B. page 12 to 17) held at concluding part of the order as under:
“Undoubtedly as per section 159 of the Act, where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased. However, undisputedly in the present case, after the death of the assessee, his legal heir was not brought on the record and no notice was issued in the name of the legal heir. Therefore, the assessment order framed in the name of the deceased assessee is non-est in law and hence quashed. Since the relief granted on this short issue, the other grounds raised in the present case are rendered academic and thus are kept open”.
Hence, Keeping in view the above facts, circumstances of the case and also the decision of ITAT Mumbai Bench in the case of Late Shri Motilal Hastimalji 13 LATE KRISHAN GOPAL GUPTA VS ITO, WARD 2(1), JAIPUR Bothra vs ITO, Ward 19(2)(3), Mumbai, (supra) we do not concur with the findings of the ld.CIT(A) and the appeal of the assessee is allowed.
3.0 In the result, the appeal of the assesee is allowed Order pronounced in the open court on 14/03/2024.