LATE SHRI PADAMSHI A SHAH,MUMBAI vs. ITO 14(1)(1), MUMBAI

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ITA 4291/MUM/2014Status: DisposedITAT Mumbai31 October 2016AY 2007-083 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that penalty proceedings initiated against a deceased person are void ab initio. Since the notice for penalty was served after the assessee's death, all subsequent actions were invalid.

What were the facts?

The assessee claimed interest expenses which were disallowed during assessment. The assessee died before penalty proceedings were initiated. The penalty notice was served after the assessee's death.

What were the issues?

Whether penalty proceedings initiated against a deceased assessee are valid. Whether a penalty notice served after the assessee's death is legally sustainable.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BENCH “C”,MUMBAI

Before: SHRI B.R.BASKARAN & SHRI PAWAN SINGH

For Appellant: Shri N.M. Porwal (AR)
For Respondent: Shri C.W. Angolkar (DR)
Hearing: 31.10.2016Pronounced: 02.11.2016

O R D E R

PER PAWAN SINGH, JM:

1.

This appeal u/s 253 of the Income-tax Act is directed by Ld. Authorized Representatives (LR’s) of assessee against the order of Ld. Commissioner of Income-tax (Appeals) (for short ‘the CIT(A)25 Mumbai dated 02.04.2014 for Assessment Year (AY) 2007-08. Though the appellant has raised as many as five grounds of appeal

, however, as per our considered opinion, the only substantial ground of appeal is whether “CIT(A) erred in confirming the levy of penalty of Rs. 1,34,077/- u/s 271(1)(c) of the Act”.

2. Brief facts of the case are that the assessee filed return of income for relevant AY on 02.11.2007 declaring total income of Rs. 1,84,440/-. The assessment was completed on 30.12.2009 u/s 143(3) in the assessment order, the Assessing Officer (AO) disallowed the interest expenses of Rs. 4,60,393/-, the assessee filed appeal

2 Late Shri Padamshi A. Shah against the quantum assessment but the same was dismissed by ld. CIT(A). Accordingly, notice u/s 274 r.w.s. 271(1)(c) issued on 10.05.2010. The LR’s of assessee contested the penalty proceedings. The LR’s of assessee filed reply to the notice and contended that the assessee expired on 11.11.2008. The LR’s of assessee filed copy of death certificate of assessee along with the TDS, certificate and confirmation of loan. The contention of ld. LR’s of assessee was not accepted. The AO levied the penalty u/s 271(1)(c) @ 100% on the tax sought to be evaded vide order dated 28.03.2012. The appellant/LR’s of assessee filed appeal before the CIT(A) wherein the penalty order was confirmed. Thus, further aggrieved by the order of ld. CIT(A), the appellant/LR’s of the assessee has filed the present appeal.

3.

We have heard ld. Authorized Representative (AR) of the appellant and ld. Departmental Representative (DR) for Revenue and perused the material available on record. We have seen that assessment was completed u/s 144 of the Act. The AO disallowed the interest expenses in absence of complete details of the loan confirmation. The AO disallowed the entire interest expenses claimed and initiated the penalty. Before assessment could be completed, the assessee died on 11.11.2008. The notice u/s 274 r.w.s. 271(1)(c) was served only on 01.06.2010 by that time the assessee expired. This fact was clearly communicated to AO.

4.

The penalty proceedings are independent of assessment proceedings. The AO initiated the penalty proceeding against the dead person. The LR’s of the assessee intimated the AO about the death of assessee. The AO has recorded that it is pertinent to mention herein that the assessee passed away only on 11.11.2008. It is settled law that no proceeding can be initiated against the dead person. Admittedly, the assessee died before the service of notice u/s 274 r.w.s. 271(1)(c) of the Act which was served only on 01.06.2010. There is no material on record to show that any fresh notice u/s 274 r.w.s. 271(1)(c) was served on the assessee for initiation of penalty proceeding u/s 271(1)(c) of the Act. As per our considered opinion, the proceedings initiated by AO were void ab-initio. Thus, all subsequent action initiated by AO are invalid, we hold accordingly. As we have declared the proceeding as void ab-initio and invalid, thus, any discussion on merit is became academic.

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