ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 4, SURAT vs. SHRI AMATLAL DEVCHANDBHAI PATEL, SURAT

Brief facts of the case are that the assessment in case of assessee/legal representative of assessee was completed under Section 143(3) r.w.s 153A of the Income Tax Act, 1961 (in short, the Act) on 30/12/2017. The Assessing Officer while passing the assessment order, initiated penalty under Section 271E of the Act for contravention of provisions of Section 269T of the Act. The Assessing Officer initiated the penalty under Section 271E of the Act by taking a view that the assessee has taken cash loan from Asharam T Harplani alias Asharam Bapu and his associates in past years. The assessee has repaid a loan of Rs. 1.00 crore on 08/03/2011 i.e. during the relevant assessment year. The Joint Commissioner of Income Tax (JCIT) after receipt of reference from Assessing Officer/DCIT on 22/02/2018, issued show cause notice to the assessee on 05/03/2018 as to why penalty under section 271E be not levied on the assessee. In response to show cause notice, the learned Authorised Representative (ld. AR) of the assessee filed his reply dated 29/08/2018. In the reply, the assessee stated that no addition is made in the assessment against the alleged repayment of loan in contravention of section 269S. No existence of loan has been found. The noting relating to repayment of Rs. 1.00 crore is found from the Asharam and there is no signature of assessee. No statement of assessee was recorded regarding such repayment. The reply of ACIT Vs. Late Amratlal Devchandbhai Patel thr. L/h-Jignesh Amritlal Patel assessee was not accepted by the ld. JCIT. The ld. JCIT held that the name of assessee appeared in the master ledger of assessee and balance was receivables Rs. 5.00 crores. The relevant portion of master ledger is scanned in para 7 of penalty order. On the basis of which, the ld. JCIT held that repayment of Rs. 1.00 crore was on account of loan repayment which was made in cash which attracts provisions of Section 271E r.w.s. 269T of the Act. The ld. JCIT accordingly levied penalty of Rs. 1.00 crore i.e. equal amount of loan repaid in cash.

Aggrieved by the order of penalty, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the ld. AR of the assessee filed detailed written submissions. The ld. AR in his submission stated that the assessee had died on 30/01/2017, copy of death certificate was filed. The assessment was completed in the name of legal heirs/ son of deceased late Jignesh Amritlal Patel. Copy of assessment was filed. The assessee stated that despite the fact the assessment was framed in the name of legal heirs on 30/12/2017, show cause notice proposing levy of penalty under Section 271E was issued in the name of deceased on 05/03/2018. The assessee stated that penalty order in the name of deceased person is void ab initio and liable to be quashed. 4. The ld. CIT(A) after considering the submission of assessee noted that the assessee has expired on 30/01/2017 whereas the penalty 4 ACIT Vs. Late Amratlal Devchandbhai Patel thr. L/h-Jignesh Amritlal Patel order was passed on 30/08/2018. The assessment order under Section 143(3)/153A of the Act was passed on 30/12/2017 in the name of legal heirs of assessee. The notice was served in the name of dead person. In such cases, notice was to be issued and served on the legal heirs of the deceased assessee. Such notices issued in the name of dead person, is not curable even by applying provisions of Section 292B as has been held by the Hon’ble Bombay High Court in Sumit Balkrishna Gupta Vs ACIT 103 taxmann.com 188 (Bom) and by the Hon’ble Jurisdictional High Court in Vikram Singh Vs Union of India 401 ITR 302 and Hon’ble Delhi High Court in Rajendra Kumar Sehgal Vs ITO 101 taxmann.com 233. By referring the aforesaid decision, the ld. CIT(A) held that the penalty levied on deceased person is null and void.

The assessee also raised grounds on merit of the case, the ld. CIT(A) recorded such submission of assessee in para 7.1 of his order. In the submission, the ld. AR of the assessee submitted that in the year of search i.e. A.Y. 2016-17, the Assessing Officer made addition of Rs. 50.00 lacs under Section 69C alleging unexplained interest payment by assessee in respect of Rs. 5.00 crores received from Ashram of Asharam Bapu. The Assessing Officer also made protective addition of Rs. 15,17,100/- under Section 69A in respect of cash found from the residence of assessee. Both the additions were deleted by the ld. CIT(A) in his order dated 07/10/2019 by holding that the amount of 5 ACIT Vs. Late Amratlal Devchandbhai Patel thr. L/h-Jignesh Amritlal Patel Rs. 5.00 crores were received by HUF of assesse and HUF earned Rs. 56.45 lacs as business income and Rs. 1.40 crore as interest income for A.Y. 2014-15 to 2016-17 which is already offered by HUF in Income Discloser Scheme-2016 (IDS-16) as a net income of Rs. 2.00 crores which is accepted by PCIT-1, Surat, thus, there is no question of making any addition in the individual hand of assessee. Copy of order of ld. CIT(A) dated 07/10/2019 was also filed. Copy of Form-4 issued by ld. PCIT in case of HUF of deceased assessee, accepting disclosure of income of Rs. 2.00 crore was also filed. On the basis of such fact, the ld. AR of the assessee submitted that from the above facts, it is clear that the alleged transaction of repayment of Rs. 1.00 crore in this year and subsequent acceptance of Rs. 5.00 crores from Ashram of Asharam Bapu pertains of HUF of assessee and not of assessee in his individual capacity and there is no question of levy of penalty in his individual capacity. Furthermore, the HUF of assessee has disclosed the said transaction under IDS-2016.

The ld. CIT(A) after considering the submission of assessee held that he has verified the submission of assessee regarding the taxing of the cash loans from Asharam Bapu Group. Out of Rs. 5.00 crores taken as cash loan, as found from the evidence seized during the course of search, the HUF of assesse offered Rs. 2.00 crores in IDS and balance of Rs. 3.30 crores were brought to tax under Section 69A in the hands of HUF of assessee in the assessment completed by 6 ACIT Vs. Late Amratlal Devchandbhai Patel thr. L/h-Jignesh Amritlal Patel ITO, Ward 1(3)(1), Surat order dated 21/12/2019 for A.Y. 2017-18 under Section 143(3) of the Act. No addition of cash loan was made in the hand of individual assessee. When the loan was taken in the hand of HUF, the penalty for repayment of loan cannot be levied in the hands of assessee individual. Therefore, the penalty was also deleted on merit. Further aggrieved by the order of ld. CIT(A), the Revenue has filed the present appeal before this Tribunal.

We have heard the submissions of the learned Senior departmental representative (ld. Sr. DR) for the revenue and the ld. AR of the assessee and have gone through the orders of the authorities below carefully. The ld. Sr. DR for the revenue submits that the representative of the assessee never informed about the death of assessee either at the time of issuance of show cause notice or during the penalty proceedings. Such fact was not brought to the notice of ld. JCIT, therefore, penalty was levied on the assessee. In para 6.1 of penalty order, it is clearly mentioned that repeated notice was issued and served and the ld. AR of the assessee sought adjournment instead of disclosing that the assessee has died.

On the other hand, the ld. AR of the assessee supported the order of ld. CIT(A). The ld. AR of the assessee submits that the assessment was passed against the legal heirs of assessee. The ld. AR as well as legal heirs of assessee informed the Assessing Officer about the death of assessee. Thus, assessment was passed in the name of 7 ACIT Vs. Late Amratlal Devchandbhai Patel thr. L/h-Jignesh Amritlal Patel legal heirs of assessee. All such facts were available before the JCIT at the time of passing the penalty. The ld. AR submits that it is settled law that the order passed against the dead person is nullity and cannot be cured under any provisions of law. To support his submission, the ld. AR of the assessee relied upon the following case laws: (i) Urmilaben Anirudhhasinhji Jadeja Vs ITO (2020) 117 taxmann.com 504 (Guj) (ii) PCIT Vs Maruti Suzuki India Ltd 107 taxmann.com 375 (SC) (iii) CIT Vs S. Gowri 116 taxmann.com 764 (Mad.) (iv) Srikishan Agarwal Vs DCIT 88 taxmann.com 380 (Jai Trib). In alternative submission, the ld. AR of the assessee submits that even on merit, no penalty was leviable against the assessee as the alleged transaction was not related to individual assessee rather relates to HUF of assessee. The ld. CIT(A) on appreciation of fact, deleted the penalty on merit as well. The ld. AR of the assessee submits that the grounds of appeal