SMT. HANSABEN VINODBHAI PARMAR LEGAL HEIR OF LATE SHRI VINODBHAI MOTIBHAI PARMAR,GANDHINAGAR vs. THE ACIT/DCIT CIRCLE, GANDHINAGAR

The assessee has taken the following grounds of appeal:-

The Learned CIT (Appeals) has grossly erred in passing the order in name of deceased person, who had died on 14,10.2018. It is submitted that there was clearly mentioned about legal heir in Form 35 and Form 35 has been duly filed and signed by wife of assessee i.e. Mrs. Hansaben Vinodbhai Parmar in the capacity of Legal heir. On facts and circumstances of the case, the various notices issued and order passed by Ld. CIT(A) are null and void and such impugned order deserves to be quashed and set aside as held by various Hon'ble Tribunals and High Courts.

The Order passed by the learned CIT(A) is bad in law and contrary to the provisions of law and facts. It is submitted that the same be held so now.

Your appellant craves leave to add, alter and/or to amend all or any of the grounds before the final hearing of appeal.”

The brief facts of the case are that the assessee is running a petrol pump and during the impugned year under consideration, the assessee has earned income from trading of lubricants i.e. petrol, diesel and oil and has filed its return of income and books of accounts are subject to audit under section 44AB of the Act. As per information regarding the cash transaction during demonetisation received from investigation Wing, Ahmedabad, the assessee had deposited cash amounting to � 1, 43, 42, 420/- in its Indian overseas Bank, Gandhinagar branch during the demonetisation period. Accordingly, the case of the assessee was selected for scrutiny under CASS for the reason “large value cash deposit during demonetisation period”. The assessing officer, during the course of assessment proceedings issued several notices to the assessee dated 12-09-2019, 02-11-2019 and 07-11-2019, but the assessee all throughout remained non-compliant the source of cash deposit in the bank account of the assessee remained unexplained. Accordingly, in view of no response whatsoever from the side of the assessee, the sum of � 1, 43, 42, 420/- was added as income of the assessee under section 68 of the Act.

In addition to the above, the assessee had claimed several administrative expenses and other expenses to the tune of � 56, 48, 213/- Page No. 4 Smt. Hansaben Vinodbhai Parmar vs. ACIT/DCIT and despite issuance of several notices, the assessee did not cause appearance before the assessing officer and did not disclose the nature and also did not furnish any evidence to demonstrate/support the genuineness of the aforesaid expenses. Accordingly, in absence of any explanation whatsoever by the assessee, despite issuance of several notices, the assessing officer disallowed 25% of these expenses and added the same to the income of the assessee.

The assessee filed appeal before Ld. CIT(A), but again despite issuance of several notices of hearing dated 03-03-2020, 23-01-2021, 24-05- 2023, 27-07-2023 and 27-10-2023, none appeared on behalf of the assessee before Ld. CIT(A) and accordingly, Ld. CIT(A) dismissed the appeal of the assessee on account of nonappearance, with the following observations: “5. Decision “I have carefully gone through the facts of the case. Moreover, all notices were duly served upon the appellant through email. The appellant opted not to respond the above notices for the reason best known to him. No documents were produced before me in support of his GOA or to rebut the aor. In view of the above facts, it is clear that the appellant is not interested in prosecuting the present appeal on merits and therefore in absence of any evidence to rebut the assessment order the assessment order is CONFIRMED and accordingly the appeal is dismissed. Hence all Ground of appeal

We have heard the rival contentions and perused the material on record. The issue for consideration before us is whether the present assessment order framed in the name of the deceased assessee is void ab initio/illegal and hence liable to be set aside, or is it a defect, while framing the assessment order which can be cured, since at the time when the assessment proceedings were initiated against assessee, the assessee was alive and the legal representatives also did not inform the tax Department about the death of the assessee. This is particularly light of the fact that as soon as the assessment was framed, the legal representatives of the assessee Page No. 7 Smt. Hansaben Vinodbhai Parmar vs. ACIT/DCIT filed appeal against the assessment order before Ld. CIT(A) and thereafter, again did not cause any appearance before the Ld. CIT(A), during the course of appellate proceedings despite large number of notices. In the facts of the instant case, certain points are noteworthy. At the time when the assessment proceedings were initiated, and the first notice of hearing was duly served in the ITP representing the assessee, the assessee was alive. At the time of hearing before us, no concrete/plausible reason was given by the counsel for the assessee to show that such notice was not duly served upon the assessee/legal representatives of the assessee by the ITP (a general explanation was given that owing to the ill-health of family member of ITP, such notice could not be given by the ITP to the assessee or his legal representatives). Secondly, as soon as the assessment order was framed, the legal representatives of the assessee filed appeal before Ld. CIT(A) (albeit with a minor delay) and therefore, from the facts which emerge before us, it cannot be concluded that the legal representatives for not at all aware about the assessment proceedings/assessment order which had been framed in the name of the deceased assessee. However, no intimation was given to the tax Department regarding the death of the assessee by the legal heirs of the assessee. Thirdly, most of the cases on which the counsel for the assessee has placed reliance on involve the case that on issuance of notice by the tax department initiating proceedings against a deceased person, the legal representatives of the assessee had duly informed the tax Department regarding the fact that assessee had expired, but despite the same, the assessing officer proceeded to frame the assessment in the name of the deceased person, without bringing the legal heirs on record, and such assessment order was held to be void ab initio. So far as this legal Page No. 8 Smt. Hansaben Vinodbhai Parmar vs. ACIT/DCIT proposition is concerned, that once the Department has been informed that the assessee has since expired, then any assessment order framed in the name of the deceased person without bringing the legal heirs on record is a nullity and hence ab- initio, we are in agreement with this proposition.

But then this brings us to the second question that once at the time of issuing of initial notice of assessment, the assessee was alive and notice was duly served on the authorised representative (ITP) the assessee, and still the legal representatives of the assessee did not inform the Tax Department, could it be held that the Department had erred in not bringing the legal heirs of the assessee on record within the permissible timeframe and that the assessment order framed in the name of the deceased person was null and void, and hence liable to be set aside. In our view, in such case, the assessment order cannot be termed to be a nullity altogether. At the time when the assessment proceedings were initiated, assessee was alive and notice had been duly served on the authorised representative (ITP) of the assessee. When the assessment order was passed, the legal heirs of the assessee filed appeal before Ld. CIT(A), and therefore, it is evident that the legal heirs of the assessee were aware of the assessment proceedings which were on going against the deceased assessee. Despite the evident knowledge of the ongoing assessment proceedings, the legal heirs chose not to intimate the Department about the death of the assessee and thereafter are now seeking to take the legal plea that the assessment order framed in the name of the dead assessee is a nullity and hence avoid ab initio. The Karnataka High Court in the case of CIT v. Shri. I. Mahabaleshwarappa [IT Appeal No. 561 of 2013,dated 16-6-2021] held that when the assessee expired after Page No. 9 Smt. Hansaben Vinodbhai Parmar vs. ACIT/DCIT the hearing was over and the assessment order was passed by the Assessing Officer subsequent to the death of the assessee, such assessment order was not void initio as opined by the Tribunal since the issue is covered under section 159(2) of the Act. The High Court, however, set aside the issue to the Assessing Officer directing him to issue notice to the legal representatives of the deceased assessee and thereafter to pass a fresh order of assessment. In the case of Md. Zafrulla, Legal Representative of Md. Rafiulla v. CIT 72 TAXMAN 231 (GAU.), the High Court held that principle under Order 22, rule 6 of the Civil Procedure Code that if death occurs between conclusion of hearing and pronouncement of judgment, judgment may in such case be pronounced notwithstanding death and shall have same force and effect as if it had been pronounced before death took place, should be extended in a proceeding under Income-tax Act on the ground of policy of law. Therefore, this would at best be a defect which could be corrected and therefore, assessment order made without notice to legal representative is not null and void where death of assessee occurs between conclusion of hearing and making of assessment. The High Court made the following observations while passing the order:

In the case of Kamalesh Kumar Mehta v. CIT 106 ITR 855 (CAL.), the High Court held that section 159 does not provide for any annulment of assessment, reassessment or recomputation but expressly provides for continuance of proceedings from stage at which they stood on date of death of assessee against his legal representatives who in terms of section 159(3) is deemed to be assessee and he is liable to pay tax which deceased would have been liable to pay if he had been alive. The facts of this case are that the Assessee died during pendency of assessment proceedings. However, his death was not brought to notice of ITO who completed assessment. The AAC set aside assessment and directed ITO to reframe assessments after getting names of legal representatives and after issuing notices to them. The High Court held that assessment after death of assessee and without issuing notices to his legal representatives was not liable to be annulled. Since the Tax officer framing the assessment was wholly unaware of death of assessee, ITO was unable to comply with provisions of law and, therefore, those assessments were rightly set aside by AACto reframe assessments after bringing legal representatives on record, inasmuch as they were not in accordance with relevant provisions of Act.

The Gujarat High Court in the case of CIT v. Sumantbhai C. Munshaw (decd.)5 Taxman 27 (Gujarat) made the following observations, relevant to the issue at hand before us:

Accordingly, looking into the instant facts where the assessment proceedings had commenced at the time when the assessee was alive, the Department had no knowledge about the death of the assessee during the course of assessment proceedings, the notice of hearing had been duly served on the authorised representative of the assessee (ITP), the legal heirs of the assessee had filed appeal against the order of the assessing officer before Ld. CIT(A), we are of the considered view that this is not a case where the assessment can be said to be null and void. Though there is no specific provision which requires the legal heirs to intimate the fact of death of the assessee to the Tax Department, however, this principle has to be seen in light of the surrounding facts and circumstances of the case and the conduct of the parties as well. If during the impugned year under consideration it is observed that the assessment proceedings had commenced against the assessee at the time the assessee was alive, then the proceedings cannot be brought to a nullity only because the legal heirs failed to intimate the tax department regarding the death of the assessee. In such case, the assessing officer can continue the proceedings against the legal heirs, in Page No. 12 Smt. Hansaben Vinodbhai Parmar vs. ACIT/DCIT accordance with law and thereafter pass assessment order after giving due opportunity of hearing to the assessee to present its case on merits.

Accordingly, in interest of justice the matter is restored to the file of assessing officer to bring the legal heirs of the deceased assessee on record and thereafter, continue proceedings against them after giving due opportunity of hearing to the legal heirs of the assessee to present the case on merits.

In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 12-06-2024 Sd/- Sd/- (NARENDRA PRASAD SINHA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 12/06/2024 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,