Section 263 revisonary proceedings under Income Tax Act, 1961 against a dead person are null and void

 

 

Author

Swati Talwar 

 

 

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IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F” DELHI 

BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER

&

SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER

 

I.T.A. No. 1853/DEL/2021

Assessment Year 2011-12

Sheela Devi (wife- legal heir of Vas Dev (deceased) C/o The Tax Chambers Advocates & Legal Advisors C-177, Defence Colony, LGF, New Delhi.	v.	Principal Commissioner of Income Tax, Faridabad.
TAN/PAN: BCVPD7807C
(Appellant)		(Respondent)

Appellant by:	Ms. Swati Talwar, Adv.
Respondent by:	Shri Ajay Kumar, Sr.D.R.
Date of hearing:	16	02	2022
Date of pronouncement:	03	03	2022

O R D E R

 

PER PRADIP KUMAR KEDIA, A.M.:

The captioned appeal has been filed at the instance of the legal heir and wife of the deceased-assessee (Vas Dev)  against  the revisional order of the Principal Commissioner of Income Tax, Faridabad (‘PCIT’ in  short) dated 28.03.2021 passed under Section 263 of the Income Tax Act, 1961 (the Act) whereby the assessment order passed by the Assessing Officer  dated  15.11.2018  under Section 143(3) read with Section 147 of the Act was sought to be set aside for reframing the assessment in terms of  supervisory jurisdiction.

2. As per the grounds of appeal, the assessee has challenged the revisional action of the PCIT whereby the Assessing Officer was directed to  pass  the assessment order  denovo after making inquiries on the points set  out  revisional order. The  assessee has  challenged the assumption of jurisdiction by the PCIT under Section 263 of  the Act on the ground that; (i)  the  initiation of  revisional  proceedings and  consequential order under Section 263 of  the Act is  in  the name of a deceased person is a nonest and unsustainable in the eyes of law (ii) the assessment order under revision is neither erroneous nor prejudicial to the interest of the Revenue and thus revisional commissioner was not competent to exercise revisional powers.

3. Briefly stated, return of the assessee under Section 143(3) w. Section 147 was assessed at Rs.1,35,682/-. Thereafter, the  PCIT called for the assessment records and opined  that  the  assessment order so passed is erroneous in so far as prejudicial to the interest of the  Revenue. A show  cause notice dated  20.03.2021 was  issued to the assessee seeking his response. It  may be  pertinent to  reproduce the show cause notice issued by the PCIT for abbreviation of controversy.

GOVERNMENT OF INDIA

MINISTR YOF FINANCE

INCOME TAX DEPARTMENT

OFFICE OF THE PRINCIPAL COMMISSIONER OF INCOME TAX

PCIT, Faridabad

 

To,

VAS DEV

HOUSE N 05 FARRUKH NAGAR KHURAM

PUR  GATE FARRUKH  N , FARRUKH

NAGAR

GURGAON 123506 , Haryana

India

PAN/ TAN: BBRPD 6119 C

A. Y. 2011 – 12

DIN & Notice No.: ITBA/ REV/ F/ REV 1 / 2020 – 21 / 1031634235 ( 1 )

Dated: 20 / 03 / 2021

NOTICE FOR THE HEARING

M/ s/ Mr/ Ms

Subject: Notice for Hearing in respect of Revision proceedings u/ s 263 of the THE INCOME TAX ACT, 1961 – Assessment Year 2011- 12 .

In this regard, a hearing in the matter is f ixed on 05/ 04/ 20^ 1 at 11: 00 AM. You are requested to attend in person or through an authorized representative to submit your representation, i f any  alongwith supporting documents/ information in  support  of  the  issues  involved (as mentioned below). If you wish that the Revision proceeding be concluded  on  the  basis  of  your  written  submissions/ representations f i led in this office, on or before the said due date, then your personal attendance is not required. You also have the option to f i le your submission from the e- f i l ing portal using the l ink: incometaxindiaefiling. gov. in

The assessment in this case was completed u/ s 143 (3 )/ 147 vide order dated 15. 11 . 2018 by the  Assessing  Officer  and  returned  Income  of Rs. 1, 35 , 682/- was accepted.

2. On perusal of the assessment records of  the  aforesaid assessee  for the Y. 2011- 12, following discrepancies are noticed:

“ The assessee had not f i led Income Tax Return for A. Y. 2011- 12 . Later on the case was selected for scrutiny under 148  as  the assessee has deposited cash of Rs. 1, 00 , 01, 000/- on various dates in his bank accounts maintained with State Bank of Patiala. Subsequent to service of Notice u/ s 148, the assessee f i led ITR declaring income of Rs. 1, 35 , 682/-.

From the records, i t is observed that the assessee submitted bank statement which depicted cash deposits  of  Rs. 50, 01 , 000/- received against sale of land.  The  assessee  submitted  that  the land in consideration was agricultural  land  and  not  a capital asset as population of Farrukhnagar MC in last census was only 9521 which is less than defined in section 2 ( 14).

But the contention of assessee is not correct the  municipal committee existed in Farrukhnagar as per sale  deed  and population     of     Farrukhnagar     as     per     last      census (www. censusindia. co. in) was 134848 instead of 9521 . Hence, the land sold was capital asset and Capital Gain tax is applicable on sale of the same. ”

3. On the basis of discrepancies, i t is observed that the assessment framed by the Assessing Officer u/ s 143(3 )/ 147  is prima facie erroneous in so far  as  i t is  pre- judicial  to  the interest of

4. Keeping in view the above facts, you are provided an opportunity to show cause as  to  why the assessment order passed by the ITO, dated 11. 2018 for the A. Y. 2011- 12 in your case should not be revised u/ s 263 of the Act. You are  requested to present the case on  23. 03. 2021 in writing or  produce or  cause to be produced at the said t ime,  any  documents  or  any  other evidence on which you rely in your support.

5. In case of no reply/ non- attendance as per above, i t shall be assumed that you do not wish  to  say  anything in  the  matter and the matter would be decided as per material available on record without any further notice/ intimation to

PCIT, Faridabad

4. A revision order was eventually passed by which the PCIT set aside the assessment so completed and remanded the  matter back to the file of the Assessing Officer for  fresh adjudication thereof on issues alleged in the show cause

5. Aggrieved, the assessee preferred appeal before the

6. When the matter was called for hearing, two fold contentions were raised on behalf of the assessee.

6.1 Firstly, it  was contended that the assessee, namely, Vas Dev expired on 04.12.2020 whereas the show cause dated 20.03.2021 has been issued and addressed to  the  deceased-assessee,  namely,  Vas Dev instead of legal heir. It was thus contended that the show cause notice issued in  the name of  a deceased person is nonest and thus liable to be quashed at the threshold. For this proposition, the ld. counsel for the assessee vehemently referred  to  the judgment rendered by the Hon’ble Delhi High Court in the  case of  Dharamraj vs. ITO, WP (C) 9227/2021 dated 17.10.2022 and Savita Kapila vs. ACIT WP (C) No.3258/2020 judgment dated 16.07.2020;  (ii) secondly, show cause notice was issued  initially  on  20.03.2021 asking the assessee to appear on  05.04.2021, i.e., after the expiry of the limitation on 31.03.2021. However, the aforesaid show  cause notice was later modified and the fresh notice dated 25.03.2021 was issued through e-mail and the matter was fixed for hearing on the immediate next date on 26.03.2021 in grave violation of principle of natural justice. There was no participation on behalf of the deceased-assessee in the proceedings and no further opportunity was given to the assessee/legal heir to  defend his case. The  revisional order was summarily passed on 28.03.2021 whereby the assessment order in question and the revision was set aside for fresh consideration. It was submitted by the ld.  counsel for  the  assessee that the revisional order is not sustainable in law in the absence of mandatory requirement of opportunity enshrined  in  Section  263 itself. It was thus urged for cancellation  of  the  revisional  order passed under Section 263 of the Act in question.

7. Sr.DR, on the other hand, relied upon the contents of the revisional order.

8. We have heard the rival submissions and perused the material placed before us and case laws Firstly,  we  consider  it expedient to address ourselves on legality of show cause notice and consequent revisional order passed under  Section  263  of  the  Act. The issue of validity of a notice and proceedings held subsequent thereto against a dead person is no longer res integra. The Hon’ble Delhi High Court in the case of Dharamraj vs. ITO (supra) has examined the  issue in  length and  held  that  the  notice issued against a death person is null  and void  and all consequent proceedings/orders being equally tainted are liable to  be  set  aside. The relevant operative paragraph in Dharamraj’s case is reproduced herein for the sake of completeness of the point.

8. The issue of validity of a notice and proceedings held subsequent thereto against a dead person is no longer res This Court in Savita Kapila vs. Assistant Commissioner of Income- Tax, in W. P. (C) No. 3258/ 2020 has held as under:

” AN ALTERNATIVE STATUTORY REMEDY DOES NOT OPERATE AS A BAR TO MAINTAINABILITY OF A WRIT PETITION WHERE THE ORDER OR NOTICE OR PROCEEDINGS ARE WHOLLY WITHOUT JURISDICTION. IF THE  ASSESSING  OFFICER  HAD NO JURISDICTION TO INITIATE ASSESSMENT PROCEEDINGS.

THE MERE FACT THAT SUBSEQUENT ORDERS HAVE BEEN PASSED WOULD NOT RENDER THE CHALLENGE TO JURISDICTION INFR UCTUOUS.

24 . Further, the fact that an assessment order has been passed and i t i s open to  challenge by  way of  an  appeal, does not denude the petitioner of i t s right to challenge the notice for assessment i f i t is without jurisdiction. I f the assumption of jurisdiction is wrong, the assessment order  passed  subsequent  would  have  no legs to s tand. I f the notice goes, so does the order of assessment. I t i s t ri te law that i f the Assessing Officer had no jurisdiction to initiate assessment proceeding, the mere fact  that  subsequent orders have been passed would not render the challenge to jurisdiction infructuous.

xxxxx

THE SINE QUA NON FOR ACQUIRING JURISDICTION  TO REOPEN AN ASSESSMENT IS THAT  NOTICE  UNDER  SECTION 148 SHOULD BE ISSUED TO  A CORRECT PERSON AND NOT TO A DEAD PERSON. CONSEQUENTLY. THE JURISDICTIONAL REQUIREMENT UNDER SECTION 148 OF THE ACT. 1961 OF SERVICE OF NOTICE WAS NOT FULFILLED IN THE PRESENT INSTANCE.

xxxxx

26. .  In the opinion of this Court the i ssuance of a notice under Section  148  of  the  Act  is  the  foundation  for  reopening of  an  Consequently, the   sine   qua   non   for acquiring jurisdiction to reopen an assessment is that such notice should be issued in the name of the  correct  person.  This requirement  of issuing notice  to  a correct person and  not  to  a dead person i s not merely a procedural requirement but is a condition  precedent  to the   impugned  notice  being  valid  in   law. [ See  Sumit  Balkrishna Gupta  v.  Asst  Commissioner of  Income Tax, Circle 16 ( 2 ), Mumbai & Ors., ( 2019 ) 2 TMI 1209 – Bombay High Court],

27. .  xxxxx  Consequently,  in  view  of  the  above,  a reopening notice under Section 148 of the Act, 1961 issued in the name of a deceased assessee i s null and

XXXX. XX

AS IN THE PRESENT CASE PROCEEDINGS WERE  NOT INITIATED/ PENDING AGAINST THE ASSESSEE WHEN HE WAS ALIVE AND AFTER  HIS DEATH THE LEGAL REPRESENTATIVE DID NOT STEP INTO THE SHOES  OF  THE  DECEASED ASSESSEE. SECTION 159 OF THE  ACT. 1961  DOES  NOT APPLY TO THE PRESENT CASE.

30. .  Section 159 of the Act, 1961 applies to a s i tuation where proceedings are initiated/ pending against the assessee when he is alive and after his death the  legal  representative steps into  the shoes of the deceased assessee. Since that i s not the present factual scenario, Section 159 of the  Act,  1961  does  not  apply  to the present case.

31. .  xxxxx

THERE IS NO STATUTORY REQUIREMENT IMPOSING AN OBLIGATION UPON LEGAL HEIRS  TO INTIMATE  THE  DEATH OF THE ASSESSEE.

32. . This Court i s of the view that in the absence of a statutory provision   i t     i s     difficult   to    cast    a     duty    upon the legal representatives to intimate the factum of death of an assessee to the income tax  After all,  there  may  be cases where the legal representatives are estranged from the deceased assessee or the  deceased assessee may  have bequeathed his entire wealth to  a charity. Consequently, whether PAN record was updated or not or whether   the    Department    was    made aware  by   the    legal representatives or not i s irrelevant. In Alamelu Veerappan ( supra) [ 2018 ( 6 ) TMI 760 – Madras High Court] i t has been held“ nothing has been placed before this Court  by  the  Revenue  to  show  that there  i s a s tatutory obligation on  the part  of  the legal representatives of  the deceased assessee to  immediately intimate the  death  of   the assessee or take s teps to cancel the PAN registration. ”

xxxxx

34. .  Consequently,  the  legal  heirs  are  under  no statutory obligation to intimate the death of the assessee to the SECTION 292 B OF THE ACT. 1961 HAS BEEN HELD TO BE INAPPLICABLE. VIS- A- VIS. NOTICE ISSUED TO A DEAD PERSON IN RAJENDER KUMAR SEHGAL 12018 ( 12 ) TMI 697

( DELHI)]. CHANDRESHBHAI JAYANTIBHAIPATEL 12019 ( I ) TMI 353 – GUJARAT HIGH COURT 1 AND ALAMELU VEERAPPAN f 2018 ( 6 ) TMI 760 – MADRAS HIGH COURT 1 .

35. .  This Court is  of the opinion that i ssuance of  notice upon a dead person and non- service of notice does not come under the ambit of mistake, defect or omission. Consequently, Section 292 B of the Act, 1961 does not apply to the present case.

 IN RAJINDER KUMAR SEHGAL ( SUPRA) A COORDINATE BENCH OF THIS COURT HAS HELD THAT SECTION 292 BB OF THE ACT  1961  IS  APPLICABLE TO AN  ASSESSEE AND  NOT  TO A LEGAL REPRESENTATIVE.

xxxxx

38 . This Court i s also of the view that Section 292 BB of the Act, 1961 is applicable to an assessee  and not to  a legal representative. Further, in the  present case one  of  the  legal heirs of the deceased assessee, i . e. the petitioner, had neither cooperated in the assessment proceedings nor f i led  return  or waived the requirement of Section 148 of  the  Act,  1961  or submitted to jurisdiction of the Assessing Officer. She had merely uploaded the death certificate of the deceased assessee.

xxxxxx

40 . Consequently, the applicability of Section 292 BB of the Act, 1961 has been held to be attracted to an assessee and not to legal representatives. ”

9. . The above judgment was followed by  this  Court in P.( C) No. 2678 / 2020 t i t led Mrs. Sripathi Subbaraya Manohara L/ H Late Sripathi Subbaraya Gupta vs. Principal Commissioner of Income Tax  22 , N. Delhi  & Anr.

10. .  In  the  present  case  also,  as  the  notice  under  Section  148  of the  Act was i ssued  against  a   dead   person,  the   same   is   null  and   void and  all consequent  proceedings/ orders,   including   the   assessment  order and the subsequent notices, being equally tainted, are l iable to be set

11. . Consequently, the impugned notice dated 30 . 03 . 2019 i ssued under Section 148   of    the   Act   i s    set   aside   along  with   all consequential proceedings/ notices/ assessment

12. .  The petition i s There shall be no order as to costs.”

9. In terms of the explicit observations made in the judgment of the Hon’ble Delhi High Court, we find considerable merit in  the plea on behalf of the legal heir for the assessee  that  the  entire proceedings beginning from issue of show cause notice and culminating in revisional order under Section 263 of the Act  is  a nonest exercise and cannot be given effect in  law  regardless of  the fact whether the revenue was privy to death or otherwise.

10. We also advert to the  second plank on  behalf of  the assessee that the show cause notice dated 03.2021 originally issued fixing the date of hearing beyond the limitation period is  bad in  law  and is not a curable defect. We see no merit in such plea. The show cause notice was  admittedly revised and  a fresh notice dated 25.03.2021 was issued fixing the  date  of  hearing within the  limitation period. The revisional authority was entitled in law to rectify such error.

11. We also  simultaneously advert to  another plank on  behalf of the assessee alleging total lack of opportunity while concluding the proceedings under Section 263 of the It is apparent from the records that solitary show cause notice issued to the assessee was for attendance on the very next date, i.e., 26.03.2021 in substitution of the first show cause notice fixing the hearing beyond limitation period. No other opportunity was given to the assessee. We are constraint to observe that such a casual approach of a very senior functionary of the Department does not augur well in the  eyes  of public and cannot be countenanced on the touchstone of sacrosanct principle of natural justice explicit in 263 itself. A question would arise as to whether a failure to give a reasonable opportunity to the assessee of  being heard was only a procedural irregularity in such gross circumstances and thus curable and did not render the order passed by PCIT void ab initio and nonest in law per se.

12. In the   case   of   Tata   Chemicals   Limited      DCIT,   ITA No.3127/Mum/2010, order dated 30.06.2011, the co-ordinate bench after making reference to the decision in the judgment in Maneka Gandhi vs. Union of India, AIR 1978 SC 597, and other judgments observed that the order which infringes the fundamental principle, passed in violation of audi alteram partem rule, is a nullity. When a competent Court or authority holds such an order as invalid or sets it aside, the impugned order becomes null and void.  Once  it  is concluded that the order in question is null and void, it is not for the adjudicating authority to advise the Commissioner as  to  what should he do. He is always at liberty to do whatever action he can take in accordance with the law, but a life to  null  and  void  order  by remitting it  back to  the Commissioner for giving a fresh opportunity of passing the order, after giving the assessee an opportunity of hearing, cannot be given. In a case, where it is possible for the Commissioner to pass a fresh order at  this stage in  accordance with the scheme of the Act, he  can very well do  so  but in  case the time limit for passing such order has already expired, such  time  limit cannot be extended by directing him to pass the order after giving an opportunity of hearing to the assessee. Otherwise, this would tantamount to  giving premium to  the authority committing default. The finality of  the  assessment cannot be  disturbed for the failure of the PCIT to obdurately adhere to  the explicitly  prescribed requirement of opportunity to assessee.

13. Hence, in the absence of any opportunity to the assessee, for which the fault is attributable squarely to the PCIT is fatal and such defect being incurable, the revisionary order passed under  Section 263 of the Act is also required to be quashed independently on this ground

14. Hence, looking from any angle, the impugned revisional order passed under Section 263 of the Act is set aside and quashed.

15. In the result, the appeal of the assessee is

Order pronounced in the open Court on 03/03/2022.

 

Sd/-                                                                                      Sd/-

[AMIT SHUKLA]                                                [PRADIP KUMAR KEDIA]

JUDICIAL MEMBER                                ACCOUNTANT MEMBER

DATED: 03/03/2022

Prabhat