Whether proceedings can be continued against the legal representatives in case of default committed by a deceased?

 

The issue before Nagpur ITAT was in case of a Penalty proceedings for a default committed by a deceased . Whetehr in such a case, proceedings to be continued against the legal representatives ?

The case details is as under:

ITAT NAGPUR

– BEANTKAUR AVTARSINGH JUNEJA

 Vs

 ITO 4 (2)

Dated.- April 25, 2024

There could be two situations as far as penalty on the deceased is concerned as under:

(i) assessee dies before the imposition of penalty or

(ii)  (ii) assessee dies after the penalty is imposed.

The imposition of penalty in cases falling in first scenario is no-more res-integra in the light of decision in ‘ACIT Vs Late Shrimant FB Gaekwad’ [2008, 313 ITR 192 Gujarat], ‘CIT Vs Dr. K.C.G. Verghese’ [2018, 92 taxmann.com 400 & 2019, 416 ITR 155 (Mad.] which followed in ‘CIT Vs Smt S Gowri’ [2020, 116 taxmann.com 764 & 417 ITR 45, Madras], wherein it has been categorically held that, penalty proceedings could not initiated and concluded against the legal representative of the deceased assessee.

The former ratio however cannot come to rescue the cases falling in the later category.

LR of the deceased can also be liable to pay penalty on behalf of the deceased assessee pursuant to the provisions of Section 159(1) of the Act. This finds support in the ratio of Hon’ble Allahabad High Court in case of ‘Kalawati Devi Vs ITO’ [1981, 6 Taxman 252] wherein their Hon’ble Lordship have held that, section 159(1) clearly makes the legal representatives liable not only for the tax payable by the deceased-assessee but also for all sums which the deceased would have been liable to pay had he not died. Hence, penalty proceedings for a default committed by a deceased could be started or continued against the legal representatives, too. Similarly, the Hon’ble Kolkata High Court in ‘Smt. Tapati Pal Vs CIT’ [2002, 124 Taxman 123 Cal.] held that penalty proceedings for a default committed by deceased can be started or continued against the legal representative as against its earlier decision in ‘Taraknath Gayen and others Vs CEGAT’ [1987, 31 ELT 631 (Cal)].

In view of the decision of Hon’ble Calcutta High Court in ‘Taraknath Gayen and others Vs CEGAT’ [1987, 31 ELT 631 (Cal)] & ‘Omwati Vs UOI’ [2000, 125 ELT 136 (All.)] their Hon’ble Lordships have held that, the penalty amount is not recoverable from the legal representatives of accused; as imposition of penalty is intended to penalise the accused, therefore, recovery of penalty from the legal representatives would amount to punishing the legal representatives. It is also in our knowledge that the co-ordinate benches in similar circumstance deleted the penalty in viz; ‘Bhuban Mohan Mitter Charitable Trust Vs ITO [1993, 45 ITD 617 (Cal)] and in ‘Bhagwansingh Shriramsingh L/H Dinesh Bhagwan Singh Vs ITO’ [2006, 9 SOT 73 (Mum)

In view of aforestated discussion and restriction placed in s/s (4) of section 159 of the Act and further adopting the reasoning laid in ‘Taraknath Gayen and others Vs CEGAT’ & & ‘Omwati Vs UOI’ we allow the legal ground arose in the instant appeal and in consequence set-aside the impugned order and direct the Ld. AO to delete the penalty.