Appanna Seetharamu (Deceased): Legal Representative B.S.Nagarathna , Bangalore V. The Income Tax Officer Ward-3(2)(2), Bangalore

ITA 410/BANG/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4807 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 12-02-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUSANTHOMAS
• Assessee Lawyers: NAYAZ PASHA
• Keywords: Validity of assessment
• Section: 143(3); 54F; 142(1); 148; 54; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO. 4 10 /BANG/201 8 ASSESSMENT YEAR : 20 1 3 - 1 4 APPANNA SEETHARAMU (DECEASED); LEGAL REPRESENTATIVE: B. S. NAGARATHNA, NO.41, MATHRUKRUPA, 3 RD MAIN, 10 TH CROSS, 1 ST STAGE, 3 RD PHASE, CHANDRA LAYOUT, BENGALURU 560 040. PAN : A GDPS 5487 N VS. THE INCOME TAX OFFICER, WARD 3(2)(2), BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : MR. NAYAZ PASHA, CA REVENUE BY : MS . SUSAN THOMAS, ADDL. CIT DATE OF HEARING : 2 8 . 0 5 .201 8 DATE OF PRONOUNCEMENT : 31 . 0 5 .201 8 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), INTER ALIA, ON FOLLOWING GROUNDS: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER (APPEALS) ERRED BY CONFIRMING THE ASSESSMENT ORDER WITHOUT APPRECIATING THE SUBSTANCE OF THE CASE AND THE GROUNDS OF APPEAL RAISED BEFORE THE APPELLATE AUTHORITY 2) THE APPEAL IS FILED ON FOLLOWING GROUNDS: A) THE LEARNED CIT (APPEALS) ERRED IN NOT QUASHING THE ASSESSMENT ORDER MADE ON THE BASIS OF NOTICE ISSUED U/S 143(2) IN THE NAME OF DECEASED SRI APPANNA SEETHARAMU AS ANY NOTICE ISSUED IN THE NAME OF DEAD PERSON IS NOT VALID NOTICE. B) THE LEARNED CIT (APPEALS) ERRED IN NOT ALLOWING THE EXEMPTION U/S 54F RESPECT OF CONSTRUCTION OF HOUSE AT BIDADI FOR RS. 38,50,000/ - ITA NO. 410/BANG/2018 PAGE 2 OF 11 A. INVALID ASSESSMENT ORDER 3) THE ASSESSMENT ORDER PASSED BY THE LEARNED AO IS BAD IN LAW, INVALID AND NULLITY DUE TO WANT OF JURISDICTION. THE NOTICE U/S 143(2) IS ISSUED ON 03.09.2014, WHEREAS THE ASSESSEE, APPANNA SEETHARAMU DIED ON 19.02.2014. FURTHER NOTICES U/S 142(1) WERE ALSO ISSUED IN THE NAME OF DECEASED ASSESSEE ON 01.06.2015 AND 24.08.2015. THE NOTICE ISSUED U/S 143(2) OR U/S 142 IS ADDRESSED TO AN ASSESSEE WHO WAS ALREADY DEAD ON THE DATE OF ISSUE OF NOTICES. THE ASSESSMENT ORDER STATES THAT NOTICE U/S 143(2) AND 142(1) WERE ISSUED AND DULY SERVED ON ASSESSEE, DESPITE THE ASSESSING OFFICER ACKNOWLEDGING IN THE ASSESSMENT ORDER THAT THE ASSESSEE WAS DECEASED. 4) IN THE PRESENT CASE THE NOTICE/ S WERE ADDRESSED TO APPANNA SEETHARAMU, WHO ADMITTEDLY, WAS DEAD AT THAT TIME AND HAD BEEN SO DEAD FOR A LONG TIME. THE ASSESSING OFFICER KNEW FROM THE INFORMATION AND RECORDS SUBMITTED DURING FIRST HEARING THAT ASSESSEE WAS NOT LIVING, AND HE ALSO KNEW WHO HIS LEGAL REPRESENTATIVES WERE. IN THESE CIRCUMSTANCES, IT WAS INCUMBENT ON THE ASSESSING OFFICER TO CAUSE THE NOTICE TO BE ISSUED TO THE LEGAL REPRESENTATIVES OF APPANNA SEETHARAMU. 5) THE NOTICE UNDER SECTION 143(2) IS THE FOUNDATION OF JURISDICTION, AND THAT NOTICE HAS TO BE LEGALLY CORRECT. WHEN A NOTICE IS ISSUED TO A DEAD PERSON, THE TAXING AUTHORITY CANNOT CATCH ANY LIVING PERSON INTO WHOSE HANDS THE NOTICE GOES AND ATTRIBUTE NOTICE TO HIM. IN THE PRESENT CASE ALL NOTICES AND COMMUNICATIONS ARE ADDRESSED TO APPANNA SEETHARAMU, WHICH SHOWS THAT THEY ARE ALL SENT TO A DEAD PERSON. 6) THE LEARNED CIT(APPEALS) IN PARA 4 OF ITS ORDER REJECTED THE GROUND OF INVALIDITY OF THE ASSESSMENT ORDER ON THE CONTENTION THAT THE LEGAL HEIR OF ASSESSEE HAD NOT INFORMED THE AO ABOUT THE DEATH OF ASSESSEE BEFORE THE ISSUE OF NOTICE U/S 143(2) / 142(1) OF THE ACT, AND THEREFORE THERE IS NO MERIT IN CONTENTION OF THE APPELLANT THAT THE NOTICES WERE ISSUED ON A DEAD PERSON. THE RELEVANT EXTRACT OF PARA 4 OF THE APPEAL ORDER READS AS 'DURING THE APPELLATE PROCEEDINGS THE AR WAS ASKED AS TO WHETHER THE AO WAS INFORMED BY THE LEGAL HEIR OF THE APPELLANT REGARDING THE DEATH OF APPELLANT BEFORE ISSUE OF NOTICE U/S 143(2) / 142(1) OF THE ACT OR NOT. THIS WAS ADMITTED BY AR THAT NO SUCH INTIMATION WAS GIVEN TO THE AO. IN THE ABOVE FACT, THERE IS NO MERIT IN THE CONTENTION OF THE APPELLANT THAT THE NOTICES WERE ISSUED ON A DEAD PERSON' 7) THE LEARD CIT (APPEALS) FAILED TO APPRECIATE THAT A) THERE IS NO PROVISION UNDER THE INCOME TAX ACT, FOR THE LEGAL HEIR TO VOLUNTARILY INFORM THE ASSESSING OFFICER ABOUT THE DEATH OF ASSESSEE. B) THERE IS NO MECHANISM UNDER THE ACT, WHEREIN THE DEPARTMENT WILL GIVE PRIOR INTIMATION THAT ASSESSEE WOULD BE ISSUED NOTICE U/S 143(2), SO THAT THE LEGAL HEIR CAN INFORM THE AO ABOUT THE DEATH OF ASSESSES BEFORE ISSUE OF SUCH NOTICE. ITA NO. 410/BANG/2018 PAGE 3 OF 11 C) THE LEGAL HEIR NOR THE ASSESSEE WILL GET TO KNOW WHETHER NOTICE U/S 143(2) WOULD BE RECEIVED BY THEM SO AS TO INFORM THE AO BEFORE ISSUE OF SUCH NOTICE. D) AFTER THE RECEIPT OF NOTICES, THE LEGAL HEIR DULY INFORMED THE AO ABOUT THE DEATH OF ASSESSEE AND THE SAME HAS BEEN DULY ACKNOWLEDGED BY THE AO IN THE ASSESSMENT ORDER. E) IT IS EVEN ACCEPTED BY THE APPELLATE AUTHORITY IN PARA 4 OF ITS ORDER THAT THE AO WAS MADE AWARE OF THIS FACT DURING ASSESSMENT PROCEEDINGS. F) IN SPITE THE AO BEING AWARE OF DEATH OF ASSESSEE, NO NOTICE/ S WERE ISSUED IN THE NAME OF LEGAL HEIR. G) WHEN NOTICE WAS NOT ISSUED TO LEGAL HEIR DESPITE KNOWING THE DEATH OF ASSESSE, INCORPORATING THE LEGAL HEIR'S NAME IN THE ASSESSMENT ORDER WILL NOT VALIDATE THE ASSESSMENT ORDER. 8) THE ISSUES FOR CONSIDERATION ON THE VALIDITY OF ASSESSMENT OF DEAD PERSON CAN BE CAN BE SUMMARIZED IN THE FOLLOWING SCENARIOS SR. SITUATION REMARK A NOTICE ISSUED AND ASSESSMENT COMPLETED IN THE NAME OF DECEASED. INVALID ASSESSMENT B AFTER ISSUE OF NOTICE ASSESSEE DIES AND ASSESSMENT COMPLETED IN THE NAME OF DECEASED. INVALID ASSESSMENT C NOTICE ISSUED IN THE NAME OF DECEASED BUT ASSESSMENT COMPLETED IN THE NAME OF LEGAL ASSESSMENT REPRESENTATIVE WITHOUT ISSUING VALID NOTICES TO LEGAL REPRESENTATIVES INVALID ASSESSMENT D NOTICE ISSUED IN THE NAME OF DECEASED AND ASSESSMENT COMPLETED IN THE NAME OF SOME OF THE LEGAL REPRESENTATIVES AFTER ISSUE OF FRESH VALID NOTICES TO LEGAL REPRESENTATIVE. IRREGULAR/DEFECTIVE ASSESSMENT 9) THE SCENARIO IN WHICH THE ASSESSMENT IS COMPLETED IN PRESENT CASE FALLS IN SR NO. 'C' OF THE ABOVE TABLE, WHEREIN NOTICE IS ISSUED IN THE NAME OF DEAD PERSON BUT ASSESSMENT COMPLETED IN THE NAME OF DECEASED ALONG WITH THE LEGAL REPRESENTATIVE WITHOUT ISSUING VALID NOTICE TO LEGAL REPRESENTATIVE. 10) THE ASSESSMENT MADE ON THE BASIS OF NOTICE ISSUED ON A DECEASED PERSON RENDERS THE ASSESSMENT ORDER NULL AND VOID, EVEN IF ORDER PASSED IN THE NAME OF LEGAL HEIR. EVEN IF THE LEGAL HEIR ATTENDED PROCEEDINGS DOES NOT MAKE THE ASSESSMENT ORDER CURABLE DEFECT U/ S 292BB. 11) THE HONORABLE MADRAS HIGH COURT IN CASE OF CIT VS M HEMANATHAN (APPEAL NO. 199 OF 2016, ORDER DATED 23.03.2016) FOLLOWING THE DECISION OF ITS DIVISION BENCH IN SAVITHRIAMMAL V. STATE OF TAMIL NADU [2006 MIJ 389] , ITA NO. 410/BANG/2018 PAGE 4 OF 11 HAS CATEGORICALLY HELD THAT THE NOTICE ISSUED IN THE NAME OF A DEAD PERSON IS A NULLITY. THE RELEVANT EXTRACTS OF THE DECISION OF HONORABLE MADRAS HIGH COURT DEALING IN DETAIL ON THE ISSUE OF NOTICE ON A DECEASED PERSON IS DETAILED BELOW: PARA 11: THE FIRST CONTENTION OF THE LEARNED STANDING COUNSEL FOR THE DEPARTMENT IS THAT THE NOTICE, DESPITE HAVING BEEN ISSUED AGAINST THE DEAD PERSON, WAS SERVED ON THE LEGAL HEIR AND THE LEGAL HEIR ALSO PARTICIPATED IN THE PROCEEDINGS. THEREFORE, IT IS HIS CONTENTION THAT IT IS NOT OPEN TO THE LEGAL HEIR NOW TO TAKE A POSITION THAT THE ENTIRE PROCEEDINGS ARE A NULLITY. PARA 12: BUT UNFORTUNATELY, THE SAID CONTENTION LOSES SIGHT OF THE SETTLED POSITION THAT ANY PROCEEDING INITIATED AGAINST A DEAD PERSON IS A NULLITY. THE CONTENTION OF THE LEARNED STANDING COUNSEL FOR THE DEPARTMENT LOSES SIGHT OF ONE IMPORTANT DISTINCTION BETWEEN A CASE WHERE THE PROCEEDINGS ARE INITIATED AGAINST A PERSON, WHO IS ALIVE, BUT CONTINUED AFTER HIS DEATH AND A CASE OF PROCEEDINGS INITIATED AGAINST A DEAD PERSON HIMSELF. IF THE PROCEEDINGS HAD BEEN INITIATED AGAINST A PERSON, WHO WAS ALIVE, AND THEY WERE CONTINUED AFTER HIS DEATH AFTER PUTTING HIS LEGAL HEIRS ON NOTICE, THOSE PROCEEDINGS, UNDER CERTAIN CIRCUMSTANCES, MAY BE SAVED. SUCH A SITUATION IS ALSO CONTEMPLATED IN CIVIL PROCEEDINGS AND A PROVISION IS MADE IN THE CIVIL PROCEDURE CODE ITSELF UNDER ORDER XXII RULE 4. THEREFORE, THE CASES WHERE THE VERY PROCEEDINGS ARE INITIATED AGAINST A DEAD PERSON STAND APART FROM THOSE PROCEEDINGS WHERE THEY ARE INITIATED AGAINST A LIVE PERSON, BUT CONTINUED AFTER HIS DEATH AGAINST THE LEGAL HEIRS. HENCE, THE FIRST CONTENTION IS REJECTED. PARA 13: THE SECOND CONTENTION REVOLVES AROUND SECTION 292BB OF THE ACT, WHICH READS AS FOLLOWS 292BB. NOTICE DEEMED TO BE VALID IN CERTAIN CIRCUMSTANCES. WHERE AN ASSESSEE HAS APPEARED IN ANY PROCEEDING OR CO- OPERATED IN ANY INQUIRY RELATING TO AN ASSESSMENT OR REASSESSMENT, IT SHALL BE DEEMED THAT ANY NOTICE UNDER ANY PROVISION OF THIS ACT, WHICH IS REQUIRED TO BE SERVED UPON HIM, HAS BEEN DULY SERVED UPON HIM IN TIME IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT AND SUCH ASSESSEE SHALL BE PRECLUDED FROM TAKING ANY OBJECTION IN ANY PROCEEDING OR INQUIRY UNDER THIS ACT THAT THE NOTICE WAS (A) NOT SERVED UPON HIM; OR (B) NOT SERVED UPON HIM IN TIME; OR (C) SERVED UPON HIM IN AN IMPROPER MANNER: PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY WHERE THE ASSESSEE HAS RAISED SUCH OBJECTION BEFORE THE COMPLETION OF SUCH ASSESSMENT OR REASSESSMENT.' PARA 14: A CURSORY LOOK AT SECTION 292BB WOULD SHOW THAT THE SAME WOULD APPLY ONLY TO TWO TYPES OF PROCEEDINGS NAMELY (I) PROCEEDINGS, IN WHICH, THE ASSESSEE HAD APPEARED AND (II) ANY INQUIRY, IN WHICH, THE ASSESSEE HAD COOPERATED. T ITA NO. 410/BANG/2018 PAGE 5 OF 11 PARA 15: IN THE CASE ON HAND, THE ASSESSEE WAS DEAD. IT WAS THE ASSESSEE'S SON, WHO APPEARED AND PERHAPS COOPERATED. THEREFORE, THE PRIMARY CONDITION FOR THE INVOCATION OF SECTION 292BB IS ABSENT IN THE CASE ON HAND. PARA 16: SECTION 292BB IS IN PLACE TO TAKE CARE OF CONTINGENCIES WHERE AN ASSESSEE IS PUT ON NOTICE OF THE INITIATION OF PROCEEDINGS, BUT WHO TAKES ADVANTAGE OF DEFECTIVE NOTICES OR DEFECTIVE SERVICE OF NOTICE ON HIM. IT IS TRITE TO POINT OUT THAT THE PURPOSE OF ISSUE OF NOTICE IS TO MAKE THE NOTICEE AWARE OF THE NATURE OF THE PROCEEDINGS. ONCE THE NATURE OF THE PROCEEDINGS IS MADE KNOWN AND UNDERSTOOD BY THE ASSESSEE, HE SHOULD NOT BE ALLOWED TO TAKE ADVANTAGE OF CERTAIN PROCEDURAL DEFECTS. THAT WAS THE PURPOSE BEHIND THE ENACTMENT OF SECTION 292BB. IN CANNOT BE INVOKED IN CASES WHERE THE VERY INITIATION OF PROCEEDINGS IS AGAINST A DEAD PERSON. HENCE, THE SECOND CONTENTION CANNOT ALSO BE UPHELD PAM 21: DESPITE BEING PUT ON NOTICE THAT THE NOTICEE WAS DEAD, THE DEPARTMENT CHOSE TO PURSUE THE VERY SAME NOTICE. IN SUCH CIRCUMSTANCES, CLAUSE (B) OF SUB SECTION(2) OF SECTION 159 CANNOT BE TAKEN ADVANTAGE BY THE DEPARTMENT PARA 31: THEREFORE THE VERY INITIATION OF PROCEEDINGS AGAINST THE DEAD PERSON AND THE CONTINUATION OF THE SAME DESPITE HAVING NOTICED THE FACTUM OF DEATH OF THE ASSESSEE, CANNOT BE APPROVED. 12) THE HONORABLE ITAT-DELHI IN THE CASE OF BIMLA DEVI VS ITO (ITA NO. 1062/DE1/2016, DATED 27.05.2016) DECIDING ON THE ISSUE OF NOTICE U/S 143(2) ON A DEAD PERSON HELD IN PARA 6 OF ITS ORDER THAT 'IT IS WELL SETTLED THAT THE ISSUANCE OF NOTICE U/ S 143(2) IS THE PRE-REQUISITE CONDITION FOR FRAMING THE ASSESSMENT U/S 143(3) OF THE ACT. HOWEVER IN THE P RESENT CASE IT IS NOTICED THAT THE AO ISSUED THE NOTICES DATED 05.02.2013 U/S 143(2) & 142(1) OF THE ACT IN THE ITA NO. 1062/DEL/ 2016 IN NAME OF DEAD PERSON I.E., SMT BIMLA DEVI. THEREFORE THE ASSESSMENT FRAMED ON THE BASIS OF SAID NOTICE WAS VOID-AB-INITO.' 13) ALSO THE HONORABLE ITAT-MUMBAI IN CASE OF AVINASH V VYAS, LEGAL HEIR OF LATE SITA VINOD VS. INCOME TAX OFFICER, ITAT MUMBAI, ITA NOS.3538 & 3539/MUM/10, IN ITS PARA 13 OF THE ORDER HELD THAT 'SUFFICIENT MATERIAL WAS AVAILABLE BEFORE THE ASSESSING OFFICER THAT THE ASSESSEE HAS DIED. STILL THE ASSESSING OFFICER HAS PASSED THE ORDER AGAINST A DEAD PERSON. THEREFORE, IN OUR OPINION THE ENTIRE ASSESSMENT PROCEEDINGS BECOMES A NULLITY.' 14) IT HAS ALSO BEEN HELD IN FOLLOWING CASES THAT THE NOTICES UNDER SECTION 143(2) OR SECTION 148 ARE JURISDICTIONAL NOTICE AND WHEN ISSUED IN THE NAME OF DEAD PERSON WILL RENDER THE ASSESSMENT VOID AND CANNOT BE CURED BY SECTION 292BB: A) BRAHAM PRAKASH VS ITO (2004) 275 ITR 242 B) VEENA VIJ VS. ITO (ITA NO. 1299/DEL/2012 C) CIT VS SHITAL PRASAD KHARAG (2005) 196 CTR 162 (ALL) D) ITO VS LATE SOMNATH MALHOTRA, ITA NO 519/DE1/2013 1 ITA NO. 410/BANG/2018 PAGE 6 OF 11 E) SHAIKH ABDUL KADAR VS ITO AIR 1959 MP 101 F) JERBANOO N. WADIA VS ACIT (1991) 36 ITD 185 (MUM) G) HASMUKHBHAI K. BAROT L/H OF LATE KANTILAL BAROT VS. ACIT , ITA NO.441/AHD/2011, ORDER DT. 13.08.15 H) ITO VS. SIKANDAR LAL JAIN (2011) 45 SOT 0113 (TM) 15) THEREFORE THE ASSESSMENT FRAMED BY THE LEARNED AO ON THE BASIS OF NOTICE ISSUED U/S 143(2) DATED 03.09.2014 AND NOTICES U/S 142(1) DATED 01.06.2015 AND 24.08.2015 ON A DEAD PERSON IS VOID-AB INITIO. B. DEDUCTION U/S 54F 16) THE ASSESSING OFFICER HAS DISALLOWED THE EXEMPTION CLAIMED UNDER SECTION 54F ON THE CONTENTION THAT THE ASSESSE HAS PURCHASED A VACANT PLOT WHICH DOES NOT QUALIFY FOR EXEMPTION UNDER SECTION 54F. 17) THE ASSESSEE CLAIMED EXEMPTION OF RS. 78,87,695/- U/S 54F ON ACCOUNT OF CONSTRUCTION OF RESIDENTIAL HOUSE AND ALSO THE COST PURCHASE OF VACANT PLOT. THE RESIDENTIAL HOUSE AT BIDADI WAS STARTED IN MAY 2012 AND WAS COMPLETED BEFORE THE DATE OF FILING RETURN OF INCOME. ASSESSEE ALSO BOUGHT A VACANT RESIDENTIAL PLOT ON 24/07/2013 WITH INTENTION TO CONSTRUCTION RESIDENTIAL HOUSE. THE TOTAL COST CONSTRUCTION OF HOUSE AT BIDADI IS RS. 38,50,000/- AND THE COST OF RESIDENTIAL PLOT IS RS. 52,20,000. THE ASSESSEE BASED ON OPINION OF A TAX CONSULTANT WAS UNDER BELIEF THAT THERE IS NO RESTRICTION ON THE CLAIMING EXEMPTION IN RESPECT OF LRARO RESIDENTIAL PROPERTIES AND ACCORDINGLY CLAIMED EXEMPTION FOR BOTH THE PROPERTIES. ASSESSEE INTENDED TO CONSTRUCT AND COMPLETE THE RESIDENTIAL PROPERTY WITHIN THE STIPULATED TIME OF THREE YEARS. HOWEVER OWING TO THE DEATH OF ASSESEE, THE RESIDENTIAL PROPERTY COULD NOT BE CONSTRUCTED. CONSIDERING THAT ASSESSEE HAS CONSTRUCTED A RESIDENTIAL HOUSE AT BIDADI THE PRESCRIBED DUE DATE, THE EXEMPTION CLAIMED U/S 54F IS REQUESTED TO BE ALLOWED ON THE COST OF CONSTRUCTION OF RESIDENTIAL HOUSE AT BIDADI. PRAYER IT IS PRAYED AND PLEADED BEFORE THE APPELLATE AUTHORITY TO A) TO QUASH THE ASSESSMENT ORDER AS THE SAME IS ILLEGAL AND NON EST. B) TO ALLOW EXEMPTION U/S 54F AS CLAIMED IN THE RETURN OF INCOME TO THE EXTENT OF RS. 38,50,000/- TOWARDS CONSTRUCTION OF HOUSE AT BIDADI. 2. THOUGH VARIOUS GROUNDS ARE RAISED BUT THEY ALL RELATE TO THE VALIDITY OF THE ASSESSMENT FRAMED UNDER SECTION 143(3) OF THE ACT AND DISALLOWANCE OF DEDUCTION UNDER SECTION 54F OF THE INCOME TAX ACT (HEREINAFTER CALLED AS AN ACT). THROUGH GROUND NOS. 1 TO 15, THE VALIDITY OF THE ASSESSMENT IS CHALLENGED ON THE GROUND THAT NOTICE UNDER SECTION 143(2) OF THE ACT WAS NOT PROPERLY SERVED UPON THE ASSESSEE. IT WAS SERVED UPON THE DECEASED PERSON. THEREFORE, THE ENTIRE ASSESSMENT FRAMED UNDER SECTION 143(3) OF THE ACT IS BAD IN LAW AS THE NOTICE ISSUED UNDER SECTION 143(2) IS NOT SUSTAINABLE IN THE ITA NO. 410/BANG/2018 PAGE 7 OF 11 EYES OF LAW. IN SUPPORT OF HIS CONTENTION, THE LEARNED COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION THAT AO HAD ISSUED A NOTICE DATED 03.09.2014, WHEREAS THE ASSESSEE WAS EXPIRED ON 19.02.2014. THEREFORE, THE NOTICE WAS ISSUED UPON THE DECEASED. THUS ON THE BASIS OF THIS NOTICE WHICH WAS NOT DULY SERVED UPON THE ASSESSEE, THE ASSESSMENT CANNOT BE FRAMED IN THE NAME OF DECEASED PERSON THROUGH HIS LEGAL HEIRS. IT WAS FURTHER CONTENDED THAT NOTICE UNDER SECTION 142(1) WAS ALSO ISSUED ON 01.06.2015 AND 24.08.2015 UPON THE DECEASED PERSON, THOUGH THE ASSESSMENT WAS FRAMED IN THE NAME OF DECEASED THROUGH HIS LEGAL HEIRS. IN SUPPORT OF HIS CONTENTION, THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED HEAVY RELIANCE UPON THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF CIT VS M HEMANATHAN (APPEAL NO. 199 OF 2016) AND THE ORDER OF THE TRIBUNAL (SMC BENCH) IN THE CASE OF BIMLA DEVI VS ITO (ITA NO. 1062/DE1/2016). RELIANCE WAS ALSO PLACED UPON THE ORDER OF THE TRIBUNAL IN THE CASE OF ITO VS LATE SOMNATH MALHOTRA, ITA NO 519/DE1/2013 AND THE ORDER OF THE TRIBUNAL IN THE CASE OF AVINASH V VYAS VS. ITO IN ITA NO. 3538 AND 3539/MUM/2010. 3. THE LEARNED DR ON THE OTHER HAND HAS CONTENDED THAT RETURN WAS FILED BY THE ASSESSEE ON 31.07.2013 WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. THEREAFTER, NOTICE UNDER SECTION 143(2) WAS ISSUED ON 03.09.2014 UPON THE ASSESSEE AND IN RESPONSE THERETO, THE AUTHORIZED REPRESENTATIVE SHRI. B. MALLAIAH APPEARED AND FURNISHED THE REQUIRED INFORMATION AS SOUGHT BY THE AO WITH REGARD TO CLAIM OF DEDUCTION UNDER SECTION 54F OF THE ACT. WHILE APPEARING BEFORE THE AO, THE AO WAS INFORMED THAT ASSESSEE WAS EXPIRED ON 19.02.2014. CONSEQUENTLY THE AO HAS EXAMINED THESE FACTS AND ADJUDICATED THE CLAIM UNDER SECTION 54F OF THE ACT AND COMPLETED THE ASSESSMENT VIDE ITS ORDER DATED 24.03.2016 IN THE NAME OF THE DECEASED THROUGH LEGAL HEIR SMT. B. S. NAGARATHNA. THE LEARNED DR FURTHER CONTENDED THAT THE AO WAS NOT AWARE OF THE DEATH OF THE DECEASED AT THE TIME OF ISSUANCE OF NOTICE UNDER SECTION 143(2) AND ONCE IT WAS BROUGHT IT HIS NOTICE, HE COMPLETED THE ASSESSMENT IN THE NAME OF DECEASED ASSESSEE THROUGH ITS LEGAL REPRESENTATIVE SMT. B. S. NAGARATHNA. DEMAND NOTICE WAS ALSO ISSUED IN THE NAME OF DECEASED ASSESSEE THROUGH ITS LEGAL HEIRS. THEREFORE, THERE IS NO ERROR IN THE ASSESSMENT ORDER FOR COMPLETING THE ASSESSMENT IN THE NAME OF THE DECEASED ASSESSEE THROUGH ITS LEGAL HEIRS. ITA NO. 410/BANG/2018 PAGE 8 OF 11 4. THE LEARNED DR FURTHER INVITED OUR ATTENTION TO THE JUDGMENTS REFERRED TO BY THE ASSESSEE WITH THE SUBMISSION THAT IN THOSE CASES, THE FACTUM OF DEATH OF THE ASSESSEE WAS TIMELY BROUGHT TO THE NOTICE OF THE AO AND DESPITE HAVING KNOWLEDGE OF THE DEATH OF THE ASSESSEE, THE AO COMPLETED THE ASSESSMENT IN THE NAME OF THE DECEASED AFTER ISSUING NOTICE IN THE NAME OF THE DECEASED ASSESSEE. THEREFORE, THE RATIO LAID DOWN IN THOSE JUDGMENTS WILL NOT APPLY TO THE PRESENT FACTS OF THE CASE. 5. HAVING CAREFULLY EXAMINED THE ORDERS OF AUTHORITIES BELOW IN THE LIGHT OF RIVAL SUBMISSIONS, WE FIND THAT UNDISPUTEDLY THE ASSESSMENT WAS COMPLETED IN THE NAME OF THE DECEASED ASSESSEE THROUGH ITS LEGAL HEIRS. THROUGH IN THE ASSESSMENT WE FIND NO INFIRMITY. THE MAIN ARGUMENT WAS RAISED WITH REGARD TO THE VALIDITY OF THE NOTICE ISSUED UPON THE DECEASED ASSESSEE. IN THIS REGARD WE FIND THAT RETURN WAS FILED BY THE ASSESSEE AND THEREAFTER IT WAS ALSO PROCESSED UNDER SECTION 143(1) OF THE ACT. BY THAT TIME ASSESSEE WAS ALIVE. THEREAFTER THE AO ISSUED A NOTICE UNDER SECTION 143(2) UPON THE DECEASED ASSESSEE AND IN RESPONSE THERETO, THE LEGAL HEIRS OF THE ASSESSEE ALONG WITH AUTHORIZED REPRESENTATIVES APPEARED BEFORE THE AO. AFTER OBTAINING THE RELEVANT INFORMATION, THE AO COMPLETED THE ASSESSMENT IN THE NAME OF DECEASED ASSESSEE THROUGH HIS LEGAL HEIRS. NOTHING HAS BEEN PLACED ON RECORD TO DEMONSTRATE THAT AFTER THE DEATH OF THE ASSESSEE, THE AO WAS DULY INFORMED ABOUT THE ASSESSEES DEMISE. RELYING UPON THE RETURN FILED BY THE ASSESSEE, THE AO HAS ISSUED A NOTICE UNDER SECTION 143(2) OF THE ACT UPON THE DECEASED ASSESSEE AND IN RESPONSE THERETO, THE LEGAL HEIRS ALONG WITH AUTHORIZED REPRESENTATIVES APPEARED AND BROUGHT THIS FACT TO THE NOTICE OF THE AO. THE AO THEREAFTER COMPLETED THE ASSESSMENT IN THE NAME OF THE DECEASED ASSESSEE THROUGH ITS LEGAL HEIRS. 6. WE HAVE ALSO CAREFULLY PERUSED THE JUDGMENTS REFERRED TO BY THE PARTIES AND WE FIND THAT IN THE CASE OF CIT VS. HEMANATHAN (SUPRA) ON WHICH HEAVY RELIANCE HAS BEEN PLACED. THE HONBLE HIGH COURT HAS RECORDED THE FACTS IN THIS JUDGMENT IN PARAS 3 AND 4 OF ITS ORDER AND FROM PERUSAL OF THOSE PARAS WE FIND THAT ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT AND THEREAFTER THE CIT(A) ISSUED A SHOW CAUSE NOTICE UNDER SECTION 263 ON 06.09.2013 ADDRESSING THE ASSESSEE MR. M. A. MURGESHAN. THE NOTICE WAS RETURNED BACK WITH THE ENDORSEMENT ADDRESSEE DECEASED AND THESE ITA NO. 410/BANG/2018 PAGE 9 OF 11 FACTS WERE INTIMATED BY THE ITO TO ACIT BY COMMUNICATION DATED 23.09.2013. ON THE BASIS OF THE VERY SAID NOTICE, THEREAFTER THE DEPARTMENT SERVED ONE MORE SHOW CAUSE NOTICE ON THE SON OF THE DECEASED ASSESSEE THROUGH A MESSENGER. LEFT WITH NO ALTERNATIVE, THE SON ENGAGED THE SERVICES OF AUTHORIZED REPRESENTATIVES WHO PARTICIPATED IN THE PROCEEDINGS UNDER SECTION 263 OF THE ACT. EVENTUALLY THE ORDER PASSED BY THE CIT(A) ON 21.03.2014 SUSTAINING, THE SHOW CAUSE NOTICE SETTING ASIDE SCRUTINY ASSESSMENT ORDER DATED 23.06.2011 AND REMANDED THE MATTER BACK TO THE AO TO PASS A FRESH ORDER. THE ORDER WAS CHALLENGED BY THE ASSESSEE BEFORE THE TRIBUNAL AND THE TRIBUNAL HAVING EXAMINED THESE VARIOUS ASPECTS HAS KNOCKED DOWN THE ORDER PASSED UNDER SECTION 263. 7. THE REVENUE PREFERRED AN APPEAL BEFORE THE HONBLE HIGH COURT AND THE HONBLE HIGH COURT CONFIRMED THE ORDER OF THE TRIBUNAL AND THEIR LORDSHIP HAS OBSERVED THAT DESPITE BEING PUT ON NOTICE THAT THE ASSESSEE WAS DEAD, THE DEPARTMENT CHOSE TO PURSUE THE VERY SAME NOTICE. IN SUCH CIRCUMSTANCE, CLAUSE (B) OF SECTION 159(2) CANNOT BE TAKEN ADVANTAGE BY THE DEPARTMENT. WHEREIN, IN THE PRESENT CASE, THE AO WAS NEVER INFORMED ABOUT THE DEATH OF THE ASSESSEE BEFORE THE ISSUANCE OF THE NOTICE UNDER SECTION 143(2) OF THE ACT. AFTER ISSUANCE OF THE NOTICE UNDER SECTION 143(2) OF THE ACT, THE LEGAL HEIRS OF THE ASSESSEE STARTED APPEARING ALONG WITH THEIR AUTHORISED REPRESENTATIVES AND JOINED THE PROCEEDINGS BEFORE THE AO. THEREFORE, THE RATIO LAID DOWN IN THIS CASE WILL NOT APPLY TO THE FACTS OF THE PRESENT CASE. IN OTHER CASES ALSO, THE AO WAS TIMELY INFORMED ABOUT THE DEATH OF THE ASSESSEE. DESPITE HAVING KNOWLEDGE OF THE DEATH OF THE ASSESSEE, THE AO HAS CONTINUED WITH THE PROCEEDINGS AGAINST THE DECEASED PERSON. THEREFORE, THE JUDGMENT REFERRED BY THE ASSESSEE WOULD NOT RENDER ANY HELP TO THE ASSESSEE AS THEY ARE DISTINGUISHABLE ON FACTS. THUS, WE FIND NO LEGAL INFIRMITY IN THE ASSESSMENT ORDER. 8. NEXT GROUND RELATE TO THE CLAIM OF DEDUCTION UNDER SECTION 54F OF THE ACT AND THE FACTS BORNE OUT IN THIS REGARD ARE THAT ASSESSEE CLAIMED DEDUCTION OF RS.78,87,695/- UNDER SECTION 54F OF THE ACT ON THE INVESTMENT MADE IN THE NEW PROPERTY. ASSESSEE CLAIMED THAT HE HAS PURCHASED THE VACANT SITE ON 24.07.2013 FOR A CONSIDERATION OF RS.48,00,000/- WHEREAS THE PROPERTY WAS SOLD ON 14.03.2013. ASSESSEE HAS ALSO STATED THAT HE HAS MADE THE INVESTMENT AND HE HAS NOT DEPOSITED THE UNUTILIZED AMOUNT IN THE ITA NO. 410/BANG/2018 PAGE 10 OF 11 CAPITAL GAIN ACCOUNT. THE AO DISALLOWED THE DEDUCTION UNDER SECTION 54 OF THE ACT AND MADE THE ADDITION OF RS.78,87,695/-. ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WITH THE SUBMISSION THAT HE HAS ALSO MADE THE INVESTMENT IN THE CONSTRUCTION OF THE HOUSE IN BIDADI AT RS.38,50,000/-. BEFORE THE CIT(A) IT WAS ALSO CONTENDED THAT COST OF RESIDENTIAL PLOT WAS OF RS.52,20,000/-. THE ASSESSEE COULD NOT DEMONSTRATE BEFORE THE CIT(A) WITH EVIDENCE THAT HE HAS CONSTRUCTED THE RESIDENTIAL HOUSE WITHIN ONE YEAR PRIOR TO THE SALE OF THE IMMOVABLE PROPERTY AND ALSO CONSTRUCTION OF THE NEW RESIDENTIAL HOUSE WITHIN A PRESCRIBED PERIOD OF 2 YEARS FROM THE DATE OF SALE OF PROPERTY. THE CIT(A) ACCORDINGLY CONFIRMED THE DISALLOWANCE. 9. NOW THE ASSESSEE IS BEFORE US AND DURING THE COURSE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE HAS CANDIDLY ADMITTED THAT HE IS NOT ENTITLED FOR DEDUCTION FOR PURCHASE OF VACANT SITE FOR RS.48,00,000/-. HE HOWEVER CONTENDED THAT HE HAS CONSTRUCTED THE HOUSE WITHIN A PERIOD OF ONE YEAR FROM THE DATE OF SALE OF IMMOVABLE PROPERTY AND MADE THE INVESTMENT OF RS.38,50,000/-. THEREFORE, THE CLAIM OF DEDUCTION SHOULD BE RESTRICTED UPTO RS.38,54,000/-. 10. THE LEARNED DR ON THE OTHER HAND HAS CONTENDED THAT BEFORE THE LOWER AUTHORITIES, ASSESSEE HAS NOT FURNISHED ANY EVIDENCE FOR CONSTRUCTION OF THE RESIDENTIAL HOUSE BEFORE THE DATE OF SALE. HOWEVER, HE PLACED RELIANCE UPON THE ORDER OF THE CIT(A) WITH THE SUBMISSIONS THAT CIT(A) HAS SCANNED THE PHOTOS OF PROPERTY WHICH WERE FILED BEFORE THE CIT(A) TO DEMONSTRATE THAT IT WAS CONSTRUCTED WITHIN A PERIOD OF ONE YEAR PRIOR TO THE SALE OF IMMOVABLE PROPERTY. 11. HAVING CAREFULLY EXAMINED THE ORDER OF THE LOWER AUTHORITIES, WE FIND THAT ASSESSEE COULD NOT PLACE THE EVIDENCE FOR CONSTRUCTION OF RESIDENTIAL HOUSE WITHIN A PRESCRIBED PERIOD BEFORE THE SALE OF IMMOVABLE PROPERTY. RATHER, HE COULD NOT PLACE ANY EVIDENCE TO DEMONSTRATE THAT HE HAS INCURRED SUCH EXPENDITURE IN CONSTRUCTION OF PROPERTIES EITHER IN THE FORM OF BILLS AND VOUCHERS OR AGREEMENT WITH THE CONTRACTOR. IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE, THE CONTENTION OF THE ASSESSEE CANNOT BE ACCEPTED THAT HE HAS CONSTRUCTED THE RESIDENTIAL HOUSE WITHIN A PERIOD OF ONE YEAR FROM THE DATE OF SALE OF IMMOVABLE PROPERTY. THEREFORE, WE FIND OURSELVES IN AGREEMENT WITH THE OBSERVATIONS OF ITA NO. 410/BANG/2018 PAGE 11 OF 11 THE CIT(A) THAT ASSESSEE IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 54F OF THE ACT. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A). 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 31 ST MAY, 2018. SD/- SD/- SD/- BANGALORE. DATED: 31 ST MAY, 2018. /NS/* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) - II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE. (INTURI RAMA RAO) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER