Smt. Hansaben Vinodbhai Parmar legal heir of late Shri Vinodbhai Motibhai Parmar, Gandhinagar V. The ACIT/DCIT Circle, Gandhinagar

ITA 58/AHD/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1698 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 12-05-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 11-01-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S USHIL KUM KUTIAR; LEGAL
• Keywords: Set aside
• Section: 68; 44AB; 72

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH Before: Shri Siddhartha Nautiyal, Judicial Member And Shri Narendra Prasad Sinha, Accountant Member S mt. Hansaben Vi n odbhai Par mar (Leg al Heir o f Late Shri Vinodbhai Motibhai Par mar) PAN: AREPP016 8K (Appellant) Vs ACIT/DCIT Circle, Gandhin agar (Resp ondent) Asses see b y : Shri Su la bh Padsh ah, A. R. Revenue by : Shri S ushil Kum ar Kutiar, Sr. D.R. Date of hearing : 13-05 -2 024 Date of pronouncement : 12-06 -2 024 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax, CIT(A), Ahmedabad-1, in proceeding u/s. 143(3) vide order dated 26/02/2021 passed for the assessment year 2016-17. 2. The assessee has taken the following grounds of appeal:- ITA No. 58/Ahd/2024 Assessment Year 2017-18 I.T.A No. 58/Ahd/2024 A.Y. 2017-18 Page No. Smt. Hansaben Vinodbhai Parmar vs. ACIT/DCIT 2 “Your appellant being aggrieved by the order passed by the learned Ld. Commissioner of Income-tax (Appeals) (herein after referred to as 'Ld. CIT (Appeals)', Income tax Department, National Faceless Appeal Centre (NFAC) presents this appeal against the same on the following amongst other grounds: 1. 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. 2. The Learned CIT (Appeals) has grossly erred in confirming the Assessment Order passed by Ld AO dated 16.11.2019 in spite of the fact that the assessee has already died on 14.10.2018. It is submitted that since the assessee had died even before the assessment was framed, the completion of assessment by Ld. AO in the name of deceased person is completely incorrect and illegal. On facts and circumstances of the case, the whole proceedings starting from Assessment order to the order passed by the CIT(A) against the dead person is illegal and void ab- initio and the assessment order passed in name of deceased person be quashed and set aside. The same please be held accordingly. 3. Without prejudice to the above, the Learned CIT (Appeals) has erred in passing an Ex-parte order and dismissing the appeal of the Appellant without appreciating the facts and circumstances of the case. It is submitted that the responses could not be filed towards notices issued during the course of Appellate proceeding only due to circumstances beyond the control of the Appellant as mentioned in the separate affidavit filed. In view of this, the lower authorities may please be directed to hear the appellant again and the additions made of Rs 1,57,54,473/- kindly be deleted after fresh verification of details and evidences in the interest of justice. 4. The Learned CIT (Appeals) has erred in confirming the addition of Rs 1,43,42,420/- made on account of cash deposited in to bank. It is submitted that the assessee running petrol pump, had/having complete documentary evidences explaining the source of cash deposits made out of sale proceeds received in cash, however the same could not be furnished because of circumstances prevailing beyond the control of the appellant. On the facts and circumstances of the case, there is no question of treating cash deposits made of Rs 1,43,42,420/- as Unexplained u/s 68 of the Act. It is therefore prayed before your honour that the Ld. AO may please be directed to hear the appellant again along with documentary evidences available and impugned addition made of Rs 1,43,42,420/- be deleted in the interest of justice. 5. The Learned CIT (Appeals) has erred in confirming addition made of Rs 14,12,053/- on account of administrative and other expense incurred. It is submitted that the complete documentary evidences justifying the each and every expenditures incurred wholly for business purpose were/are available on record, I.T.A No. 58/Ahd/2024 A.Y. 2017-18 Page No. Smt. Hansaben Vinodbhai Parmar vs. ACIT/DCIT 3 however the same could not be furnished because of circumstances prevailing beyond the control of the appellant. On the facts and circumstances of the case, it is prayed before your honour that the Ld. AO may please be directed to hear the appellant again along with documentary evidences available and adhoc addition made of Rs 14,12,053/- be deleted in the interest of justice. 6. 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. 7. Your appellant craves leave to add, alter and/or to amend all or any of the grounds before the final hearing of appeal.” 3. 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. 4. In addition to the above, the assessee had claimed several administrative expenses and other expenses to the tune of 56, 48, 213/- I.T.A No. 58/Ahd/2024 A.Y. 2017-18 Page No. Smt. Hansaben Vinodbhai Parmar vs. ACIT/DCIT 4 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. 5. 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 raised by the appellant are dismissed. 6. In result, the assessment order is CONFIRMED.” 6. In appeal against the aforesaid order passed by Ld. CIT(A), the counsel for the assessee has challenged the order passed by the assessing officer on grounds of jurisdiction itself. The contention of the counsel for the assessee was that the assessment order has been framed in the name of a deceased person i.e. the assessee had expired at the time when the assessment order was framed and hence, in view of various judicial I.T.A No. 58/Ahd/2024 A.Y. 2017-18 Page No. Smt. Hansaben Vinodbhai Parmar vs. ACIT/DCIT 5 precedents which have consistently taken the position that no assessment can be framed in the name of a deceased person, the assessment order itself is void ab initio, having passed in the name of a deceased person. Even otherwise, the counsel for the assessee submitted that the assessee has a good case on merits, since the assessee is running a successful petrol pump and therefore the source of deposits in the bank account held by the assessee during the demonetisation period stands duly explained. Further, it was submitted that the assessing officer has disallowed 25% of administrative expenses on an adhoc basis and therefore, this addition/disallowance is not sustainable. The counsel for the assessee placed reliance on several judicial precedents, which are placed on record before us, in support of the contention that an assessment order framed in the name of the deceased person is void ab initio and hence, the assessment order is liable to be set aside. On the issue/query raised to the assessee regarding the non- appearance of the legal heirs of the assessee and non-intimation to the Department that the assessee had expired, the counsel for the assessee submitted that at the time of issuance of first notice of hearing dated 21-09- 2018, which was served on the ITP of the assessee, the assessee was alive, but the assessee was not keeping in good health and shortly expired on 14- 10-2018. Further, the counsel for the assessee submitted that the ITP of the assessee regarding the initiation of assessment proceedings also could not inform the assessee/legal heirs of the assessee since the wife of the ITP was unwell, and therefore the assessee and thereafter the legal heirs of the assessee were not aware about the initiation of assessment proceedings against the assessee. Accordingly, since the legal heirs of the assessee were not aware about legal proceedings against the assessee, it was for the I.T.A No. 58/Ahd/2024 A.Y. 2017-18 Page No. Smt. Hansaben Vinodbhai Parmar vs. ACIT/DCIT 6 aforesaid reasons that the legal heirs of the assessee could not intimate the Department about the death of the assessee, during the course of assessment proceedings. 7. In response, DR submitted that there has been consistent non- compliance on the part of the assessee/legal heirs of the assessee. On one hand, the legal heirs of the assessee had filed appeal against the assessment order before the ld. CIT(A) , but thereafter they had remained totally non- compliant, non-participant and non-responsive. The legal heirs of the assessee never informed the Department about the death of the assessee and did not respond to several notices of hearing issued to the assessee. Since the assessing officer itself had no knowledge about the fact that the assessee had since expired, and no such intimation was given to the Department by legal heirs of the assessee, the assessing officer could not bring the legal heirs of the assessee on record under section 159 of the Act, and the assessing officer had no option but to pass assessment order in the name of the assessee itself. 8. 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 I.T.A No. 58/Ahd/2024 A.Y. 2017-18 Page No. Smt. Hansaben Vinodbhai Parmar vs. ACIT/DCIT 7 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 I.T.A No. 58/Ahd/2024 A.Y. 2017-18 Page No. Smt. Hansaben Vinodbhai Parmar vs. ACIT/DCIT 8 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. 9. 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 I.T.A No. 58/Ahd/2024 A.Y. 2017-18 Page No. Smt. Hansaben Vinodbhai Parmar vs. ACIT/DCIT 9 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 terms of section 159 of the Income-tax Act in a proceeding taken against the deceased before his death, a notice is required to be issued to the legal representative to have his say before making the assessment order, as the legal representative is an assessee by operation of law from the stage of death. However, the Income-tax Act does not provide abatement of assessment proceeding under the Act like abatement of suit under the Code of Civil Procedure. ................. Under Order 22, rule 6 of Code of Civil Procedure, if death occurs between the conclusion of hearing and pronouncement of judgment, judgment may in such case be pronounced notwithstanding the death and shall have the same force and effect as if it had been pronounced before the death took place. The principle underlying rule 6 is founded on public policy, for, time taken by an authority or Court for doing a thing which is incumbent on it shall not cause prejudice to the parties. As such the general principle I.T.A No. 58/Ahd/2024 A.Y. 2017-18 Page No. Smt. Hansaben Vinodbhai Parmar vs. ACIT/DCIT 10 underlying rule 6 should be extended in a proceeding under the Act on the ground of policy of law. In view of the above, the Tribunal was correct in law in setting aside the order of the Commissioner (Appeals) and directing the Assessing Officer to remove the defect by issuing notice to all the legal representatives of the deceased and bringing them on record. Also the Tribunal was correct in holding that non-issue of notices to legal representatives of the deceased assessee ‘R' did not invalidate the assessment order passed by the IAC and that at best it was a defect which was liable to be corrected and as such it was not a case fit for cancellation of the assessment. 10. 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. I.T.A No. 58/Ahd/2024 A.Y. 2017-18 Page No. Smt. Hansaben Vinodbhai Parmar vs. ACIT/DCIT 11 11. 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: A decree against a dead person is not a nullity for all purposes. If at the date of the death of the deceased assessee, a return in respect of the income earned by him in the previous year had already been filed and the assessment proceeding had commenced, it would not be necessary to start the proceeding afresh, against the legal representative, since any proceeding taken against the deceased prior to the date of his death is, by a fiction, deemed as having been taken against the legal representative. It would be necessary, therefore, to determine who the legal representative is and take all further steps in the proceeding against him. The legal representative will also be given full opportunity of being heard before an assessment is made on him in respect of the estate of the deceased. 12. 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 I.T.A No. 58/Ahd/2024 A.Y. 2017-18 Page No. Smt. Hansaben Vinodbhai Parmar vs. ACIT/DCIT 12 accordance with law and thereafter pass assessment order after giving due opportunity of hearing to the assessee to present its case on merits. 13. 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. 14. 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, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद