Estate Of Hemraj Khajanchi , Kolkata V. ITO, Ward - 43(1), Kolkata , Kolkata

ITA 904/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6879 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 04-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHURY ACIT
• Keywords: Business income; Ignorance of law
• Section: 143(1); 154

Judgement Text

1 ITA NO.904/KOL/2018 ESTATE OF HEMRAJ KHAJANCHI, AY:2011-12 , C (SMC) , IN THE INCOME TAX APPELLATE TRIBUNAL C(SMC) BENCH : KOLKATA ( ) . . , ) [BEFORE SHRI A. T. VARKEY, JM] I.T.A. NO. 904/KOL/2018 ASSESSMENT YEAR: 2011-12 ESTATE OF HEMRAJ KHAJANCHI (PAN: AAABE0341G) VS. INCOME-TAX OFFICER, WD-43(1), KOLKATA APPELLANT RESPONDENT DATE OF HEARING 19.02.2019 DATE OF PRONOUNCEMENT 03.05.2019 FOR THE APPELLANT SHRI SUBASH AGARWAL, ADVOCATE FOR THE RESPONDENT SHRI ROBIN CHOUDHURY, ACIT, SR. DR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-13, KOLKATA DATED 13.11.2017 FOR AY 2011-12 ON THE FOLLOWING REVISED GROUND OF APPEAL: 1. FOR THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UP HOLDING THE REJECTION OF THE CLAIM OF THE ASSESSEE TO BE TREATED AS AN INDIVIDUAL/BOI AND APP LY THE PROVISION OF SEC. 168 OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IN THE CAPACITY OF EXECUTOR OF THE WILL OF HIS FATHER LATE SHRI HEMRAJ KHAJANCHI, WHO EXPIRED ON 30.10.2009 HAS FILED THE RETURN OF INCOME ONBEHALF OF THE ESTATE OF LATE SHRI HEMRAJ K HAJANCHI. SHRI HEMRAJ KHAJANCHI BEFORE HIS DEATH HAD MADE A WILL DATED 09.03.2009 W HEREIN HE HAD APPOINTED SHRI NARENDRA KUMAR KHAJANCHI AS THE EXECUTOR OF THIS WI LL. HE ALSO HAD MADE IT CLEAR IN THE WILL THAT IF SHRI NARENDRA KUMAR KHAJANCHI FAILS TO BE THE EXECUTOR, THEN AND IN THAT EVENT ONLY SHRI SUBHAS KUMAR KHAJANCHI (BROTHER OF SHRI N ARENDRA KUMAR KHAJANCHI) BE THE 2 ITA NO.904/KOL/2018 ESTATE OF HEMRAJ KHAJANCHI, AY:2011-12 EXECUTOR OF THE WILL TO CARRY OUT HIS DESIRES AS EX PRESSED IN THE WILL. SINCE SHRI HEMRAJ KHAJANCHI DIED ON 30.10.2009, THEREAFTER THE ESTATE OF THE LATE HEMRAJ KHAJANCHI HAD TO FILE ITS RETURN OF INCOME TILL THE DATE ON WHICH COMPLET E DISTRIBUTION OF ASSETS IS MADE TO THE BENEFICIARIES/LEGATEES FROM THE ESTATE OF LATE SHRI HEMRAJ KHAJANCHI. THEREFORE, THE EXECUTOR ON THE BONA FIDE BELIEF APPLIED FOR PAN IN THE STATUS OF BODY OF INDIVIDUALS (BOI), THOUGH ERRONEOUSLY. AFTER GETTING PAN AS BOI FILED THE RETURN OF INCOME FROM AY 2010-11 ONWARDS. BUT IT WAS BROUGHT TO OUR NOTICE THAT FROM AY 2010-11 HE WAS FACING PROBLEMS WHILE FILING ELECTRONICALLY THE RETURN OF INCOME [WHILE DATA WERE FED/PUNCHED IN THE STATUS BOI]. ACCORDING TO LD. AR, WHILE ELECTR ONICALLY THE RETURN OF INCOME IS UPLOADED, AND THE DATA ARE FED/PUNCHED IN THE STATU S OF ASSESSEE AS BOI, IT AUTOMATICALLY (ERRONEOUSLY) SHOWED IT AS FIRM. THEREAFTER, THE LD . AR DREW MY ATTENTION TO PAGE 7 OF VOLUME-I OF PAPER BOOK AND IT IS NOTED THAT THE STA TUS OF ASSESSEE IS SHOWN AS FIRM. HOWEVER, THE LD. AR DREW OUR ATTENTION TO PAGE 14 W HEREIN THE COMPUTATION OF TOTAL INCOME IS REFLECTED AS BUSINESS INCOME AS RS.46,7 41/- WHEREAS IN THE COMPUTATION OF TAX LIABILITY ON TOTAL INCOME ON PAGE 15 THE CALCULATIO N HAS BEEN DONE AUTOMATICALLY BY THE SOFTWARE WHEREIN IT HAS BEEN SHOWN AS NIL. FURTHER , IT WAS POINTED OUT BY THE LD. AR THAT WHEN THE RETURN OF INCOME WAS PROCESSED BY THE CPC, BANGALORE, AN ERROR HAD CREPT INSIDE WHICH COULD BE EVIDENT FROM THE PERUSAL OF THE INTI MATION U/S. 143(1) OF THE ACT, WHICH IS PLACED IN VOLUME-II OF THE PAPER BOOK, FROM WHEREIN , I NOTE THAT THE STATUS OF ASSESSEE HAS BEEN ERRONEOUSLY TAKEN AS FIRM AND AT PAGE 2 IT SH OWS THAT THE AGGREGATE INCOME OF RS.46,740/- AND TAX ON INCOME AT NORMAL RATE IS SHO WN AS RS.14,022/-, WHICH ACCORDING TO LD. AR IS PER SE ERRONEOUS. THE LD. AR EXPLAINED T HAT WHEN THE RETURN OF INCOME WAS FILED, THOUGH THE BUSINESS INCOME IS SHOWN AS RS.46 ,740/-, THE COMPUTATION OF INCOME HAS BEEN DONE AUTOMATICALLY BY THE SOFTWARE AS NIL; A ND, ACCORDING TO HIM, WHEN THERE WAS A MISMATCH DETECTED, THEN THE PRUDENT WAY WOULD HAVE BEEN THAT THE AO OUGHT TO HAVE ISSUED NOTICE U/S. 143(1) AND 143(2) OF THE ACT AND THEREA FTER SHOULD HAVE COMPLETED THE ASSESSMENT RATHER THAN ALLOWING THE MISTAKE TO CARR Y ON. AFTER THE AO HAD GIVEN INTIMATION DATED 13.01.2012 U/S. 143(1) OF THE ACT, THE ASSESS EE PREFERRED BEFORE AO AN APPLICATION FOR 3 ITA NO.904/KOL/2018 ESTATE OF HEMRAJ KHAJANCHI, AY:2011-12 RECTIFICATION U/S. 154 OF THE ACT WHEREIN THE AO TO OK THE STATUS OF ASSESSEE AS AOP. HOWEVER, THE DEMAND HAS NOT CHANGED AND HAD REMAINE D AT RS.14,022/- WHICH ACCORDING TO LD. AR, IS ERRONEOUS AND, THEREFORE, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO CONFIRMED THE ORDER OF AO. AGGRIEVED, ASSESSEE IS BEFORE US. 5. I HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE FACTS NARRATED ABOVE ARE NOT REPEATED FO R THE SAKE OF BREVITY AND THE FACTS ARE NOT DISPUTED. IN ORDER TO UNDERSTAND THE NUASANCE OF T HE ISSUE RAISED, I NEED TO GO TO THE SPECIAL PROVISIONS WHICH DEAL WITH THE EXECUTORS OF THE EST ATE OF A DECEASED PERSON WHICH I FIND FROM A READING OF SEC. 168 OF THE ACT. SECTION 168 OF THE ACT READS AS UNDER: 168. EXECUTORS (1) SUBJECT AS HEREINAFTER PROVIDED, THE INCOME OF THE ESTATE OF DECEASED PERSON SHALL BE CHARGEABLE TO TAX IN THE HANDS OF THE EXECUTOR,- (A) IF THERE IS ONLY ONE EXECUTOR, THEN, AS IF THE EXE CUTOR WERE AN INDIVIDUAL; OR (B) IF THERE ARE MORE EXECUTORS THAN ONE, THEN, AS IF THE EXECUTORS WERE AN ASSOCIATION OF PERSONS; 1. SUBSTITUTED BY THE DIRECT TAX LAWS (AMENDMENT) A CT, 1989, W. E. F. 1- 4- 1989. EARLIER, THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987 HAD INSER TED SECTION 167B WITH EFFECT FROM THE SAME DATE BUT IT WAS SUBSTITUTED BEFORE COMING INTO EFFECT. AND FOR THE PURPOSES OF THIS ACT, THE EXECUTOR SHAL L BE DEEMED TO BE RESIDENT OR NON- RESIDENT ACCORDING AS THE DECEASED PERSON WAS A RESIDENT OR NON- RESIDENT DURING THE PREVIOUS YEAR IN WHICH HIS DEATH TOOK PLACE. (2) THE ASSESSMENT OF AN EXECUTOR UNDER THIS SECTION S HALL BE MADE SEPARATELY FROM ANY ASSESSMENT THAT MAY BE MADE ON HIM IN RESPECT OF HI S OWN INCOME. (3) SEPARATE ASSESSMENTS SHALL BE MADE UNDER THIS SECT ION ON THE TOTAL INCOME OF EACH COMPLETED PREVIOUS YEAR OR PART THEREOF AS IS INCLU DED IN THE PERIOD FROM THE DATE OF THE DEATH TO THE DATE OF COMPLETE DISTRIBUTION TO THE B ENEFICIARIES OF THE ESTATE ACCORDING TO THEIR SEVERAL INTERESTS. (4) IN COMPUTING THE TOTAL INCOME OF ANY PREVIOUS YEAR UNDER THIS SECTION, ANY INCOME OF THE ESTATE OF THAT PREVIOUS YEAR DISTRIBUTED TO, OR APP LIED TO THE BENEFIT OF, ANY SPECIFIC LEGATEE OF THE ESTATE DURING THAT PREVIOUS YEAR SHALL BE EXCLU DED; BUT THE INCOME SO EXCLUDED SHALL BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR O F SUCH SPECIFIC LEGATEE. EXPLANATION.- IN THIS SECTION,' EXECUTOR' INCLUDES AN ADMINISTRATOR OR OTHER PERSON ADMINISTERING THE ESTATE OF A DECEASED PERSON. 6. A BARE PERUSAL OF THE AFORESAID POSITION OF LAW STATES THAT THE INCOME OF THE ESTATE OF A DECEASED PERSON SHALL BE CHARGEABLE TO TAX IN THE H ANDS OF THE EXECUTOR AS PER SECTION 168 OF THE ACT. CLAUSE (A) TO SUB-SECTION (1) OF SECTION 168 OF THE ACT IS UNAMBIGUOUS AND STATES THAT IF THERE IS ONLY ONE EXECUTOR TO THE ESTATE OF A DECEASED PERSON, THEN THE EXECUTOR WILL BE 4 ITA NO.904/KOL/2018 ESTATE OF HEMRAJ KHAJANCHI, AY:2011-12 TREATED AS AN INDIVIDUAL. CLAUSE (B) TO SUB-SECTIO N (1) OF SECTION 168 COMES INTO PLAY ONLY IF THERE IS MORE THAN ONE EXECUTOR AND NOT OTHERWISE A ND THEN THE STATUS OF THE EXECUTOR WOULD BE THAT OF AN ASSOCIATION OF PERSONS (AOP). HERE IN THE INSTANT CASE, WE NOTE THAT THE EXECUTOR/ASSESSEE DUE TO IGNORANCE OF LAW HAS FIRST OF ALL APPLIED FOR PAN IN THE STATUS OF BOI AND THEREAFTER WHILE FILING THE RETURN OF INCOM E ELECTRONICALLY FACED THE GLITCHES/PROBLEM IN THE SOFTWARE, WHICH HAS AUTOMAT ICALLY TAKEN THE STATUS OF THE EXECUTOR AS THAT OF FIRM; AND CONSEQUENTLY THERE WAS MISMATCH B ETWEEN THE RETURN OF INCOME AS WELL AS 143(1) INTIMATION. IN THIS CASE, THE LAW IS VERY C LEAR, IF THERE ONLY ONE EXECUTOR THEN THE EXECUTOR SHALL BE TREATED AS AN INDIVIDUAL AND WHER E THERE IS MORE THAN ONE EXECUTOR THE EXECUTORS SHALL BE TREATED AS AN ASSOCIATION OF PER SON (AOP). I NOTE THAT IN THE RECTIFICATION APPLICATION FILED BY ASSESSEE UNDER SECTION 154 BEF ORE THE AO, THE AO HAS TAKEN THE STATUS OF ASSESSEE AS THAT OF AN AOP WHICH IS ERRONEOUS. I N THIS CASE, A CAREFUL READING OF THE WILL OF LATE SHRI HEMRAJ KHAJANCHI DATED 09.03.2009, IN NO UNCERTAIN TERM HAS CHOSEN SHRI NARENDRA KUMAR KHAJANCHI AS THE EXECUTOR OF HIS WIL L. ONLY IF SHRI NARENDRA KUMAR KHAJANCHI FAILS TO PERFORM THE DUTIES OF EXECUTOR, THEN ONLY SHRI SUBHAS KUMAR KHAJANCHI GETS THE MANDATE TO EXECUTE THE WILL OF LATE SHRI H EMRAJ KHAJANCHI. AND SINCE SHRI NARENDRA KUMAR KHAJANCHI IS DISCHARGING HIS DUTIES AS AN EXECUTOR, THE CONTINGENCY MENTIONED IN THE WILL OF LATE SHRI HEMRAJ KHAJANCHI HAS NOT RISEN AND SO SHRI NARENDRA KUMAR KHAJANCHI IS THE ONLY EXECUTOR OF THE WILL, A ND, THEREFORE, THE STATUS OF EXECUTOR IN THIS CASE IS THAT HE SHALL BE TREATED AS AN INDIVID UAL AND NOT AS AOP AS ERRONEOUSLY CLASSIFIED BY AO. IT IS TRUE THAT THE CONFUSION HAS ARISEN TO START WITH BECAUSE OF THE IGNORANT ACTION OF THE ASSESSEE WHEN HE APPLIED FOR THE PAN IN THE STA TUS OF BOI AND THEREAFTER GLITCHES IN THE SOFTWARE OF DEPARTMENT AS DISCUSSED ABOVE. HOWEVER , IT HAS TO BE KEPT IN MIND THAT THERE IS NO ESTOPPEL AGAINST LAW. IN THIS CASE THE FACTS CL EARLY SHOW THAT THE SHRI NARENDRA KUMAR KHAJANCHI IS THE ONLY EXECUTOR OF THE WILL AND IS D ISCHARGING HIS DUTIES AS AN EXECUTOR, AND THEREFORE HAS TO BE TREATED IN THE STATUS AS AN IND IVIDUAL AS PER SEC. 168 OF THE ACT AND WHEN HE IS TREATED AS AN INDIVIDUAL ACCORDING TO APPLICA BLE TAX SLAB DURING AY 2011-12 THE ASSESSEE IS HAVING ONLY BUSINESS INCOME TO THE TUNE OF RS.46,741/- WHICH FALLS BELOW THE 5 ITA NO.904/KOL/2018 ESTATE OF HEMRAJ KHAJANCHI, AY:2011-12 THRESHOLD EXEMPTION LIMIT OF RS.1,60,000/- AND, THE REFORE, NO TAX IS PAYABLE AS PER LAW. THUS THE APPEAL OF THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 3RD MAY, 2 019. SD/- (ABY. T. VARKEY) JUDICIAL MEMBER DATED : 3RD MAY, 2019 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT ESTATE OF HEMRAJ KHAJANCHI, C/O M/S. PRATAPMULL HEMRAJ, 113A, MANOHAR DAS KATRA, KOLKATA-700 007. 2 RESPONDENT ITO, WARD-43(1), KOLKATA. 3. 4. CIT(A)-13, KOLKATA(SENT THROUGH E-MAIL) CIT, . KOLKATA. 5. DR, ITAT, KOLKATA. (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR