A.Rathinasabapathy, Erode V. DCIT, Coimbatore

ITSSA 10/CHNY/2016

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4685 (ITAT-CHENNAI)
• Duration Of Justice: 5 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 19-04-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 30-06-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Validity of assessment; Procedural lapse; Block assessment; Set aside; Capital Gains; CHAPTER IV
• Section: 132; 144; 139; 143(2); 158BC; 158BD

Judgement Text

आयकर अपीलीय अिधकरण ’सी’ Ɋायपीठ चेɄई मŐ। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, CHENNAI माननीय ŵी वी. द ु गाŊ राव, Ɋाियक सद˟ एवं माननीय ŵी मनोज कु मार अŤवाल ,लेखा सद˟ के समƗ। BEFORE HON’BLE SHRI V. DURGA RAO, JUDICIAL MEMBER AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपीलसं./ IT(SS)A No.10/Chny/2016 (ɰॉक अविध/ Block Period: 1996-1997 to 2002-03) Shri. A. Rathinasabapathy S/o Late M. Arthanari Chettiar 383, Perundurai Road, Erode – 638 001. बनाम/ Vs. DCIT Central Circle –IV, Coimbatore. ̾थायीलेखासं./जीआइआरसं./PAN/GIR No. AAFHA-8267-C (अपीलाथŎ/Appellant) : (ŮȑथŎ / Respondent) अपीलाथŎकीओरसे/ Appellant by : Shri S. Sridhar (Advocate) – Ld. AR ŮȑथŎकीओरसे/Respondent by : Shri M. Rajan (CIT) – Ld. DR सुनवाईकीतारीख/ Date of Hearing : 23-02-2022 घोषणाकीतारीख / Date of Pronouncement : 21-04-2022 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Block Period 1996-97 to 2002-03 arises out of the order of learned Commissioner of Income Tax (Appeals)-3, Coimbatore [CIT(A)] dated 14.03.2016 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s.158BD r.w.s. 158BC &144 of the Act on 22.12.2006. The grounds taken by the assessee read as under: - IT(SS)A No. 10/Chny/2016 - 2 - 1) The order of the Commissioner of Income Tax (Appeals) - 3, Coimbatore dated 14- 3-2016 is opposed to law, facts and circumstances of the case. 2) The Commissioner of Income Tax (Appeals) - 3, Coimbatore failed to appreciate that the assessment was without Jurisdiction, bad, illegal, erroneous, wrong and not sustainable both on facts and in law. 3) The Commissioner of Income Tax (Appeals) - 3, Coimbatore erred in not appreciating the fact that the legal heir Smt. A. Seethalakshmi had already filed the return of income voluntarily on 21.03.2002 admitting the Capital gain well before the date of issue of notice U/s 158 BD r.w.s. 158 BC i.e 10.03.2005 to the appellant. 4) The Commissioner of Income Ten (Appeals) - 3, Coimbatore failed to appreciate the fact that the assessing officer had knowledge about the return filed by Smt. A. Seethalakshmi and also other legal heirs before issue of Notice U/s 158 BD in the hands of the appellant. 5) The Commissioner of Income Tax (Appeals) - 3, Coimbatore erred in not appreciating the fact that, why the return already filed by Smt. A. Seethalakshmi was not acted upon. 6) The action of the Commissioner of Income Tax (Appeals) - 3, Coimbatore in sustaining the assessment in the hands of the appellant without appreciating the above facts is erroneous. 7) The appellant craves leave to file additional grounds / arguments at the time of hearing and prays that the assessment framed may kindly be quashed. 2. This is third round of appeal before Tribunal. In the first round, an order was passed by Tribunal vide IT(SS)A No.143/Mds/2007 on 13.07.2009. The Tribunal in Para 7.1 of the order opined that the assessment was rightly framed in the individual capacity and the grounds raised by the assessee, on merits, were dismissed. However, regarding alternative plea of the assessee about requirement of serving all the legal heirs before proceedings with the assessee, the Tribunal held as under: - 8. As regards, the alternative plea of the assessee’s counsel about not serving all the L/H before proceeding with the assessment is concerned, we find that this plea has been taken before us for the first time and since it is a legal plea and ld. CIT(A) had no occasion to consider such plea/aspect, therefore, in the interest of justice and to have fair play in the matter, we think it just and appropriate to set aside the order of the ld. CIT(A) and restore back the matter on his file with the direction to look into this aspect after due opportunity to the assessee as well as Assessing Officer. We hold and direct accordingly. IT(SS)A No. 10/Chny/2016 - 3 - 3. Pursuant to these directions, Ld. CIT(A) passed order on 29.07.2011 dismissing the aforesaid ground. The same was again challenged by the assessee before this Tribunal vide IT(SS)A No.23/Mds/2011 order dated 10.10.2012 wherein the bench held as under: - 7. We have considered rival submissions at length and also perused the relevant findings as well as the order of the CoordinateBench. We find that the issue in hand on merit is no more res integra. This is second round of litigation. Vide order dated 13.07.2009, the Coordinate Bench has already upheld the assessment on merits. However, only qua the alternative plea raised by the assessee's counsel regarding non-service of notice to all the legal heirs of the deceased assessee Shri M. Arthanari Chettiar before finalizing assessment, the issue had been remitted back to CIT(A). It is observed from the CIT(A)'s order, under challenge before us that despite the fact that the direction issued by the Coordinate Bench had attained finality in the absence of any challenged by the Revenue. Still the issue in question has not been properly appreciated by the CIT (A). We reiterate that this Tribunal has entertained the assessee's legal plea, whereas the CIT (A) has held that the same plea is without any basis and the same should have been raised in the assessment proceedings itself. This, in our considered opinion, is substantive non- compliance of directions issued by the Coordinate Bench. Refraining ourselves from commenting further qua the findings of the CIT (A), we reiterate the settled law that direction issued by a higher forum alike ITAT is binding on the lower authorities. Once the relevant plea stands entertained by the higher forum and the issue is remitted back to the lower authorities there is no other way out for the lower authorities except to decide the issue on merits without adjudicating maintainability of the plea. As we notice from the order of the CIT (A), the assessee's voluminous case law and pleas raised thereon have nowhere been considered in detail by giving reasons. We fail to appreciate the course adopted by the CIT (A). In view of our above observations, to ensure substantive compliance of the order dated 13.7.2009, we deem appropriate the CIT (A) shall redecide the issue afresh in accordance with law after affording adequate opportunity of being heard to the assessee. 4. Accordingly, Ld. CIT(A) captured the issue and adjudicated the aforesaid legal ground vide order dated 14.03.2016 as under: - 4.0 I have considered the grounds raised by the appellant and the materials available on record. I have respectfully considered the order of the Income Tax Appellate Tribunal Chennai "B" Bench in IT(SS)A No. 23/Mds/2011 and ITA No. 1732/Mds/2011 dated 10/10/2012. Paragraph 7 of the order which the operative part forming basis of this order has been reproduced in pages 1, 2 of this order. 4.1 As per the above cited order, in which it was directed to ensure substantive compliance of the jurisdictional tribunal's earlier order dated 13/7/2009, the legal issue raised by the appellant for the first time before the Income Tax Appellate Tribunal (ITAT), that is, notice had rrot been served on all legal heirs of the late M Arthanari Chettiar, while making the assessment u/s 158BC read with Section 158BD read with Section 144 of the Income Tax Act 1961, is to be considered and decided. This is the only issue to be settled as other issues have been decided. The facts of the case are as under: IT(SS)A No. 10/Chny/2016 - 4 - a) C. M. Arthanari Chettiar and his family members sold 1637 sq. ft. of land on 6/6/2007 to Dr. D. Kandasamy, Sudha Heart Hospital, Erode. b) Shri M. Arthanari Chettiar expired on 18/7/2001. c) There was a search u/s 132 of the Income Tax Act 1961 in the premises of Dr. D Kandasamy, the buyer of the land, on 06/3/2002. d) The details of purchase consideration of properties purchased by Dr. Kandasamy and his family members from Late Athanari Chettiar and his family members were found during the course of the search. e) Smt. Seethalakshmi, w/o Late Arthanari Chettiar filed return for assessment year 2001-02 on 21/3/2002, in her capacity of legal representative of the former. The return filed was within the time limit u/s 139 (4) of the Income Tax Act, 1961, but after the date of search conducted on 6/3/2002 u/s section 132 of the IT Act 1961. f) As per the statement of income attached to the return of income filed, the sale consideration shown was Rs. 9,68,000/-. This appears to be the share of late Arthanari Chettiar in the total sale consideration including the consideration received over and above what was shown in the registered document also. g) The Assessing Officer issued notice u./s 158BC read with Section 158BD of the Income Tax Act, 1961, to Shri Rathinasabapathy, the appellant in the present case and made the assessment for capital gains arising in the case of late M Arthanari Chettiar, in his hands treating him as legal representative.No objection to this was raised during the assessment proceedings or in the appellate proceedings with the Commissioner of Income Tax (Appeals).However, this was raised for the first time before the ITAT. The legal ground raised was that notices to all the legal heirs were not issued and this had affected the validity of the assessment. 4.2 The relevant provision for assessment in the instant case is 158BC and 158BD in Chapter IV B of the Income Tax Act, 1961. The transaction is entered into by late Arthanari Chettiar before his death and from the evidence found during the search u/s 132 in the case of Dr Kandaswamy regarding actual consideration, the share of late Arthanari Chettiar is assessable as undisclosed income under chapter IVB invoking the provisions of 158BC and 158BD. Section 158BC and BD are reproduced as under: 158BC: "Where any search has been conducted under section 132 or books of account, other documents or assets are requisitioned under section 132A, in the case of any person then:- (a) the Assessing Officer shall- (i) in respect of search initiated or books of account or other documents or any assets requisitioned after the 30 th day of June, 1995, but before the 1 st day of January 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days. (ii) in respect of search initiated or books of accounts or other documents or any assets requisitioned on or after the 1 st day of January 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days. IT(SS)A No. 10/Chny/2016 - 5 - As may be specified in the notice a return in the prescribed form and verified in the same manner as a return under clause (i) of subsection (1) of section 142, setting forth his total income including the undisclosed income for the block period: 158BD Where the Assessing Officer is satisfied that any undisclosed income belongs to any person other than the person with respect to whom search was made under section 132, or whose books of account or other documents or any assets were requisitioned under section 132A, then the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed under section 158BC against such other person and the provisions of this Chapter shall apply accordingly." 4.3 In the instant case, the undisclosed income, including the consideration over and above that recorded in the registered document and received by late M. Arthanari Chettiar along with his family members clearly falls within the ambit of Chapter IVB. Since the undisclosed income belongs to persons other than the persons in whose case search u/s 132 was initiated, received on whom search was made under 132 the Assessing Officer has correctly invoked the provisions of 158BC read with section 158BD. Here the issue boils down to the following: "Whether the assessment on one of the legal heir without issuing the notice to other legal heirs is null and void or not ?" 4.4 The appellant has relied upon the following judicial decisions. Their ratios are as under: a) First Additional Income Officer Vs. SuseeksSadandan&Anr – 57 ITR 168 (SC) "If a person dies executing a will appointing more than one executor or dies intestate leaving behind him more than one heir, the ITO shall proceed to assess the total income of the deceased against all the executors or the legal representatives, as the case may be." The issue on facts was set aside to the High court of Kerala. b) ChooharmalWadhuram Vs. Commissioner of Income Tax (80 ITR 360 (Guj) " Liability in special cases- Legal representative- Department well aware of existence of all legal heirs of the deceased- It was the duty of the Department to issue notices not only to one but also to other legal heirs- Proceedings taken by Department issuing notice under section 34 to one of the executors is invalid- Further orders of assessment based upon such notice are illegal and void- It was perfectly open to legal representative or executors to raise al objections based upon non-compliance with provisions of section 34." c) Income Tax Officer vs. Sunshine Electric & Radio Co. 37 TTJ 378 (ITAT Delhi D Bench) "Liability in special cases - Legal representative- Service of notice- ITO not issuing notices on legal representatives- Though informed about death of assessee and also supplied with list of legal representatives as also their addresses- Assessment thus made is a nullity and not simply invalid." d) MD Abdul Mazid Vs. Commissioner of Income Tax 216 ITR 841(Gauhati) Assessment-Validity- Death of assessee- Assessment made without serving a notice under section 143(2) on all the legal heirs of deceased assessee- ITO made no enquiries as to the existence of legal heirs other than the wife of the deceased- Assessment not valid. (In this case, decision of the Gauhati High Court in Jai Prakash Singh vs CIT 111 ITR 507 (1977) followed. {This decision was later reversed by the Apex Court 219 ITR 737}. IT(SS)A No. 10/Chny/2016 - 6 - e) Commissioner of Income Tax Vs. DalumalShyamumal (MP Indore Bench) 276 ITR 62 In this case, assessment on a deceased assessee was completed (assessee had died during the pendency of the assessment proceedings), completed without sending notice to any legal heirs and not following the provisions of section 159 of the Income Tax Act, 1961, was held to be a nullity. f) Income Tax Officer Vs. Anr Vs. MaramreddySulochanamma (SC) 79 ITR 1 In this case notice was sent to all daughters but not to the mother or the trustees and the Income Tax Officer had not made proper enquiries whether daughters alone were the legal representatives and there was vagueness in the claim of one of the daughters refusing to be legal representative. The assessment was remanded back to the High \Court for reconsideration and certain more facts. g) Commissioner of Income Tax Vs. Chandra Mohart Verma 244 ITR 430 (All) When notice under section 143 (3) was issued only to one legal heir of the deceased, none of the other legal heirs had raised any objection about non- impleadment of all the heirs and legal representatives before ITO or in the course of appeal proceedings before the AAC- Held that all other heirs willfully abandoned the plea of abatement and chose to be governed by the assessment orders passed by the ITO and the assessment proceedings were not a nullity. i) Commissioner of Income Tax Vs. Kumari Prabhawati Gupta &Ors. 231ITR 188 (MP) The assessment completed without bringing the legal representatives of the deceased assessee on record is void ab initio being in violation of section 159 (2).It was held that if possible under law, it would be open to the ITO to proceed under section 159 (2). k) E Alfred Vs. First Additional Income Tax Officer 32 ITR 401 (Mad) Held that all legal representatives of the deceased are liable to be served with notices under section 24B(2) of the 1922 Act and validity of the assessment could be challenged. (I) In CIT vs Jai Prakash Singh (219 ITR 737) (SC), it was held that non service of notice to all legal representatives cannot make the assessment order null and void. At the worst, they are defective proceedings- or irregular proceedings. 4.5 The decisions, cited by the appellant holding the assessment without notice to all legal heirs as a nullity were rendered before this are no longer good law, These decisions also had unique and distinguishable factors. But the Apex Court decision cited above has settled that non service of notice to all legal heirs is at worst a procedural irregularity and would not render the assessment a nullity. 4.6 In the instant case the legality of the assessment was not disputed till the second appeal stage. The fact is that Smt. Seethalakshmi filed the return of income us/ 139 (4) on 21/3/2002, i.e. after the search on 6/3/2002. The assessability of the income under the head capital gains in the hands of late Arthanari Chettiar is not in dispute. There is no dispute among the legal heirs also. The only legal issue is that notice has not been issued to all legal heirs. The undisputed fact is that the income that would have assessable in the hands of late Arthanari Chettiar u/s 159 (2) has been assessed in the hands of A. Rathinasabapathy, one of the legal heirs without issue of notice to other legal heirs. Alternatively, the assessment should have been IT(SS)A No. 10/Chny/2016 - 7 - made in the hands of SmtSeethalakshmi legal heir and wife of late Arthanari Chettiar, after issue of notice to all legal heirs. 4.7 During the course of hearing, the appellant's AR contended that as per the return of income filed in the name of late Arthanari Chettiar represented by SmtSeethalakshmi as legal heir, the capital gains should be brought to tax in the normal income tax proceedings and not at 60 per cent as applicable in the case of block assessment under chapter XIV B. This argument is not legally sustainable, as the undisclosed income has been found as a result of search u/s 132 in the case of Dr Kandaswamy, in the hands of the co-owners including late M Arthanari Chettiar is assessable under Chapter XIV B it is mandatory for the Assessing Officer to bring to tax the undisclosed income under provisions of Chapter XIV B invoking provisions of section 158BC read with section 158 BD at the rates prescribed, which is 60 per cent of the undisclosed income assessed. 4.8 In Commissioner of Income Tax Vs. Chandra Mohan Verma (244 ITR 430) (All), rendered after the above cited decision of the Apex Court, 219 ITR 737, (where it was held that assessment order made without issuing notice to all legal representatives is a procedural irregularity which is liable to be corrected and assessment is neither void nor liable to be annulled), the facts of the case are also similar to the case of the appellant In both the cases, no objections were raised by other legal heirs before the Assessing Officer or the first appellate authority and the assessment made was not held to be a nullity by the Allahabad High Court This decision is followed in the case of the appellant and circumstances are similar and the assessment is upheld, as there has been no objection from other legal heirs before the Assessing Officer or the first appellate authority. Redoing the assessment by issuing notice under section 158 BC read with section 158 BD, which is even now not barred by limitation by law, would be a mere repetitive exercise resulting in the same tax liability to the appellant as facts of the case are not in dispute. 4.9 The directions of the Hon'ble ITAT to consider and decide the legal issue has been followed. 5.0 The appeal is treated as dismissed for statistical purposes. In other words, the legal ground as urged by the assessee were dismissed, inter-alia, by placing reliance on the decision of Hon’ble Supreme Court in the case of CIT V/s Jai Prakash Singh (219 ITR 737) which was followed by Hon’ble Allahabad High Court in CIT V/s Chandra Mohan Verma (244 ITR 430) wherein the facts are stated to be identical to the present case. Aggrieved, the assessee is in further appeal before us. 5. The Ld. AR, drawing attention to the grounds of appeal, submitted that notices were not issued to all legal heirs which would vitiate assessment proceedings. The Ld. CIT-DR, on the other hand, reiterated IT(SS)A No. 10/Chny/2016 - 8 - the adjudication as done in the impugned order. Having considered rival submissions, our adjudication would be as under. Our findings and Adjudication 6. Upon careful consideration of assessment order, it could be gathered that Shri A.Rathinasabapathy was treated as legal heir of deceased assessee Late Shri M. Arthanari Chettiar. Accordingly, a notice was issued and served on legal heir (L/H) on 12.03.2005. However, L/H did not file block return of income. Despite several notices, L/H did not appear and finally, the assessment was made ex-parte qua the assessee and certain additions were made in the hands of L/H. In para 9 of the order, Ld. AO take note of the fact that legal heir & wife of Late Shri M.Arthanari Chettiar i.e., Smt. A.Sitalakshmi filed regular return of income declaring certain income. However, that return was filed after search and undisclosed income was to be considered in Block Assessment only. Accordingly, the said return of income was disregarded and the assessment was framed in the name of Shri A.Rathinasabapathy. The same, upon confirmation by Ld. CIT(A), was under challenge by assessee before the Tribunal. During appellate proceedings, remand report was called from Ld. AO wherein no such legal objection was taken by the L/H. It is evident from Tribunal order dated 13.07.2009 that the issue, on merits, has been decided against the assessee and the same is not the subject matter of appeal before us. 7. So far as the legal grounds (which is the subject matter of appeal before us), are concerned, we find that Ld. CIT(A), in the impugned order, took note of the material facts and considered various case laws which were relied on by L/H to submit that the assessment was null and void since all the legal heirs were not served. Though the assessee IT(SS)A No. 10/Chny/2016 - 9 - relied on various judicial pronouncements to support the argument that in the absence of notice to all the legal heirs, the assessment proceedings would be bad in law, however, the decision of Hon’ble Supreme Court in the case of in the case of CIT V/s Jai Prakash Singh (219 ITR 737) was held to be applicable by Ld CIT(A). In this decision, it was held by Hon’ble Court that non-service of notice to all the legal representatives would not make the assessment order null and void. At the worst, they are defective proceedings or irregular proceedings. This decision was subsequently been followed by Hon’ble Allahabad High Court in the case of CIT V/s Chandra Mohan Verma (244 ITR 430) which is stated to be under identical factual matrix. 8. After carefully going through the impugned order, we concur with the findings of Ld. CIT(A) since the decision of Hon’ble Supreme Court would prevail over all the other decisions as cited by the assessee during the course of impugned appellate proceedings. In this decision, it was held by Hon’ble Court that non-service of notice to all the legal representative would not make the assessment order null and void. At the worst, they are defective proceedings or irregular proceedings. This decision has subsequently been followed by Hon’ble Allahabad High Court in the case of CIT V/s Chandra Mohan Verma (244 ITR 430). Similar is the decision of Hon’ble High Court of Punjab & Haryana in CIT V/s Hukam Singh (276 ITR 347) wherein it was held that non-service of notice on all the legal heirs would not result into quashing of the order. It was mere irregularity and would not affect the validity of assessment order. Accordingly, we are unable to find fault with the adjudication of Ld. CIT(A) in the impinged order particularly in view of the fact that the assessee did not appear during assessment proceedings and the IT(SS)A No. 10/Chny/2016 - 10 - assessment was framed u/s 144 of the Act. Further, no such legal objections were raised by the assessee before any of the lower authorities. 9. Accordingly, the appeal stand dismissed in terms of our above order. Order pronounced on 21 st April, 2022. Sd/- (V. DURGA RAO) Ɋाियक सद˟ /JUDICIAL MEMBER Sd/- (MANOJ KUMAR AGGARWAL) लेखासद˟ /ACCOUNTANT MEMBER चेɄई/ Chennai; िदनांक/ Dated : JPV आदेशकीŮितिलिपअŤेिषत/Copy of the Order forwarded to : 1. अपीलाथᱮ/Appellant2. ᮧ᭜यथᱮ/Respondent 3. आयकरआयुᲦ (अपील)/CIT(A) 4. आयकरआयुᲦ/CIT 5. िवभागीयᮧितिनिध/DR6. गाडᭅफाईल/GF