Shri Hashmukhbhai K. Barot L/h of late Kantilal B.Barot, Surat V. The ACIT., Circle-3, Surat

ITSSA 441/AHD/2011

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 0967 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 13-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 05-08-2015
• Assessment Year: misc
• Appeal Filed On: 23-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C MISHRA
• Keywords: Reassessment proceedings
• Section: 147; 148; 132

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ IT(SS)A NO.441/AHD/2011 / ASSTT. YEAR: BLOCK [ 1990-91 TO 1999-2000] HASMUKHBHAI K. BAROT L/H. OF LATE SHRI KANTILAL B. BAROT A/801,YOGI COMPLEX CHOKSHI WADI NR. RANDER ROAD, SURAT. VS ACIT, CIR.3 SURAT. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI TUSHAR HEMANI REVENUE BY : SHRI D.C. MISHRA, SR.DR / DATE OF HEARING : 05/08/2015 / DATE OF PRONOUNCEMENT: 13/08/2015 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF THE LD.CIT(A)-II, SURAT DATED 24.03.2011 PASSED FOR BLO CK PERIOD STARTING FROM 1990-91 AND ENDING ON 29.10.1999. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS PLEADED THAT THE ASSESSMENT ORDER PASSED UNDER SECTION 158BD IS NOT SUSTAINABLE FOR THE REASON THAT THE NOTICE ISSUED UNDER SECTION 158BD W AS ISSUED UPON A DECEASED PERSON. 3. BRIEF FACTS OF THE CASE ARE THAT THAT A SEARCH A ND SEIZURE OPERATION UNDER SECTION 132 OF THE ACT WAS CARRIED OUT AT THE BUSINESS OF PREMISES OF OHM ORGANISERS, SURAT ON 29.10.1999. SOME INCRI MINATING MATERIAL WERE FOUND AND SEIZED. THE AO HAVING JURISDICTION OVER M/S.OHM IT(SS)A NO.441/AHD/2011 2 ORGANIZERS NOTICED THAT INVESTMENTS IN PURCHASE OF PLOTS/SHOPS WERE MADE BY THE BUYERS AFTER PAYMENT OVER AND ABOVE DIS CLOSED IN THE SALE DEED. THE ASSESSEE, SHRI HASMUKHBHAI BAROT HAD ALS O PURCHASED FLAT BEARING NO.A/801 IN YOGI COMPLEX, RANDER ROAD, SURA T. AN ASSESSMENT ORDER WAS PASSED UNDER SECTION 158BC R.W.S. 158BD O N 29.6.2006 DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS.8,90 ,000/-. THE ISSUE TRAVELLED UPTO THE TRIBUNAL, AND THE TRIBUNAL HAS S ET ASIDE THE ISSUE TO THE FILE OF THE AO FOR RE-ADJUDICATION IN IT(SS)A.N O.54/AHD/2007. ACCORDING TO THE TRIBUNAL, THE ASSESSEE WAS NOT GIV EN PROPER OPPORTUNITY TO CROSS-EXAMINE THE PERSON WHO DISCLOS ED RECEIPT OF ON- MONEY FROM THE PURCHASER OF THE FLATS. THESE DETAI LS ARE NOT RELEVANT FOR THE PURPOSE OF ADJUDICATION OF GROUND NO.1 RAIS ED BY THE ASSESSEE. IN ORDER TO NARRATE BRIEF HISTORY, WE HAVE TAKEN CO GNIZANCE OF THE BACKGROUND. 4. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE OUT SET, SUBMITTED A NOTICE UNDER SECTION 158BD WAS ISSUED ON 29.4.2004. IT WAS ISSUED IN THE NAME OF KANTILAL B. BAROT. IN RESPONSE TO THI S NOTICE, IT WAS CONTENDED BY THE LEGAL HEIR, SHRI HASMUKHBHAI K. BA ROT THAT SHRI KANTILAL HAD EXPIRED ON 27 TH DECEMBER, 2001. THE FIRST REPLY WAS GIVEN VIDE LETTER DATED 6.6.2004. THEREAFTER, A DETAILED REPLY WAS SENT ON 26.6.2006. THE LEGAL HEIR HAS BROUGHT THIS FACT TO THE NOTICE OF THE AO. DURING THE FIRST ROUND OF ASSESSMENT PROCEEDINGS, T HE LD.AO HAS DULY NOTICED THIS FACT. INSPITE OF THAT, HE PROCEEDED T O FRAME THE ASSESSMENT ORDER UNDER SECTION 158BD R.W.S. 158BC ON SHRI HASM UKHBHAI K. BAROT, REPRESENTING HIS FATHER, SHRI KANTILAL B. BAROT. 5. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT NO ASSESSMENT PROCEEDING CAN CONTINUE ON THE B ASIS OF A NOTICE ISSUED TO A DECEASED PERSON. FOR BUTTRESSING HIS C ONTENTION, HE RELIED UPON THE ORDER OF THE ITAT, THIRD MEMBER DECISION I N THE CASE OF ITO VS. SIKANDARLAL JAIN, 45 SOT 113 (AGRA) (TM). IT(SS)A NO.441/AHD/2011 3 6. THE LEARNED DR, ON THE OTHER HAND, CONTENDED THA T SECTION 292BB HAS BEEN BROUGHT ON STATUTE W.E.F. 1..2008, WHICH P ROVIDES THAT IF AN ASSESSEE HAS PARTICIPATED IN THE PROCEEDINGS, THEN HE WILL BE PRECLUDED TO RAISE ANY OBJECTION VIZ. (A) NOTICE NOT SERVED U PON HIM, OR (B) NOT SERVED UPON HIM IN TIME; OR (C) SERVED UPON HIM IN AN IMPROPER MANNER. HE POINTED OUT THAT THE ASSESSEE HAS PARTI CIPATED IN THE PROCEEDINGS, AND THEREFORE, HE CANNOT TAKE OBJECTIO N TO THE SERVICES OF NOTICE UPON HIM. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE TH ROUGH THE RECORD CAREFULLY. WE FIND THAT THE AO HAD ISSUED NOTICE UNDER SECTION 158BD ON 21.6.2004 UPON SHRI KANTILAL B. BAROT. CO PY OF THE NOTICE IS AVAILABLE AT PAGE NO.25. HIS LEGAL HEIR, SHRI HASM UKHBHAI K. BAROT, HAS POINTED OUT TO THE AO VIDE LETTERS DATED 6.6.2004 A ND 23.6.2006 THAT SHRI KANTILAL B. BAROT WAS EXPIRED ON 27.12.2001. THUS, IT IS AN ESTABLISHED FACT THAT NOTICE UNDER SECTION 158BD WA S ISSUED UPON A DECEASED PERSON. THE QUESTION BEFORE US, WHETHER T HIS INHERENT DEFECT IN THE NOTICE CAN BE LEGALIZED WITH THE HELP OF SEC TION 292BB. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SEC TION 292BB WAS CONSIDERED BY THE SPECIAL BENCH OF THE ITAT IN THE CASE OF KUBER TOBACCO VS. DCIT, 117 ITD 273 WHEREIN IT HAS BEEN O BSERVED THAT THIS PROVISION IS PROSPECTIVE IN NATURE. IT WAS BROUGHT IN STATUTE W.E.F. 1.4.2008 AND HENCE, IT WAS NOT EFFECTIVE WHEN THE N OTICE UNDER SECTION 158BD WAS ISSUED. THEREFORE, THE DEPARTMENT CANNOT GET ANY BENEFIT FROM THIS SECTION. APART FROM THIS, WE FIND THAT T HIRD MEMBER OF THE ITAT IN THE CASE OF SIKANDAR LAL JAIN (SUPRA) HAS M ADE LUCID ENUNCIATION THE LAW ON THIS ISSUE, AND HENCE, THE NOTICE ISSUED UPON A DECEASED PERSON WOULD NOT BE VALID ONE FOR INITIATING THE PR OCEEDINGS. THE DISCUSSION MADE IN THE ORDER IS WORTH TO NOTE, AS U NDER: 12. NOW COMING TO THE SECOND ISSUE WHETHER THE NOT ICE ISSUED IN THE NAME OF A DEAD PERSON IS A VALID NOTICE OR NOT. CAN THE IT(SS)A NO.441/AHD/2011 4 PROCEEDINGS BE INITIATED AGAINST A DEAD PERSON ? TH E FACTS OF THE CASE CLEARLY SPEAK THAT THE NOTICE UNDER SECTION 14 8 WAS ISSUED IN THE NAME OF THE ASSESSEE WHO HAS ALREADY EXPIRED ON 17-11-2002. SHRI SIKANDAR LAL JAIN, THE ASSESSEE, HAS SUBMITTED THE RETURN UP TO THE ASSESSMENT YEAR 2002-03. HIS RETURN FOR ASSESSM ENT YEAR 2003- 04 WAS FILED ON 26-3-2004 BY HIS WIFE SMT. UMA RANI JAIN AS HIS LEGAL HEIR. THE SAID RETURN WAS PROCESSED BY THE AS SESSING OFFICER ON 2-7-2004 AND REFUND WAS GRANTED IN THE NAME OF SMT. UMA RANI JAIN AS LEGAL HEIR OF THE ASSESSEE. THUS, THE FACT REGAR DING THE DEATH OF THE ASSESSEE WAS VERY MUCH IN THE RECORD OF THE ASS ESSING OFFICER. UNDER THESE FACTS, THE ASSESSING OFFICER INITIATED THE PROCEEDINGS IN THE NAME OF SHRI SIKANDAR LAL JAIN BY RECORDING THE REASONS AS WELL AS ISSUING OF THE NOTICE UNDER SECTION 148 DATED 21 -3-2005. FOR A VALID INITIATION OF THE PROCEEDINGS UNDER SECTION 1 47, IN MY OPINION, ISSUANCE OF A VALID NOTICE WITHIN THE LIMITATION PE RIOD AS WELL AS RECORDING OF THE REASONS IS ESSENTIAL. THE SERVICE OF THE NOTICE ON THE ASSESSEE IS ALSO NECESSARY. A READING OF SECTIONS 1 47, 148 AND 149 MAKES IT CLEAR THAT THE NOTICE HAS TO BE ISSUED TO THE ASSESSEE. ISSUANCE OF THE NOTICE TO THE ASSESSEE, AS I HAVE A LREADY HELD, IS ESSENTIAL FOR VALID PROCEEDINGS. THE ASSESSEE IS DE FINED UNDER SECTION 2, SUB-SECTION (7) WHICH LAYS DOWN AS UNDER : '(7) 'ASSESSEE' MEANS A PERSON BY WHOM ANY TAX OR A NY OTHER SUM OF MONEY IS PAYABLE UNDER THIS ACT, AND INCLUDES (A )EVERY PERSON IN RESPECT OF WHOM ANY PROCEEDING UNDER THIS ACT HAS BEEN TAKEN FOR THE ASSESSMENT OF HIS INCOME OR ASSESSMENT OF FRINGE BENEFITS OR OF THE INCOME OF ANY OTHER PE RSON IN RESPECT OF WHICH HE IS ASSESSABLE, OR OF THE LOSS SUSTAINED BY HIM OR BY SUCH OTHER PERSON, OR OF THE AMOUNT OF REFUND DUE T O HIM OR TO SUCH OTHER PERSON ; (B )EVERY PERSON WHO IS DEEMED TO BE AN ASSESSEE UN DER ANY PROVISION OF THIS ACT; (C )EVERY PERSON WHO IS DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER ANY PROVISION OF THIS ACT;' FROM THE READING OF THIS SECTION, IT IS APPARENT TH AT ASSESSEE MEANS A PERSON BY WHOM ANY TAX OR ANY SUM OF MONEY IS PAY ABLE UNDER THIS ACT AND ALSO INCLUDES EVEN EVERY PERSON WHO IS DEEMED TO BE AN ASSESSEE UNDER ANY PROVISION OF THE INCOME-TAX ACT. THE PERSON IS DEFINED UNDER SECTION 2, SUB-SECTION (31) WHICH INC LUDES AN INDIVIDUAL. INDIVIDUAL MEANS A SINGLE HUMAN BEING DISTINCT FROM A GROUP OF HUMAN BEINGS. NOW, THE QUESTION ARISES WHE THER THE PERSON WHO HAS ALREADY EXPIRED, CAN BE REGARDED TO BE A HUMAN BEING SO AS TO FALL WITHIN THE DEFINITION OF INDIV IDUAL. NOTICE IN THIS CASE IS NOT ISSUED IN THE NAME OF THE LEGAL REPRESE NTATIVES OF THE ASSESSEE BUT ISSUED IN THE NAME OF AN INDIVIDUAL WH O HAS ALREADY EXPIRED ON 17-11-2002. THEREFORE, IT CANNOT BE SAID THAT THERE WAS IT(SS)A NO.441/AHD/2011 5 AN INDIVIDUAL IN EXISTENCE IN THE NAME OF SHRI SIKA NDAR LAL JAIN IN WHOSE NAME NOTICE IS ISSUED AS ON THE DATE WHEN THE PROCEEDINGS UNDER SECTION 147 WAS INITIATED OR THE NOTICE UNDER SECTION 148 WAS ISSUED. UNDER THE 1922 ACT, THE WORD 'INDIVIDUAL' D ID NOT NECESSARILY REFER TO A NATURAL HUMAN BEING BUT ALSO INCLUDED A JURISTIC PERSON LIKE A HINDU IDOL, BUT UNDER THE 1961 ACT DEFINITION, TH ERE IS A SEPARATE APPROPRIATE SPECIFICATION 'EVERY ARTIFICIAL JURIDIC AL PERSON.....'. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE ANDHRA PRADESH H IGH COURT IN THE CASE OF DECCAN WINE & GENERAL STORES V. CIT [19 77] 106 ITR 111, IN WHICH IT WAS CATEGORICALLY HELD THAT AN IND IVIDUAL UNDER THE INCOME-TAX ACT, 1961 MEANS ONLY A HUMAN BEING. THE ISSUANCE OF A VALID NOTICE IS A FOUNDATION FOR THE VALIDITY OF TH E RE-ASSESSMENT. THERE IS A CLEAR CUT DISTINCTION BETWEEN THE PRECED ENT AND PROCEDURE. THE DEFECT IN THE PROCEDURE WILL NOT NOR MALLY AMOUNT TO LACK OF JURISDICTION. THE NOTICE PRESCRIBED UNDER S ECTION 148 FOR THE PURPOSE OF INITIATION OF REASSESSMENT PROCEEDINGS I S NOT A MERE PROCEDURAL REQUIREMENT, BUT IS A CONDITION PRECEDEN T TO THE VALIDITY OF REASSESSMENT. IF NO NOTICE IS ISSUED OR IF THE N OTICE ISSUES IS SHOWN TO BE INVALID, THE PROCEED- INGS INITIATED BY THE ASSESSING OFFICER WOULD BE INVALID AND VOID. THE ASSESSMENT F RAMED ON THE BASIS OF SUCH INVALID PROCEEDINGS WILL BE INVALID. A NOTICE ISSUED TO A DEAD PERSON, IN MY OPINION, CANNOT BE REGARDED TO B E A NOTICE ISSUED TO AN INDIVIDUAL AS HE CANNOT BE A PERSON TO BE AN ASSESSEE. IN CONSEQUENCE THEREOF, IT CANNOT BE REGARDED TO HA VE BEEN ISSUED TO AN ASSESSEE. NO DOUBT, UNDER SECTION 2, SUB-SECT ION (7) OF THE INCOME-TAX ACT, HIS LEGAL REPRESENTATIVES BEING DIF FERENT HUMAN BEINGS FROM SHRI SIKANDAR LAL JAIN, ARE DEEMED TO B E THE ASSESSEE IN VIEW OF THE PROVISIONS OF SECTION 159 OF THE INCOME -TAX ACT. SECTION 159(1) STRESSED THAT WHERE A PERSON DIES, HIS LEGAL REPRESENTATIVES SHALL BE LIABLE TO PAY ANY SUM WHICH THE DECEASED W OULD HAVE BEEN LIABLE TO PAY IF HE HAD NOT DIED, IN THE LIKE MANNE R AND TO THE SAME EXTENT AS THE DECEASED. SIMILARLY, SECTION 159(2) A LSO EMPOWERS THE ASSESSING OFFICER TO TAKE THE PROCEEDINGS AGAINST T HE LEGAL REPRESENTATIVES WHICH HE SHOULD HAVE TAKEN AGAINST THE DECEASED IF HE HAD SURVIVED. SECTION 159(2) NOWHERE AUTHORIZES THE ASSESSING OFFICER TO TAKE THE PROCEEDINGS AGAINST THE INDIVID UAL WHO HAS ALREADY EXPIRED, THAT IS WHY THE LEGAL REPRESENTATI VE UNDER SECTION 2(7) ARE REGARDED TO BE ASSESSEE. IT EMANATES THAT THE ASSESSEE IN THE CASE OF A DECEASED PERSON WILL BE THE PERSON WH O ARE REGARDED TO BE THE LEGAL HEIRS OF THE DECEASED AS THEY CAN B E REGARDED TO BE THE HUMAN BEING. THE NOTICE UNDER SECTION 148 HAS T O BE ISSUED ON THE ASSESSEE,I.E.,INDIVIDUAL (HUMAN BEING). A PERSO N WHO HAS ALREADY EXPIRED CANNOT BE REGARDED TO BE A HUMAN BE ING AS ON THE DATE WHEN THE NOTICE WAS ISSUED IN THIS CASE. ONLY LEGAL HEIR CAN BE REGARDED TO BE THE INDIVIDUAL. IN VIEW OF THE CLEAR MANDATES OF THE PROVISIONS OF SECTION 2(7) AND SUB-SECTIONS (1), (2 ) AND (3) OF SECTION 159, I AM OF THE OPINION THAT THE NOTICE IS SUED IN THE NAME IT(SS)A NO.441/AHD/2011 6 OF A DEAD PERSON IS NOT A VALID NOTICE. IN THE ABSE NCE OF ISSUANCE OF A VALID NOTICE, THE PROCEEDINGS INITIATED UNDER SEC TION 147 CANNOT BE SAID TO BE VALID ONE. SINCE BOTH THE PARTIES HAVE A RGUED THIS ISSUE EXTENSIVELY RELYING ON A NUMBER OF CASE LAWS CLAIME D TO BE IN THEIR FAVOUR, I AM BOUND TO DISCUSS ALL THESE CASE LAWS B EFORE GIVING ANY FINAL VERDICT AND ACCORDINGLY THESE CASES ARE DISCU SSED IN THE FOLLOWING PARAGRAPHS AS UNDER: .. 8. DURING THE COURSE OF HEARING, SECTION 159 OF THE INCOME TAX ACT, WAS ALSO BROUGHT TO OUR NOTICE. THIS SECTION PROVI DES A MECHANISM FOR PUTTING TAX LIABILITY UPON THE LEGAL REPRESENTATIVE , WHO INHERITED THE PROPERTY OF THE DECEASED. 9. THIS ASPECT HAS ALSO BEEN CONSIDERED BY THE TRIB UNAL IN THE CASE OF SIKANDAR LAL JAIN EXTRACTED (SUPRA). THIRD MEMB ER HAS HELD THAT SECTION 159(2) NOWHERE AUTHORIZE THE AO TO TAKE PRO CEEDING AGAINST THE INDIVIDUAL WHO HAS ALREADY EXPIRED, THAT IS WHY THE LEGAL REPRESENTATIVE UNDER SECTION 2(7) ARE REGARDED TO BE ASSESSEE. TH IS ASPECT CAN ALSO APPRECIATED BY AN EXAMPLE, VIZ. AN ASSESSEE DIED LE AVING BEHIND FOUR LEGAL REPRESENTATIVES. THE AO ISSUED NOTICE ON THE DECEASED. ONE OF THE LEGAL REPRESENTATIVES PARTICIPATED IN THE PROCE EDINGS AND THE AO PASSED ASSESSMENT ORDER. ALL THE FOUR LEGAL REPRES ENTATIVES HAD INHERITED PROPERTY OF THE DECEASED. CAN TAX LIABIL ITY IMPOSED UPON THE DECEASED ASSESSEE WILL BE RECOVERED FROM THE REST O F THE LEGAL REPRESENTATIVES, WHO INHERITED THE PROPERTY, BUT DI D NOT PARTICIPATE IN THE PROCEEDING, BECAUSE THEY HAD NOT RECEIVED ANY N OTICE ? SECTION 292BB WILL NOT HELP THE AO IN THIS SITUATION. THER EFORE, CONSIDERING FROM ALL ANGLES, WE FIND THAT NOTICE ISSUED BY THE AO UPON THE DECEASED IS DEFECTIVE NOTICE AND NO VALID ASSESSMENT ORDER C OULD BE PASSED. RESPECTFULLY FOLLOWING THE ORDER OF THE ITAT IN THE CASE OF SIKANDARLAL JAIN (SUPRA), WE ALLOW THE FIRST GROUND OF APPEAL A ND QUASH THE ASSESSMENT ORDER. IT(SS)A NO.441/AHD/2011 7 CONSEQUENTLY, WE DO NOT DEEM IT NECESSARY TO CONSI DER OTHER GROUNDS OF APPEAL, IN VIEW OF THE ABOVE DISCUSSION. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE COURT ON 13 TH AUGUST, 2015 AT AHMEDABAD. SD/- SD/- (ANIL CHATURVEDI) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER