LATE RAJASEKHAR CHELIKANI,HYDERABAD V. ACIT., CENTRAL CIRLCE 3(2), HYDERABAD

ITA 154/HYD/2025

AI Insights

The case involves appeals filed by the legal heirs of the late Shri Rajasekhar Chelikani against the assessment orders for the assessment years 2011-12 to 2014-15, which were passed in the name of the deceased. The primary legal contention was that the assessments made in the name of a deceased person were null and void, and thus, any proceedings or orders passed in such a manner were without legal basis. The Tribunal examined the procedural compliance with Section 159 of the Income Tax Act, which governs the continuation of proceedings against the legal representatives of a deceased assessee. The Tribunal found that the Assessing Officer had not properly impleaded the legal heirs in the assessment proceedings, leading to the setting aside of the assessment orders.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 313044 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-B
• Assessment Year: 2014-2015
• Other Referred Cases: Commissioner of Income Tax Vs. Dalumal Shyamumal (2005) 276 ITR 62 (MP)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Set aside; Deemed dividend; Principle of natural justice
• Section: 147; 148; 144; 2(22)(e); 133A

Judgement Text

"आयकर अपीलीय न्यायाधिकरण में, हैदराबाद ‘ ‘बी’ बेंच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ B ‘ Bench, Hyderabad श्री रवीश सूद, माननीय न्याययक सदस्य एवं श्री मिुसूदन सावडिया, माननीय लेखा सदस्य SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER आयकरअपीलसं./I.T.A.Nos.147 to 149 and 154/Hyd/2025, (निर्धारण वर्ा/ Assessment Years : 2011-12 to 2014-15) Late Rajasekhar Chelikani, Hyderabad. Legal Heir Shri Chelikani Venkata Sai Sampath Sunil Kumar, Hyderabad. PAN : AAYPC4722H Vs. The Assistant Commissioner of Income Tax, Central Circle – 3(2), Hyderabad. (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri A.V. Raghuram, Advocate. राजस्व का प्रतततितित्व/ Department Represented by : Dr. Sachin Kumar, Sr.D.R. सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 22.04.2025 घोर्णध की तधरीख/ Date of Pronouncement : 28.04.2025 O R D E R प्रनत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M. The captioned appeals filed by the legal heirs of the assessee (since deceased) are directed against the consolidated 2 ITA Nos.147 to 149 & 154/Hyd/2025 order passed by the Commissioner of Income Tax (Appeals) – 11, Hyderabad dated 09.11.2024, which in turn arises from the respective orders passed by the Assessing Officer (for short “A.O.”) u/s 144 r.w.s. 147 of the Income Tax Act, 1961 (for short \"the Act\") dated 27.02.2021 for A.Ys.2011-12 to 2014-15 As the facts and issues involved in the captioned appeals are common, therefore, the same are being taken up and disposed off by way of a consolidated order. 2. We shall first take up the appeal filed by the assessee in ITA No.147/Hyd/2025 for A.Y. 2011-12 as lead matter and the order therein passed shall mutatis-mutandis apply for disposing of the remaining appeals. The assessee has assailed the impugned order on the following grounds of appeal before us: “1. The Learned CIT(A) erred in setting aside the assessment for fresh consideration without appreciating the fundamental fact that the original assessment was completed on a deceased person, rendering it a nullity in the eyes of law. 2. The learned CIT(A) misinterpreted the scope of powers under Section 251 of the Income Tax Act. Setting aside an invalid assessment for fresh adjudication undermines the fundamental principles of natural justice and procedural law, 3. The Assessing Officer erred in completing the assessment without making an effort to identify or bring the legal heirs of the deceased assessee on record as mandated under Section 159 of the Income Tax Act, 1961. The CIT(A) failed to appreciate this legal requirement.” 3 ITA Nos.147 to 149 & 154/Hyd/2025 3. Succinctly stated, the assessee had filed his return of income for A.Y. 2011-12 on 30.09.2011, declaring an income of Rs.1,46,89,240/-. Subsequently, the return of income of the assessee was processed as such u/s 143(1) of the Act. 4. Survey proceedings u/s 133A of the Act were conducted in the case of M/s. Sai Venkat Sai Media Pvt. Ltd on 27.02.2017. During the course of survey proceedings, it was noticed that the assessee who was a director in the aforementioned company and was holding substantial shareholding had during the subject year received a loan from the said company. The A.O. holding a conviction that the amount received by the assessee was liable to be brought to tax in his hands as a “deemed dividend” under the provisions of Section 2(22)(e) of the Act, initiated proceedings u/s 147 of the Act. Notice u/s 148 of the Act was issued to the assessee on 31.03.2018. 5. Thereafter, the A.O. framed the assessment vide his order passed u/s 144 r.w.s. 147 of the Act, dated 27.02.2021, wherein he made an addition of “deemed dividend” of Rs. 4,05,95,758/- u/s 2(22)(e) of the Act and assessed the income of the assessee at Rs.5,52,84,998/-. 4 ITA Nos.147 to 149 & 154/Hyd/2025 6. Aggrieved, the assessment order was assailed in appeal before the CIT(A). It was, inter alia, claimed by the legal heirs of the assessee (since deceased) before the CIT(A) that as the assessee had expired on 29-08-2020, therefore, the assessment framed by the A.O. vide his order passed under Section 144 r.w.s 147 of the Act, dated 27.02.2021 in the name of the assessee, viz. Sri Rajasekhar Chelikani, had no existence in the eye of law and was liable to be quashed. The CIT(A), in all fairness, after deliberating on the contentions advanced by the assessee, set aside the assessment order for fresh consideration of the issues to the file of the A.O. For the sake of clarity, the observations of the CIT(A) are culled out as under: 5 ITA Nos.147 to 149 & 154/Hyd/2025 6 ITA Nos.147 to 149 & 154/Hyd/2025 7. The legal representatives of the assessee (since deceased), being aggrieved with the order of CIT(A) have carried the matter in appeal before us. 8. We have heard the Learned Authorized Representatives of both parties, perused the orders of lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. 9. Shri A.V. Raghuram, Advocate, the Learned Authorized Representative for the legal heirs of assessee (for short, \"Ld. AR\"), 7 ITA Nos.147 to 149 & 154/Hyd/2025 at the threshold of the hearing of the appeal, submitted that, as the A.O. had grossly erred in law and on facts of the case by framing the assessment vide his order passed u/s 144 r.w.s. 147 of the Act dated 27.02.2021 in the name of the assessee (since deceased), therefore, the same cannot be sustained and is liable to be struck down. Elaborating on his contention, the Ld. AR submitted that, as the assessee had expired on 29.08.2020, and the legal heir of the assessee, viz., Shri. Chelikani Venkata Sai Sampath Sunil Sekhar (assessee’s son), had vide his letter dated 15.10.2020 brought the fact about the death of the assessee along with a copy of the “death certificate” to the notice of the A.O., therefore, there was no justification for the A.O. to have framed the assessment in the hands of the assessee (since deceased). 10. Per contra, the Learned Senior Departmental Representative (for short, \"Ld. DR\") submitted that, as there was no evidence that would irrefutably prove that the legal heirs of the assessee (since deceased) had in the course of the assessment proceedings brought the fact about the death of the assessee to the notice of the A.O., therefore, the latter could not have impleaded the legal heirs of the assessee while framing the assessment vide his order 8 ITA Nos.147 to 149 & 154/Hyd/2025 passed u/s 144 r.w.s. 147 of the Act, dated 27.02.2021. Elaborating further on his contention, the Ld. DR submitted that as the letter dated 15.10.2020 (supra) claimed to have been filed by the legal heir of the assessee based on which it was claimed that the A.O. was informed about the assessee’s death, in the absence of any acknowledgment of receipt of the same by the A.O. had no evidentiary value. The Ld. DR further submitted that though the legal heir of the assessee, viz., Chelikani Venkata Sai Sampath Sunil Sekhar, in his “affidavit” dated 15.02.2023, had inter alia stated that on 15.10.2020 he had met the A.O. and informed him about the demise of his father, but it is difficult to fathom that why the impugned intimation letter dated 15.10.2020 was deposited by him in the drop box of the department instead of getting the same acknowledged by the officer concerned. 11. Admittedly, it is a matter of fact borne from the record that the assessee, viz. Late Shri. Rajasekhar Chelikani had expired on 29.08.2020 (copy of death certificate placed on record). Shri Chelikani Venkata Sai Sampath Sunil Sekhar, assessee’s son, had claimed to have brought the fact of the assessee’s death to the notice of the A.O. vide a letter dated 15.10.2020 along with a copy 9 ITA Nos.147 to 149 & 154/Hyd/2025 of the death certificate. Also, as observed hereinabove, the aforesaid legal heir of the assessee (since deceased) to support his claim that the fact regarding the death of the assessee was in the course of the assessment proceedings brought to the knowledge of the A.O, had filed before us an “affidavit” (photocopy), dated 15.02.2023. 12. As per the settled principle of law, no order can be passed against a dead person and, any proceedings regarding the deceased assessee shall be continued against the legal representative from the stage at which it stood on the date of the death of the deceased. The aforesaid mandate of law can be gathered from Section 159 of the Act, which reads as under: \"159. (1) Where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased. (2) For the purpose of making an assessment (including an assessment, reassessment or re-computation under section-147) of the income of the deceased and for the purpose of levying any sum in the hands of the legal representative in accordance with the provisions of sub-section (1),-- (a) any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased; 10 ITA Nos.147 to 149 & 154/Hyd/2025 (b) any proceeding which could have been taken against the deceased if he had survived, may be taken against the legal representative; and (c) all the provisions of this Act shall apply accordingly. (3) The legal representative of the deceased shall, for the purposes of this Act, be deemed to be an assessee. (4) Every legal representative shall be personally liable for any tax payable by him in his capacity as legal representative if, while his liability for tax remains undischarged, he creates a charge on or disposes of or parts with any assets of the estate of the deceased, which are in, or may come into, his possession, but such liability shall be limited to the value of the asset so charged, disposed of or parted with. (5) The provisions of sub-section (2) of section-161, section-162 and section- 167, shall, so far as may be and to the extent to which they are not inconsistent with the provisions of this section, apply in relation to a legal representative. (6) The liability of a legal representative under this section shall, subject to the provisions of sub-section (4) and sub-section (5), be limited to the extent to which the estate is capable of meeting the liability.\" (emphasis supplied by us) In a case where an assessee dies pending any proceedings before the department, the provisions of Section 159 of the Act get attracted. Accordingly, it is incumbent on the department to ensure compliance with Section 159 before any order is passed. An analogy can be drawn from the judgment of the Hon'ble High Court of Madhya Pradesh in the case of Commissioner of Income Tax Vs. Dalumal Shyamumal (2005) 276 ITR 62 (MP). The Hon'ble High Court had observed that as the A.O. had framed 11 ITA Nos.147 to 149 & 154/Hyd/2025 the assessment in the name of the assessee (since deceased), therefore, the assessment so framed was a nullity. However, the Hon'ble High Court was of the view that once the assessment order was held to be a nullity, then the Tribunal should have given a consequential direction as contemplated u/s. 159 of the Act to the A.O. so that a proper assessment order could be passed. For the sake of clarity, the observations of the Hon'ble High Court are culled out as under: \"In our opinion, the Tribunal while deciding the appeal ought to have taken note of section 159 ibid and should have accordingly, remanded the case to assessing officer for ensuring compliance of section 159 for passing appropriate orders of assessment after due notice to legal representative of deceased assessee. Indeed, once the assessment order is held to be a nullity then in such event consequential direction as contemplated under section 159 of the Act should have been given to assessing officer so that proper assessment order could be passed.\" Based on our aforesaid observations and the judgment of the Hon'ble High Court of Madhya Pradesh in the case of Commissioner of Income Tax Vs. Dalumal Shyamumal (supra), we are of the view that as the A.O. i.e., ACIT, Central Circle – 3(2), Hyderabad had passed the assessment order u/s 144 r.w.s. 147 of the Act dated 27.02.2021 in the name of the deceased assessee 12 ITA Nos.147 to 149 & 154/Hyd/2025 who had expired on 29.08.2020, therefore, the order so passed by him suffers from a fundamental defect and cannot be sustained. 13. Be that as it may, we are of the firm conviction that as the assessee (since deceased) had expired on 29.08.2020, therefore, the A.O. as per the mandate of Section 159(2)(a) of the Act ought to have continued with the proceedings against the legal representatives from the stage at which it stood on the date of death of the assessee. We thus, in terms of our aforesaid observations, set aside the assessment order passed by the A.O. under Section 144 r.w.s. 147 of the Act dated 27.02.2021 in the name of the deceased assessee and direct him to continue the proceedings against the legal representative/representatives from the stage at which it stood on the date of the death of the assessee (since deceased) i.e 29.08.2020. We thus, approve the setting aside of the assessment order by the CIT(A), but in terms of our aforesaid observations. 14. Resultantly, the appeal filed by the assessee being devoid of bereft of any substance is dismissed. 13 ITA Nos.147 to 149 & 154/Hyd/2025 ITA Nos.148, 149 and 154 /Hyd/2025 A.Ys. 2012-13, 2013-14 and 2014-15 15. As the facts and the issue involved in the captioned appeals remain the same as were there before us in the assessee’s appeal for A.Y. 2011-12 in ITA No.147/Hyd/2025, therefore, the order therein passed shall apply mutatis mutandis for disposing of the captioned appeals i.e., ITA Nos.148, 149 and 154/Hyd/2025 for A.Ys. 2012-13, 2013-14, and 2014-15. 16. Resultantly, all the captioned appeals are dismissed in terms of our aforesaid observations. 17. To sum up, all the appeals of the assessee are dismissed in terms of our aforesaid observations. Order pronounced in the Open Court on 28th April, 2025. Sd/- (श्री मिुसूदन सावडिया) (MADHUSUDAN SAWDIA) लेखा सदस्य/ACCOUNTANT MEMBER Sd/- (श्री रवीश सूद) (RAVISH SOOD) न्यायिक सदस्य/JUDICIAL MEMBER Sd/- Sd Hyderabad, dated 28.04.2025. #***#TYNM/sps 14 ITA Nos.147 to 149 & 154/Hyd/2025 आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/The Assessee : Late Rajasekhar Chelikani, Legal Heir Shri Chelikani Venkata Sai Sampath Sunil Kumar, R/o.8-2-686/7, 10/A & B, Road No.12, Banjara Hills, Hyderabad – 500 034. 2. रधजस्व/ The Revenue : The Assistant Commissioner of Income Tax, Central Circle 3(2), Hyderabad. 3. The Principal Commissioner of Income Tax (Central), Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Hyderabad "