SANDEEP CHOPRA V. PRINCIPAL COMMISSIONER OF INCOME TAX

WPC/2972/2022

AI Insights

The case revolves around the legality of re-assessment proceedings initiated against a deceased individual, Bhim Sain Chopra, under the Income Tax Act, 1961. The petitioner, Sandeep Chopra, representing the deceased's legal heir, challenged the notice and subsequent re-assessment order issued in the name of the deceased. The Income Tax Department had initiated these proceedings despite being aware of the assessee's death, leading to legal complications regarding the validity of such actions. The court examined the provisions of Sections 147, 148, 159, and 292BB of the Income Tax Act, alongside relevant judicial precedents, to determine the procedural correctness of the actions taken by the tax authorities.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 748171 (HC-JHARKHAND)
• Appeal Type: Others
• Pronouncement Date: 09-02-2023
• Assessment Year: misc
• Other Referred Cases: Shabina Abraham and Others vs. Collector of Central Excise And Customs, Savita Kapila vs. Assistant Commissioner of Income Tax, Dharamraj vs. Income Tax Officer, RAJENDRA KUMAR SEHGAL vs. I.T.O., PRINCIPAL COMMISSIONER OF INCOME TAX, NEW DELHI Versus MARUTI SUZUKI (INDIA) LIMITED
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RATNESH SAHAY
• Assessee Lawyers: SUMEET GADODIA
• Keywords: Deceased assessee; Income Tax; Legal representative; Notice validity; Re-assessment
• Section: 147; 148; 142(1); 292BB; 143(2); 159

Judgement Text

"1 IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P.(T) No. 2972 of 2022 Sandeep Chopra, son of late Bhim Sain Chopra, alias, Bhim Sen Chopra …… Petitioner Versus 1. Principal Commissioner of Income Tax, Dhanbad Division, having its office at Aaykar Bhawan, Luby Circular Road, Dhanbad, P.O. and P.S. Bank More, District Dhanbad (Jharkhand) 2. Deputy Commissioner of Income Tax, Circle-1, having its office at Ravindra Path, Hazaribagh, P.O. and P.S. Hazaribagh, District Hazaribagh (Jharkhand), PIN 825301 3. Assistant Commissioner of Income Tax, Circle-1, having its office at Ravindra Path, Hazaribagh, P.O. and P.S. Hazaribagh, District Hazaribagh (Jharkhand), PIN 825301 4. National Faceless Assessment Centre, Delhi, through its Commissioner of Income Tax, having its office at North Block, P.O. and P.S. North Block, District New Delhi, PIN 110001 …… Respondents -------- CORAM: Hon’ble The Acting Chief Justice Hon’ble Mr. Justice Deepak Roshan -------- For the Petitioner : Mr. Sumeet Gadodia, Advocate For the Respondents : Mr. Ratnesh Nandan Sahay, Sr.S.C. ------- 10/09.02.2023 The petitioner has prayed for following reliefs: “(i) For issuance of an appropriate writ/order/direction, including Writ of Certiorari, to call for and quash the Notice dated 18.03.2020 issued under Section 148 of the Income Tax Act, 1961, including all consequential orders passed pursuant to the said Notice, against Late Bhim Sain Chopra @ Bhim Sen Chopra, as the very initiation of the re-assessment proceedings against the said assessee is nonest and void ab initio, especially because the said assessee has already died on 18.01.2016 itself. (ii) For issuance of further appropriate writ/order/direction for quashing/setting aside the Assessment/Re-assessment Order dated 10.09.2021 (Annexure-12) passed by Respondent No. 4 under Section 147 of the Income Tax Act, 1961 against the deceased assessee Bhim Sain Chopra @ Bhim Sen Chopra, as the said Assessment/Re-assessment Order is nonest and illegal having been passed against a dead assessee without even substituting and/or transposing legal heirs of the said assessee in accordance with law.” 2. Brief fact of the case is that the Assessee filed its return of income for the A.Y. 2015-16 on 27.09.2015 showing total income of Rs. 19,82,030/-. The case was selected for scrutiny through CASS for “limited 2 scrutiny” on the ground of mismatch in the sales turnover reported in Audit Report and ITR, as compared to the alleged higher turnover reported in Service Tax Return. Subsequently notice u/s 143 (2) & 142(1) was duly served on the Assessee. During the pendency of the scrutiny proceedings, the Assessee namely, Bhim Sain Chopra died and he was duly represented by his legal representative i.e., the present petitioner. Assessment order under section 143(3) of the Act was passed wherein the original declared income of the Assessee in the Income Tax Return was accepted. Thereafter, a reassessment proceeding was initiated against the deceased Assessee despite the fact that the department was in complete knowledge about the fact of the death of the deceased assessee-Bhim Sain Chopra. Even notice under Section 148 of the Act was issued in the name of the deceased assessee. Reassessment proceedings were initiated on the ground that the assessee, in his audit report, had shown an amount of Rs. 58,07,470.67/- as Bills receivable but has not included the same in his total turnover receipt and offered it for taxation. Further notice u/s 142(1) was issued to the deceased assessee requiring the deceased assessee to furnish certain information. This petitioner submitted his reply to the said notice by submitting his response online. In the said reply, the petitioner clearly stated that assessee had died and even annexed the death certificate of Bhim Sain Chopra. Another notice was issued stating that reply submitted by petitioner was unsatisfactory and accordingly further direction was given to furnish the information as sought for in the said notice. Petitioner duly submitted a detailed response to the respondent-authority vide online response dated 22nd February, 2021 reiterating that the assessee-Bhim Sain Chopra had died and again annexed the death certificate. Despite the reply filed by the petitioner, respondents again issued Notice under section 142(2) of the Act against the deceased assessee with direction to furnish reply. Petitioner again submitted his reply and clearly informed the respondent that the amount of Rs.58,07,470.67/-, shown as Bill receivable relates to repairs of electrical equipment and machines with the CCL and the same was forming part of the gross and thus, the same has already been offered to taxation. Thereafter, show cause Notice was issued in the name of the deceased assessee, containing therein draft assessment order proposing to add an amount of Rs. 58,07, 471/- in the total turnover of the deceased assessee by treating it as 3 undisclosed income and directed the assessee to submit his report to the said draft assessment. The petitioner, vide his e-mail, replied to the show cause and again reiterated that the original assessee had already expired and arbitrarily assessment was being continued in the name of the deceased assessee. Despite repeated replies by the petitioner, intimating about the death of the original assessee, an assessment order under Section 147 of the Act, was passed by the Respondent No. 4 against the deceased assessee and an amount of Rs.58,07,471/- has been added to the income of the deceased assessee. Petitioner again informed the Respondent-Authority that the order of reassessment against the deceased assesse has no legal sanctity in the eye of law. Interestingly, a Penalty proceedings u/s 271(1)(b) and 271(1)(c) against the deceased assessee was initiated vide notice dated 26.10.2021 and 21.12.2021. Petitioner again informed the Respondent-authorities about the death of the assessee and that the initiation of the penalty proceeding is not maintainable. Thereafter, an Order dated 02.03.2022 was passed by the respondent-authority, wherein penalty proceedings initiated against the deceased assessee has been dropped by recording that the assessee has already expired on 18.01.2016 and hence, imposing penalty against the deceased assessee is bad in law. 3. Mr. Sumeet Gadodia, learned counsel for the petitioner submits that this is a peculiar case in which the Respondent-authority itself passed an order dated 02.03.2022, wherein penalty proceeding initiated against the deceased assessee has been dropped by recording inter alia that the assessee namely Bhim Sain Chopra @ Bhim Sen Chopra has already died on 18.01.2016 and hence, imposing of penalty against the deceased assessee is bad in law. From bare perusal of the penalty order itself, it would be evident that Respondents were duly aware of the fact that the assessee has already died, nevertheless, on one hand respondents have treated the initiation of penalty proceeding against the deceased assessee as bad in law and has dropped the same, and, on the other hand, Respondent-Department has proceeded to pass Re-assessment Order under Section 147/148 of the Act despite being aware that the assessee has already died on 18.01.2016. Thus, Respondents are approbating and reprobating at the same time. He further submits that very initiation of the re-assessment proceedings against the original assessee - Bhim Sain Chopra @ Bhim Sen 4 Chopra is non est and void ab initio, especially because the said assessee has already died on 18.01.2016 itself. He contended that Assessment/Re- assessment order dated 10.09.2021 (Annexure-12) passed by Respondent No.4 under Section 147 of the Act against the deceased assessee-Bhim Sain Chopra @ Bhim Sen Chopra is non est and illegal having been passed against a dead person without even substituting and/or transposing legal heirs of the said assessee in accordance with law. In support of his contention, learned counsel relied upon the judgments passed in the following cases: 1. Shabina Abraham and Others vs. Collector of Central Excise And Customs reported in (2015) 10 SCC 770, Para-15, 16, 17. 2. Savita Kapila vs. Assistant Commissioner of Income Tax, 2020 SCC OnLine Del 2540 3. Dharamraj vs. Income Tax Officer, 2022 SCC OnLine Del 174 4. Mr. Ratnesh Nandan Sahay, learned counsel for the Revenue submits that as per the law 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. It is thus clear that in case where a person dies, the assets and liabilities of the person automatically devolve on the legal heir and also all proceedings due against the deceased will continue in the name of the legal heir. He further relied upon Section 292 BB of the Income Tax Act, 1961 and submits that if the assessee had participated in the proceedings, by way of legal fiction the notice would be deemed to be valid even if there be infraction as detailed in said Section. He further submits that the scope of the provision is to make service of notice having certain infirmities to be proper and valid, if there was requisite participation on the part of the assessee. In the present case, though, all the notices were issued in the name of the deceased Late Bhim Sain Chopra, Sri Sandeep Chopra made compliance as a legal heir of the assessee and never raised any objection during assessment proceedings and fully cooperated with the Income Tax Authorities. Therefore, he is precluded from taking objection at this stage in view of the provisions of Section 292BB of the Act. 5. Heard learned counsel for the parties and perused the documents available on record. To decide the question as to “whether the assessment 5 made under Section 147 of the Income Tax Act, 1961 in the name of the deceased late Bhim Sain Chopra and not in the name of the legal representative, i.e. the petitioner, is valid in the eye of law” or “whether this is simply a procedural defect which can be cured”, it is necessary to go through Section 292 BB and Section 159 of the Income Tax Act. For brevity, Section 159 and Section 292 BB is quoted hereinbelow. “ 292 BB- Notice deemed to be valid in certain circumstances-Where an assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was – (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner: Provided that nothing contained in this Section shall apply where the assessee has raised such objection before the completion of such assessment or reassessment.” “ 159. Legal representatives (1) Where a person dies, his legal representatives 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 recomputation 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 subsection (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; (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. 6 6. After going through the aforesaid provision under Section 292 BB of the I. T. Act, 1961, it is to be noted that the intent of this Section does not save complete absence of notice. As a matter of fact, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. In the instant case, after going through the original assessment order dated 23.10.2017, passed for the Assessment Year 2015-16, it is clear that the assessing officer was well informed about the death of Bhim Sen Chopra during pendency of the original Assessment proceeding, who has recorded as under: “Shri Arya also informed that the assessee Shri Bhim Sen Chopra has expired and he produced affidavit given by the sons of the deceased assessee declaring Shri Sandeep Chopra as legal representative of the deceased assessee.” Thus, it is crystal clear that the assessee died during the original assessment proceeding and the department was well aware of this fact that the original assessee had died. 7. Respondent-authority itself passed an order dated 02.03.2022, wherein penalty proceeding initiated against the deceased assessee has been dropped by recording inter alia that the assessee namely Bhim Sain Chopra @ Bhim Sen Chopra has already died on 18.01.2016 and hence, imposing of penalty against the deceased assessee is bad in law. From bare perusal of the penalty order itself, it would be evident that Respondents were duly aware of the fact that the assessee has already died, and have treated the initiation of penalty proceeding against the deceased assessee as bad in law and has dropped the same. On the other hand, Respondent-Department has proceeded to pass Re-assessment Order under Section 147/148 of the Act despite being aware that the assessee has already died on 18.01.2016. 8. Thus, it appears that the very initiation of the re-assessment proceedings against the original-assessee namely, Bhim Sain Chopra @ Bhim Sen Chopra is non est and void ab initio, especially because the said assessee had already died on 18.01.2016 itself and thus, the Re-assessment order dated 10.09.2021 (Annexure-12) passed by Respondent No.4 under Section 147 of the Act against the deceased assessee Bhim Sain Chopra @ Bhim Sen Chopra is non est and illegal having been passed against a dead assessee without even substituting and/or transposing legal heirs of the said assessee in accordance with law. 9. It is true that as per the provisions of I. T. Act, 1961, for the purpose of making any assessment, any proceeding taken against the 7 deceased before his death is by deeming fiction deemed to have been taken against his legal representatives and may be continued against the legal representatives from the stage at which it stood on the date of death of the deceased. However, in the instant case the re-assessment proceeding has been initiated after issuance of notice against the dead person, which is not permissible in the eye of law. The condition precedent for acquiring jurisdiction to reopen any assessment is that notice under Section 148 should be issued to a correct and alive person and not to a dead person. Thus, in the instant case the jurisdictional requirement under Section 148 of the Act of Service of Notice was not fulfilled. The law mandates that the moment the revenue came to know about the death of the original assesse, they are legally bound to make the legal representative for the purpose of proceeding in the matter. At the cost of repetition, during the original assessment proceeding itself, the original assessee-Bhim Sen Chopra died and the assessing officer was well-informed, as such there was no question to issue a notice under Section 148 of the Act as against a dead person. 10. Heavy reliance has been made by learned Counsel for the Revenue that in view of the provision of Section 292 BB of the Act and the regular response by the petitioner has cured the defect of issuance of notice to the dead person. We are not in agreement with such contention, inasmuch as, Section 292 BB does not save complete absence of notice. It is only the infirmities in the manner of service of notice that this section seeks to cure, but in no case this section will save the revenue from issuing a notice to a dead person. In the case of RAJENDRA KUMAR SEHGAL vs. I.T.O. (Delhi High Court) reported in [2018 (12) TMI 697 (Delhi)], it is held that Section 292 BB of the Act, 1961 is applicable to an assessee and not to a legal representative. It is not a case where the proceedings under Section 147/148 were initiated against the assessee and during its pendency the assessee died and after his death the legal representative did not step into the shoes of the deceased assessee; it is a case where the first notice for reassessment was issued against the dead person, as such Section 159 of the Act, 1961 does not apply to the present case. Recently, in the case of PRINCIPAL COMMISSIONER OF INCOME TAX, NEW DELHI Versus MARUTI SUZUKI (INDIA) LIMITED, reported in (2020) 18 SCC 331, the Hon’ble Apex Court has dealt a similar issue where the original company [Suzuki Powertrain India Ltd. (SPIL)] had 8 been amalgamated with Maruti Suzuki India Ltd. The Hon’ble Apex Court has held that the notice issued to the original company as null and void. Paragraph 36 of the said judgment is quoted hereinbelow. “ 36. In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a coordinate Bench of two learned Judges which dismissed the appeal of the Revenue in Spice Enfotainment on 2-11- 2017. The decision in Spice Enfotainment has been followed in the case of the respondent while dismissing the special leave petition for AY 2011-2012. In doing so, this Court has relied on the decision in Spice Enfotainment.” 11. Having regard to the discussions made hereinabove, notice issued under Section 148 for initiation of reassessment proceeding in the name of the deceased assessee (Bhim Sen Chopra) on his PAN and not in the name of his legal representative is held to be illegal and bad in law. Consequently, since the notice itself has been declared to be null and void, the order passed pursuant to the said notice is also null and void. As a result, the notice dated 18.3.2020 issued under Section 148 of the Act and all consequential orders, passed pursuant to the notice, is non est and void ab initio and accordingly quashed and set aside. 12. As a result, the instant application is allowed on contest, however, there is no order to cost. (Aparesh Kumar Singh, A.C.J.) (Deepak Roshan, J.) s.m. "