I-T - Whether legal heir is automatically
deemed to be assessee upon death of original assessee - NO: ITAT
The issues before the Bench are –
- Whether penalty can be levied on the deceased assessee, when the legal heir was never brought on record;
- Whether the penalty can be levied on legal heirs when inaccurate return of income was filed by the deceased during his life time and
- Whether the LR is automatically deemed to be the assessee upon the death of the original assessee. And the verdict goes in favour of the assessee.
Facts
of the case
The assessee is the legal heir and representative of the original assessee who died during the pendency of assessment. The original assessee during his life time furnished inaccurate particulars in his return. During the pending assessment proceeding the legal heir of the assessee discovered that he was never impleaded and brought on records. Upon the said observation the assessee filed a rectification application before the AO intimating that original assessee had expired and to make the changes by impleading him and bringing on records.
AO did not made any changes and passed a show cause notice along a penalty order upon the original dead assessee upon the observation that the income earned by the late assesee was not only from its agricultural income and it willfully evaded the undisclosed income. Aggrieved assessee appealed before the CIT(A).
The CIT(A) passed an order under section 250 confirming the penalty levied under section 158BFA(2) for block period and held that the assessee had willfully evaded the undisclosed income and the explanation offered by the assessee was not satisfactory.
In appeal before the tribunal, the Counsel for the assessee contented that the fact that the assessee had expired was brought to the notice of the AO time and again, and still the AO passed penalty order in the name of dead assessee. Therefore, the impunged order passed by the AO upon the dead assesee was bad in law and illegal. The law is settled on this issue and a penalty imposed on dead person is null and void. The assessee also submitted that even on merits of the case, the assessee is not liable to penalty as the only source of income of the assessee is agriculture. Accordingly, even if some deposit is found to be not satisfactorily explained by the assessee, the same could not be assessed as undisclosed income of the assessee. It was further submitted that ITAT, Ahmedabad in the quantum appeal of the assessee had allowed only the credit of its agricultural income declared in the income-tax return for the block period, and credit of earlier years (prior to block period) income was not allowed to the assessee and directed the AO to compute undisclosed income by taking the figure of savings from agricultural income at 40% for some years, 60% for some other years and 80% in succeeding years. The basis for determining the saving figures of the assessee for the block period was merely on estimate, and that no penalty under section 158BFA(2) was imposable.
The revenue opposed the submissions made by the assessee and submitted that not mentioning the name of the son of late assessee as legal heir of his father is merely a clerical and typographic mistake, which does not render the order imposing the penalty as null and void. He submitted that the AO had given an opportunity of hearing to the assessee, and that the clerical error had not resulted in any adverse effect on the proceedings within the meaning of section 292B of the Act. It was further submitted that proviso to section 158BFA(2) makes the levy of penalty mandatory, once the assessed income is found to be more than returned income.
The assessee is the legal heir and representative of the original assessee who died during the pendency of assessment. The original assessee during his life time furnished inaccurate particulars in his return. During the pending assessment proceeding the legal heir of the assessee discovered that he was never impleaded and brought on records. Upon the said observation the assessee filed a rectification application before the AO intimating that original assessee had expired and to make the changes by impleading him and bringing on records.
AO did not made any changes and passed a show cause notice along a penalty order upon the original dead assessee upon the observation that the income earned by the late assesee was not only from its agricultural income and it willfully evaded the undisclosed income. Aggrieved assessee appealed before the CIT(A).
The CIT(A) passed an order under section 250 confirming the penalty levied under section 158BFA(2) for block period and held that the assessee had willfully evaded the undisclosed income and the explanation offered by the assessee was not satisfactory.
In appeal before the tribunal, the Counsel for the assessee contented that the fact that the assessee had expired was brought to the notice of the AO time and again, and still the AO passed penalty order in the name of dead assessee. Therefore, the impunged order passed by the AO upon the dead assesee was bad in law and illegal. The law is settled on this issue and a penalty imposed on dead person is null and void. The assessee also submitted that even on merits of the case, the assessee is not liable to penalty as the only source of income of the assessee is agriculture. Accordingly, even if some deposit is found to be not satisfactorily explained by the assessee, the same could not be assessed as undisclosed income of the assessee. It was further submitted that ITAT, Ahmedabad in the quantum appeal of the assessee had allowed only the credit of its agricultural income declared in the income-tax return for the block period, and credit of earlier years (prior to block period) income was not allowed to the assessee and directed the AO to compute undisclosed income by taking the figure of savings from agricultural income at 40% for some years, 60% for some other years and 80% in succeeding years. The basis for determining the saving figures of the assessee for the block period was merely on estimate, and that no penalty under section 158BFA(2) was imposable.
The revenue opposed the submissions made by the assessee and submitted that not mentioning the name of the son of late assessee as legal heir of his father is merely a clerical and typographic mistake, which does not render the order imposing the penalty as null and void. He submitted that the AO had given an opportunity of hearing to the assessee, and that the clerical error had not resulted in any adverse effect on the proceedings within the meaning of section 292B of the Act. It was further submitted that proviso to section 158BFA(2) makes the levy of penalty mandatory, once the assessed income is found to be more than returned income.
After
hearing the parties, the Tribunal held that,
- It is found in the present case that the son of the deceased assessee was never impleaded as the legal heir of his deceased father. The revenue also did not place any material before the tribunal to suggest that any order bringing the legal heir of the deceased assessee on record, was passed by the AO;
- It is found that decision of Punjab and Haryana High Court supported the case of the assessee. It is concluded that it was not merely a clerical mistake, but since the order imposing the penalty was passed on the dead person, the same is null and void, and penalty is liable to be cancelled on the ground alone. The decisions relied upon by the revenue were distinguishable;
- In this case, before us, the only source of income being agriculture and that the credit for past savings from agriculture income, prior to the block period, having not been allowed in the quantum proceedings, and figure of addition having been determined on estimate basis, applying the average rate of 40%, 60% and 80% for working out the figures of savings from agricultural income in different years of block period, and the part of the addition having been sustained by the Tribunal on estimation only, we hold that penalty imposed under section 158BFA(2) is liable to be cancelled on merits also and is accordingly cancelled.
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