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LATE GHANSHYAM H PARSANA vs. INCOME TAX OFFICER

IN THE ITAT AHMEDABAD BENCH ‘C’

WASEEM AHMED, AM & MADHUMITA ROY, JM.

ITA No. 2871/Ahd/2017 Order date Aug 31, 2020

Section 159 AY 2006-07

Decision in favour of: Assessee

Cases Referred

CIT v. Amarchand N. Shroff [1963] 48 ITR 59

First Addl. ITO v. Mrs. Suseela Sadanandan [1965] 57 ITR 168

CIT v. Shantilal C. Mehta [1978] 113 ITR 79

CIT v. C.V. Raghava Reddy [1984] 148 ITR 385

 

Counsel appeared:

1. N. Soparkar Sr. Advocate with Urvashi Sodhan AR for the Appellant.: L. P. Jain, Sr. D.R for the Respondent

 

Section 159. The assessment made on dead person, on the face of it, be a nullity in law. In the case in hand, we find that when the factum of death was brought to the notice of the authorities below, instead of substituting the legal heirs of the assessee in the file of the Revenue both the authorities below proceeded with and finalized the assessment against the assessee, Late Ghanshyam H Parsana, since deceased which is unlawful, arbitrary, erroneous and bad in law. LATE GHANSHYAM H PARSANA vs. INCOME TAX OFFICER. Order date Aug 31, 2020. AY 2006-07. In favour of assessee.

 

MADHUMITA ROY, JM.

 

1. The instant appeal filed by the assessee is directed against the order dated 30.03.2016 passed by the Commissioner of Income Tax (Appeals)-4, Vadodara arising out of the order dated 24.03.2014 passed by the ITO, Ward-5(4), Baroda under Section 143(3) r.w.s 147 of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) for Assessment Year 2006-07.

 

2. There is a delay of 566 days in preferring the instant appeal before us. In support of the delay the Ld. Senior Counsel appearing for the assessee submitted before us that during the pendency of the re-assessment proceeding the assessee passed away on 06.08.2013. The notice under Section 142(1) of the Act was served subsequent thereto. It was the nephew of the assessee late Shri Ghanshyam H Parsana, since deceased, who was entrusted upon to approach the ITO to enquire about the proceeding pending. Ultimately the same was finalized against the assessee. The appellate order dated 30.03.2016 in rejecting the appeal preferred by the assessee was not received by the nephew of the assessee and only upon making an application for supplying the certified copy on 23.06.2017, the same was received on 10.11.2017 and the instant appeal was filed on 18.12.2017 before the Registry. In support of his argument he has also filed an affidavit affirmed by one Mayur N. Parsana claimed to be the nephew of the assessee Late Ghanshyam H Parsana, since deceased, explaining such delay. There is no latches and/or negligence on the part of the relative of the assessee in preferring the appeal before us as also submitted by the assessee. Unless the appeal is condoned the assessee will suffer irreparable loss and injury, hence, the Ld. Senior Counsel appearing for the assessee prays for condonation of delay.

 

3. On the other hand, the Ld. DR relied upon the order passed by the authorities below.

 

4. We have heard the submissions made by the respective parties, and we have also perused the affidavit affirmed by the nephew of the assessee Late Ghansyam H Parsana, since deceased, and other relevant documents from which it is reflected that only upon receipt of the penalty order under Section 271(1)(c) of the Act the legal heir of the assessee could come to the fact of dismissal of appeal by the Ld. CIT(A). Thereafter on 23.06.2017 a letter was written before the Ld. Commissioner for furnishing a certified copy of the order passed by him rejecting the appeal. A copy of the said letter dated 23rd June is also available on record. Further that only on 10.11.2017 such photocopy of the appellate order was received by the nephew of the assessee (Late Ghansyam H Parsana), since deceased and the appeal could be filed before us on 18.12.2017. Hence, the delay of 566 days. Upon perusal of the relevant records including the letter dated 23.06.2017 written by the nephew of the assessee (Late Ghansyam H Parsana), since deceased, addressing the Ld. CIT(A) enclosing the death certificate of the assessee, it appears that the explanation provided by the nephew of the assessee in the form of an affidavit affirmed by him seems to be genuine. We do not find any negligence on the part of the relative of the assessee in pursuing the matter before the authorities below and also in preferring the appeal before us. Hence, for the ends of justice we find it fit and proper to condone the delay. The appeal is, therefore, condoned.

 

On merit the short point involved in this particular case is this that as to whether and assessment proceeding can be finalized in the name of dead person. In fact, very maintainability of the reassessment proceeding has been challenged by the assessee at the threshold of the matter. The relevant fact relating to the assessee is this that during the pendency of the appellate proceeding assessee left for his heavenly abode on 08.03.2013 which particular fact was brought to the notice of the Assessing Officer by his nephew, reflecting at Page 2 of the order passed by the AO. In spite of the same the matter was finalized against the assessee. The said fact was further brought to the notice of the Ld. CIT(A). In both the occasions the photocopy of the death certificate of the assessee Late Ghanshyam H Parsana, since deceased, was duly submitted by the nephew of the assessee before the authorities below. In spite of that the Ld. CIT(A) proceeded to finalize the matter and ultimately by and under the order dated 30.03.2016 the appeal was dismissed. It is the argument of the Ld. Senior Counsel appearing for the assessee that the assessment cannot be framed on a deceased person; the same is against the tenets of legal principle, and void ab initio and hence the entire proceeding is liable to be quashed. In support his argument he relied upon a judgment passed by the Co-ordinate Bench in ITA No. 426/Ahd/2011 for A.Y. 2007-08; a copy whereof was also furnished before us.

 

5. On the other hand, the Ld. DR relied upon the order passed by the authorities below.

 

6. The case of the Revenue is this that since the nephew of the assessee appeared before the authorities below, the Revenue has rightly finalized the issue though it is in the name of the deceased person.

 

7. We have heard the respective parties, we have also perused the relevant materials available on records.

 

8. It appears that the nephew of the assessee Late Ghanshyam H Parsana duly submitted the death certificate of the assessee, since deceased before the AO in support of the fact of death of the assessee on 06.08.2013; the said fact was also reflected from the order passed by the Ld. CIT(A). But in spite of the same the appellate proceeding was continued against the dead person and in order to complete the proceeding at any cost the same was finalized by the Ld. CIT(A) and confirmed the order passed by the Ld. AO. As per the principle of fair play such a proceeding cannot continue when the factum of death is brought to the notice of the Revenue. In this particular case instead of taking steps to bring the legal heirs on record both the authorities below proceeded purportedly to frame the assessment on a dead person.

 

We have further considered the order passed by the Co-ordinate Bench in ITA No. 426/Ahd/2011 for A.Y. 2007-08. While dealing with the identical issue the Hon’ble Tribunal has been pleased to observe as follows:-

 

“5. We have considered rival submissions and perused the orders of the lower authorities and material available on record. The undisputed facts of the case are that the assessee, Shri Vasudev Gordhandas Dapki expired on 23.12.2007 and this fact was brought to the notice of the AO during the course of assessment proceedings vide assessees’s authorized representative, Shri Moihan Shah, Chartered Accountant, letter dated 1.9.2009. The Bench had called for the assessment record to verify whether the said letter was filed by the assessee and was forming part of the assessment record or not. The DR confirmed during the course of hearing by producing the assessment record that the said letter of the assessee dated 1.9.2009 was there in the assessment record. This proves that the assessee’s AR had brought to the notice of the AO the factum of the death of the assessee, Shri Vasudev Gordhandas Dapki. The AO, thereafter, instead of taking steps to bring the legal heirs on record, proceeded to frame the assessment of a dead person. Thus, this issue is covered by the decision of this Bench of the Tribunal in the case of ITO Vs. Shri Akhter Nooruddinahmed Saiyed (supra) wherein the Tribunal held as under:

 

“This is an appeal filed by the assessee against the order of the CIT(A), Valsad dated 27.12.2012 by taking the following grounds of appeal:

 

1. On the facts and circumstances of the case, and in law, the learned CIT(A) has erred in restricting the addition from Rs 18,34,600/- to Rs 1,66,949/- as G.P. @ 9.10% made on account of the undisclosed income.

 

2. On the facts and circumstances of the case, and in law, the learned CIT(A) has erred in deleting the addition made on account of disallowances of expenses of Rs 7,78,364/-.

 

2. Notice was issued to the respondent assessee by Registered Post with Acknowledgement Due on 07.05.2014 which was returned by the postal authorities on 09.05.2014 with the remarks “deceased”.

 

3. The Departmental Representative at the time of the hearing filed before us copy of the death certificate of the assessee Shri Akhter Nooruddinahmed Saiyed and pointed out therefrom that the assessee expired on 29.12.2009 and the impugned order of assessment was passed by the Assessing Officer on 21.11.2011. As the assessment has not been made in the name of the legal representative, therefore the assessment should be set aside and the matter should be restored back to the file of the Assessing Officer for making assessment afresh after bringing legal representatives of the assessee on record.

 

4. We have heard the Departmental Representative and perused the orders of lower authorities and material available on record. We find that in the instant case, the assessment order was passed on late Shri Akhter Nooruddinahmed Saiyed u/s. 143(3) of the Act on 21.11.2011, and thereafter, the CIT(A) passed the appellate order on 27.12.2012. According to the death certificate of Shri Akhter Nooruddinahmed Saiyed filed before us by the Departmental Representative, the assessee had expired on 29.12.2009 which was much before the date of passing of the assessment order.

 

5. It may be recalled that in the case of Ellis C. Reid v. CIT 5 ITC 100 the Bombay High Court had held that where a person died after the commencement of the assessment year but before his income of the previous year was assessed, his executor was not liable to pay the tax and that if the death occurred while assessment proceedings were pending, the proceedings could not be continued and the assessment could not be made after the person’s death: This view of the Bombay High Court led the Legislature to introduce Section 24B in the1922 Act in 1933. Section 24B corresponds to Section 159 of the present Act. The relevant part of Section 159 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 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 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 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.

 

A study of Sub-section (1) of Section 159 clearly shows that it is by a legal fiction created in the provision that the legal representative of a deceased person had been made 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. The legal representative of the deceased, as has been laid down in Sub-section (3) of Section 159 are, by such legal fiction, deemed to be the assessees. Sub-section (2) of Section 159 lays down the conditions of applicability of the provisions of Section 159. Clause (a) of Sub-section (2) says that any proceedings 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. For the applicability of this clause the proceedings for making an assessment or for the purpose of levying any sum should have been taken against the deceased in his lifetime and these would be such proceedings which may be continued against the legal representative from the stage at which such proceedings stood on the date of the death of the deceased. Clause (b) of Sub-section (2) says that any proceedings which could have been taken against the deceased if he had survived may be taken against the legal representative. This clause obviously deals with the situation where the proceedings are contemplated to be taken against the estate of the deceased after his death. Since the legal representative of the deceased represents his estate such proceedings may be taken against them. The study of these provisions clearly brings us to hold that only those proceedings for making assessment or levying any sum may be taken against the deceased, so that they may be continued after his death, which have been taken in his lifetime. In his lifetime such proceedings would necessarily be taken against and in the name of the deceased. However, if the deceased had died before any such proceedings could have been taken against him, the proceedings may be taken against the legal representative of the deceased under the provisions of Sub-clause (b) of Sub-section (2) of Section 159. It is clearly inferred that assessment under the Act can only be made against an individual assessee who must be a living person.

 

6. In the case of CIT v. Amarchand N. Shroff [1963] 48 ITR 59 the Supreme Court held that the individual has ordinarily to be a living person and there could be no assessment on a dead person. With regard to the legal fiction, as has been created Under Section 159 of the Act, their Lordships of the Supreme Court referring to their earlier decision in the case of Bengal Immunity Co. Ltd. v. State of Bihar (sic.) observed that legal fictions are only for a definite purpose for which they are created and should not be extended beyond that limited field. The same principle was reiterated by the Supreme Court in the case of First Addl. ITO v. Mrs. Suseela Sadanandan [1965] 57 ITR 168 where it was held that on the death of a person the Income-tax Officer has to proceed against the executor and/or legal representative of the deceased. The proposition laid down by the Supreme Court in the above cases was followed by the Calcutta High Court in the case of CIT v. Shantilal C. Mehta [1978] 113 ITR 79 where it was held that on the death of an assessee, his estate remains liable for payment of taxes accruing both before and after his death. After the death of the assessee, the assessment proceedings can only continue in the name of his legal representative. The Andhra Pradesh High Court in the case of CIT v. C.V. Raghava Reddy [1984] 148 ITR 385 following the same principle held that Under Section 159 a proceeding could be continued against the legal representative of the deceased assessee only if it had been initiated when the assessee was alive. It is thus well settled that an assessment made on a dead person would, on the face of it, be a nullity in law.

 

10. In the instant case, the Departmental Representative could not bring any material before us to show that the impugned assessment order was passed after issuing any notice to the legal representative of the deceased individual. Therefore, in our considered view, the appeal filed by the Revenue is not maintainable. We, therefore, dismiss the same.”

 

6. Respectfully following the above decision of the Tribunal, we hold that the assessment order passed under section 143(3) dated 30.9.2009 is bad in law, and therefore, we cancel the same, and allow the appeal of the assessee. “

 

It appears that in the above matter it was decided that a proceeding could be continued against the legal representative of the deceased assessee only if it had been initiated when the assessee was alive. Thus, it has been decided that the assessment made on dead person, on the face of it, be a nullity in law. In the case in hand, we find that when the factum of death was brought to the notice of the authorities below, instead of substituting the legal heirs of the assessee in the file of the Revenue both the authorities below proceeded with and finalized the assessment against the assessee, Late Ghanshyam H Parsana, since deceased which is unlawful, arbitrary, erroneous and bad in law. Our observations become strengthen by the ratio laid down in the above narrated matter by the Co-ordinate Bench in identical issue and respectfully relying on the same we find no merit in the proceeding itself having been continued and finalized against the dead person which is void ab initio and the same is liable to be quashed. We pass order accordingly. The assessee’s appeal is, therefore, allowed.

9. In the result, assessee’s appeal is allowed.

This Order pronounced in Open Court on 31/08/2020