2025 (1) TMI 1584 - AT - Income Tax

Reopening of assessment against dead asseesee - status of legal representative at this stage u/sec. 2(29) - tax authorities to issue notice of proceedings under the Act on the correct person i.e. all the legal representatives of the deceased assessee in this case - disallowance of speculation loss shown on account of trading in commodities and being the speculation profit earned through Divya Commodities by invoking the provisions of section 68 - difference of opinion between the Hon ble Members constituting the Division Bench HELD THAT - A perusal of the reasons so recorded shows that the AO has reopened the assessment on the ground that the assessee has purchased shares worth Rs. 6, 77, 00, 975/- from unaccounted cash which has escaped assessment. However in the order passed u/s 143(3) r.w.s. 147 AO has made addition of Rs. 1, 95, 90, 855/- by disallowing the speculation loss shown on account of trading in commodities and Rs. 77, 35, 444/- u/s 68 being the speculation profit earned through Divya Commodities as unexplained income. Thus there is absolutely no addition on account of which the case was reopened but certain other additions have been made. Therefore the re-assessment proceedings in the instant case are not in accordance with law and are liable to be quashed in view of the decision of Jet Airways (I) Ltd. 2010 (4) TMI 431 - BOMBAY HIGH COURT and various other decisions which the Ld. Judicial Member has adopted. Although the Ld. Accountant Member agrees with this proposition however he proceeded to dismiss the appeal as infructuous on the ground that all the legal heirs were not brought on record and it is incumbent upon the tax authorities to issue notice of proceedings under the Act on the correct person i.e. all the legal representatives of the deceased assessee in this case. He held that in the absence of compliance to provisions of section 159 r.w.s. 2(29) of the Act the appeal deserves to be dismissed with a leave to revive. This argument of the Ld. Accountant Member in my opinion is nothing but to prolong the litigation and harass the assessee. Once it is held that the reassessment proceedings are not in accordance with law and are liable to be quashed and since one of the legal heirs had participated in the appeal proceedings and in whose name the appeal order has been passed by the Ld. CIT (A) / NFAC the matter should have rested there. Thus as answered the appellant herein admittedly son of the deceased-assessee expired on 11.08.2020 during pendency of the lower appellate proceedings) could not be denied status of the latter s legal representative at this stage u/sec. 2(29) of the Income Tax Act 1961 read with sec. 2(11) of the Code of Civil Procedure 1908. In the facts and circumstances of the case the appellant herein could not be held as not having any locus standi as the legal representative of the deceased-assessee) for purpose of invoking this tribunal s sec. 254(1) jurisdiction. Appellant is not barred from involving sec. 254(1) appellate jurisdiction of this tribunal in absence of the remaining legal heirs of his father/deceased-assessee. In facts and circumstance and in law the impugned order dismissed as infructuous by the first appellate authority u/s 250(6) of the Act owning to non-compliance of section 159 r.w.s. 2(29) of the Act is appealable u/s 253(1)(a) of the Act and is maintainable under the facts of the case. Matter may now be placed before the regular Bench for an appropriate order in accordance with law.

Summary

ISSUES:

Whether the appellant, as the son and legal representative of the deceased assessee, can be denied status as legal representative under section 2(29) of the Income Tax Act, 1961 read with section 2(11) of the Code of Civil Procedure, 1908, once the NFAC has confirmed the assessment findings in his hands'Whether the appellant lacks locus standi as the legal representative of the deceased assessee to invoke the Tribunal's jurisdiction under section 254(1) of the Income Tax Act, given the NFAC's contradictory findings on his status'Whether the appellant is barred from invoking the Tribunal's section 254(1) appellate jurisdiction in absence of other legal heirs of the deceased assessee'Whether an order dismissed as infructuous by the first appellate authority under section 250(6) of the Act due to non-compliance with section 159 read with section 2(29) of the Act is appealable and maintainable under section 253(1)(a) of the Act'Whether an appeal filed without compliance to section 159 read with section 2(29) of the Act is maintainable in law, particularly in light of precedent'Whether the appellant is entitled to prosecute the appeal without establishing on record with cogent evidence that he solely represents the estate of the deceased among multiple legal heirs'Whether the reassessment proceedings are valid when additions made are unrelated to the reasons recorded for reopening under section 147 of the Act?

RULINGS / HOLDINGS:

The appellant could not be denied status as the legal representative of the deceased assessee under section 2(29) of the Income Tax Act read with section 2(11) of the Code of Civil Procedure at this stage, especially since the NFAC confirmed the assessment findings in his hands.The appellant has locus standi as the legal representative of the deceased assessee for the purpose of invoking the Tribunal's jurisdiction under section 254(1), notwithstanding the NFAC's contradictory findings on his status.The appellant is not barred from invoking the Tribunal's section 254(1) appellate jurisdiction due to the absence of other legal heirs of the deceased assessee.The impugned order dismissed as infructuous by the first appellate authority under section 250(6) due to non-compliance with section 159 read with section 2(29) is appealable under section 253(1)(a) and maintainable under the facts and circumstances of the case.An appeal filed without compliance to section 159 read with section 2(29) is maintainable in law, consistent with the decision rendered by this Bench in Yogesh Bhomraj Ponval Vs PCIT.The appellant is entitled to prosecute the appeal without establishing on record with cogent evidence that he solely represents the estate among two sons and the widow of the deceased.The reassessment proceedings are not in accordance with law and are liable to be quashed where additions made are unrelated to the reasons recorded for reopening under section 147, following the jurisdictional High Court precedent.

RATIONALE:

The Court applied the definitions of "legal representative" under section 2(29) of the Income Tax Act, 1961 and section 2(11) of the Code of Civil Procedure, 1908, emphasizing the principle that once a legal representative is recognized in appellate proceedings, such status cannot be arbitrarily denied.The Court relied on the principles of locus standi in tax appellate proceedings, holding that the recognized legal representative has standing to invoke appellate jurisdiction under section 254(1), despite contradictory findings by the NFAC on an "alternative" basis.The Court referred to the statutory scheme under sections 159 and 2(29) of the Income Tax Act regarding representation of deceased assessee's estate, and held that absence of other legal heirs does not bar the appellant from proceeding.The Court interpreted the appealability provisions under section 253(1)(a) and the effect of non-compliance with procedural requirements under section 159 read with 2(29), holding that dismissal as infructuous does not preclude maintainability of appeal.The Court considered prior decisions of the Bench, including the recent ruling in Yogesh Bhomraj Ponval Vs PCIT, to uphold the maintainability of appeals filed without strict compliance when the appellant is a legal representative.The Court followed the precedent set by the jurisdictional High Court in CIT vs. Jet Airways (I) Ltd., holding that reassessment proceedings are invalid if additions made are unrelated to the reasons recorded for reopening under section 147, emphasizing the requirement of nexus between reopening grounds and additions.The differing views of the Judicial and Accountant Members were reconciled by emphasizing that prolonging litigation on procedural grounds when reassessment is quashed serves no purpose, and the participation of one legal heir suffices to proceed.