1981 (4) TMI 177 - AT - Income Tax

Summary

Issues:
- Penalty imposition under section 271(1)(a) of the IT Act, 1961 for the assessment years 1971-72, 1972-73, and 1973-74.
- Validity of penalty orders issued by the ITO against the legal heir of the deceased assessee without a reasonable opportunity of being heard.
- Interpretation of section 274 of the IT Act regarding the requirement of giving a reasonable opportunity of being heard before imposing penalties.
- Applicability of section 159(2)(a) of the IT Act in penalty proceedings against a deceased assessee.

Analysis:
The appeals were filed against the penalty orders imposed by the ITO under section 271(1)(a) of the IT Act, 1961 for the assessment years 1971-72, 1972-73, and 1973-74. The penalties were confirmed by the AAC, leading to the consolidated appeal. The delays in filing the returns ranged from 25 to 62 months, prompting penalty proceedings by the ITO. The penalties were imposed without the assessee providing any explanation, resulting in penalties of varying amounts.

The main contention raised before the AAC was that the penalties were imposed on the legal heir of the deceased assessee without a reasonable opportunity of being heard, as required under section 274 of the IT Act. The AAC, however, held that the notices were issued before the penalty orders and that no reasonable cause for the delays in filing the returns was shown. Consequently, the AAC confirmed the penalties and dismissed the appeals.

Upon further appeal, the ITAT considered the issue of whether the penalties imposed on the legal heir without issuing a fresh notice after the death of the assessee were valid. Citing a previous case, the ITAT emphasized the necessity of issuing a fresh notice to the legal heir before imposing penalties in such circumstances. Despite the provision under section 159(2)(a) allowing proceedings against the legal representative, the ITAT deemed the penalty orders invalid due to the lack of notice to the legal heir. As a result, the ITAT canceled the penalty orders for all three assessment years and directed any penalties already paid to be refunded to the assessee.

In conclusion, the ITAT allowed all three appeals in full, emphasizing the importance of providing a reasonable opportunity of being heard and issuing proper notices in penalty proceedings involving deceased assessees and their legal heirs.