2025 (6) TMI 1919 - AT - Income Tax

Order passed against a dead person - proceedings and assessments conducted against a deceased individual without bringing the legal representatives - Admission of additional evidence submitted by the legal representatives HELD THAT - CIT(A) issued all the 4 notices after the death of assessee at the email address given in Form 35. The AO was informed by the L/R as per letter dated 18.6.2018. The L/R went to the AO in response to letter written by the AO to Corporation Bank on 14.2.2019 intimating the outstanding demand. AO was also submitted a copy of death certificate and Will of the assessee. It appears that the AO despite these did not inform the ld. CIT(A) also about the death of assessee. CIT(A) passed an order in the name of assessee Sri Madaiah Manjunath on 8.6.2023 when he has already passed away on 8.9.2018. Therefore the order of the ld. CIT(A) passed on the dead person cannot be sustained. Further the notices issued are also after the death of assessee therefore apparently the L/R of the assessee did not get an opportunity to present his case before the ld. CIT(A). Before us the assessee has submitted an application under Rule 29 for admission of additional evidences wherein the bank statement of the assessee copies of sale deed copies of the Will etc. are furnished as additional evidence. In these peculiar circumstances we admit the additional evidence as the ld. CIT(A) has decided the appeal holding that assessee does not want to prosecute the appeal and on merits nothing is presented before him we restore the appeal back to the file of ld. CIT(A) with a direction to consider the additional evidence placed before us and to decide the issue afresh after giving reasonable opportunity of hearing to the L/R of the assessee. Appeal of the assessee is allowed for statistical purpose.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

- Whether the appellate order passed by the National Faceless Appeal Centre (NFAC) against the deceased assessee without impleading the legal representatives (L/R) is valid in law.

- Whether the proceedings and assessments conducted against a deceased individual without bringing the legal representatives on record violate the provisions of Section 159 of the Income-tax Act, 1961.

- Whether the failure of the Assessing Officer (AO) to inform the appellate authority about the death of the assessee and to implead the legal representatives amounts to a jurisdictional defect.

- Whether the delay of 503 days in filing the appeal by the legal representatives is liable to be condoned on sufficient cause.

- Whether additional evidence submitted by the legal representatives ought to be admitted and considered by the appellate authority.

- Whether it is necessary to adjudicate the merits of the appeal in view of the procedural irregularities and the death of the assessee during pendency of the appeal.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of appellate order passed against a deceased individual without impleading legal representatives

Relevant legal framework and precedents: The Tribunal considered Section 159 of the Income-tax Act, 1961, which mandates that when an assessee dies, the legal representatives must be brought on record for continuation of assessment or appeal proceedings. The Tribunal also referred to judicial precedents emphasizing that a deceased individual is not a "person" in the eye of law, and hence proceedings against a dead person without impleading legal representatives are invalid. The Tribunal cited a judgment of the Hon'ble High Court of Delhi which held that issuance of notice to the correct person is a condition precedent to the validity of reopening assessments.

Court's interpretation and reasoning: The Tribunal observed that the assessee died on 8.9.2018 during the pendency of the appeal before the CIT(A). The legal representatives were unaware of the appeal and did not receive notices. Despite being informed of the death and submission of the death certificate and Will to the AO, no steps were taken by the AO to inform the CIT(A) or to implead the legal representatives. The CIT(A) continued to issue notices and ultimately passed the appellate order on 8.6.2023 against the deceased assessee, which the Tribunal held to be "unsustainable in the eye of law."

Key evidence and findings: The Tribunal noted correspondence from the legal representatives to the AO dated 18.6.2019 informing about the death and requesting impleadment. The AO did not communicate this to the CIT(A). Notices were issued to the deceased person's email address after death. The appellate order was passed without any opportunity to the legal representatives.

Application of law to facts: The Tribunal held that the failure to bring legal representatives on record and continue proceedings against a dead person is a jurisdictional defect. The impugned appellate order is therefore invalid. The Tribunal emphasized that the AO ought to have informed the appellate authority about the death and the legal representatives' request to be impleaded.

Treatment of competing arguments: The Revenue did not dispute the death of the assessee or the legal representatives' request but contended the appeal was delayed. The Tribunal distinguished the procedural delay from the substantive legal defect of passing orders against a deceased person without impleading legal representatives.

Conclusion: The appellate order passed against the deceased assessee without impleading legal representatives is invalid and unsustainable in law.

Issue 2: Condonation of delay of 503 days in filing the appeal by legal representatives

Relevant legal framework: The Tribunal applied the principle of "sufficient cause" under the procedural rules governing appeals before the Tribunal, which permits condonation of delay if the appellant demonstrates reasonable cause beyond their control for delay.

Court's interpretation and reasoning: The Tribunal found that the legal representatives were unaware of the appeal proceedings until June 2019, when they received a letter from the AO to the bank regarding outstanding tax demand. They promptly informed the AO of the death and requested impleadment. The legal representatives were advised to obtain a succession certificate before filing the appeal, which was obtained only in September 2024. Further, health issues delayed filing until January 2025.

Key evidence and findings: Affidavit dated 13.1.2025 explaining the delay, correspondence with counsel, and the timeline of succession certificate procurement and health issues were taken into account.

Application of law to facts: The Tribunal concluded that the delay was due to circumstances beyond the control of the legal representatives and that they acted bona fide and with due diligence once aware of the proceedings.

Treatment of competing arguments: The Revenue opposed the delay but did not dispute the facts. The Tribunal found the explanation credible and sufficient.

Conclusion: The delay of 503 days in filing the appeal is condoned and the appeal admitted.

Issue 3: Admission of additional evidence by legal representatives

Relevant legal framework: The Tribunal considered Rule 29 of the Income Tax Appellate Tribunal Rules which permits admission of additional evidence in exceptional circumstances.

Court's interpretation and reasoning: The Tribunal admitted the additional evidence including bank statements, sale deeds, and the Will, considering the peculiar circumstances of the case where the legal representatives were not parties to the original proceedings and only recently became aware.

Application of law to facts: The Tribunal found that the additional evidence was relevant and material to the appeal and that refusal to admit it would cause prejudice to the legal representatives.

Conclusion: Additional evidence is admitted for fresh consideration by the appellate authority.

Issue 4: Necessity of adjudicating the merits of the appeal

Court's reasoning: Since the appellate order was passed without impleading the legal representatives and without opportunity, and the appeal was dismissed for non-prosecution, the Tribunal found it appropriate to restore the appeal to the file of the CIT(A) for fresh adjudication after impleading the legal representatives and considering the additional evidence.

Conclusion: The appeal is restored for fresh hearing and decision on merits by the CIT(A). Other grounds of appeal on merits are not adjudicated at this stage.

3. SIGNIFICANT HOLDINGS

- "The order of the ld. CIT(A) passed on the dead person cannot be sustained. Further the notices issued are also after the death of assessee, therefore apparently the L/R of the assessee did not get an opportunity to present his case before the ld. CIT(A)."

- "Framing assessment or reassessment proceedings on a non-existent person is a jurisdictional defect and the same cannot be cured under Section 292B of the Act."

- "The AO ought to have intimated the death of the assessee to ld. CIT(A), as soon as he came to know about it."

- "Looking at the causes stated above, the assessee acted in a bonafide manner, and the delay was due to circumstances beyond the control of LR. Thus, I find that there is sufficient cause in not filing the appeal in time. Accordingly, I condone the delay and admit the appeal."

- "The appeal is restored back to the file of ld. CIT(A) with a direction to consider the additional evidence placed before us and to decide the issue afresh after giving reasonable opportunity of hearing to the L/R of the assessee."

Core principles established include the necessity to implead legal representatives upon the death of an assessee during pendency of proceedings, the invalidity of passing orders against a deceased person, the requirement for the AO to inform appellate authorities of such death, and the discretion to condone delay in filing appeals when sufficient cause is shown.

Final determinations:

- The appellate order passed against the deceased assessee without impleading legal representatives is set aside.

- The delay in filing the appeal by the legal representatives is condoned.

- Additional evidence submitted by the legal representatives is admitted.

- The appeal is restored to the CIT(A) for fresh adjudication after impleading the legal representatives and considering the additional evidence.