2025 (7) TMI 1311 - HC - Income Tax

Rectification of mistake u/s 154 - benefit of Tax Deducted at Source from the salary income of her husband as deceased - as alleged income shown by the petitioner in the return of income belonged to her late husband - Instead of filing the return of income in the name of late husband of the petitioner in capacity as legal representative u/s 159 petitioner filed return of income in her name HELD THAT - As petitioner submits that the petitioner shall file a return of income in name of her husband as legal representative offering the income from salary earned by late husband of the petitioner for the Assessment Year 2014-15 to claim TDS deducted from such salary as per Form No. 16 issued by the respondent No. 3-ONGC within a period of two weeks from the date of receipt of copy of this order. The respondent-Centralized Processing Center is directed to process such return expeditiously without raising any defect on account of limitation and the limitation to file return is ordered to be waived in the facts of the case. With the aforesaid directions the petition is disposed of. Notice is discharged. It is a trite law to consider that amount of TDS deducted from salary of late husband would be if not adjusted or paid against the tax liability if any arising in the hands of late husband of the petitioner would amount to unjust enrichment in the hands of the Revenue.

Summary

ISSUES:

Whether a return of income filed by a legal heir in her own name claiming salary income and TDS of her deceased husband is valid under the Income Tax Act, 1961.Whether TDS deducted on salary income of a deceased taxpayer can be credited against the tax liability of the legal heir who filed return in her own name.Whether rectification under section 154 of the Income Tax Act is maintainable when TDS credit is denied due to incorrect PAN linkage.Whether the petitioner can be permitted to file return of income as legal representative of the deceased taxpayer after registration under the Act and rules.Whether interest under section 244A of the Income Tax Act is payable on refund arising from delayed filing of return by legal heir.Whether limitation for filing return can be waived in circumstances involving ill-advice and procedural errors by a layperson.

RULINGS / HOLDINGS:

The return of income filed by the petitioner in her own name showing salary income of the deceased husband is invalid as the income does not belong to the petitioner; as per the decision in Income Tax Officer vs Ch. Atchaiah, "the right person is required to be taxed under the provisions of the Act."TDS deducted on salary income of the deceased husband cannot be credited to the petitioner's PAN as the TDS was not deducted in her name; the TDS credit must be given against the PAN of the deceased taxpayer or his legal representative.The application for rectification under section 154 was rightly rejected because no TDS was deducted in the petitioner's PAN and "no rectification is required to be made to the order passed under section 143(1) of the Act."The petitioner is permitted to file return of income for the Assessment Year 2014-15 in the name of her late husband as legal representative after proper registration under the Act and Income Tax Rules, and the Assessing Officer is directed to process such return accordingly.The petitioner is not entitled to interest under section 244A on any refund payable, as the return in the name of the deceased was not filed in time.The limitation for filing the return as legal representative is waived in the interest of justice due to the petitioner's ill-advice and procedural error.

RATIONALE:

The Court applied the statutory provisions of the Income Tax Act, 1961, particularly sections 143(1), 154, 159, and 244A, and relied on the precedent set by the Supreme Court in Income Tax Officer vs Ch. Atchaiah, emphasizing that income must be taxed in the hands of the "right person."The Court recognized the procedural requirements for legal representatives to file returns on behalf of deceased taxpayers, including registration on the Income Tax E-portal as prescribed by the Act, Rules, and CBDT notifications.The Court exercised its extraordinary jurisdiction under Article 226 of the Constitution of India to provide relief, noting that conventional remedies under sections 264 and 119 of the Act were inadequate to address the petitioner's situation caused by ill-advice.The decision reflects a doctrinal emphasis on preventing unjust enrichment of the Revenue by ensuring that TDS deducted on salary income is appropriately credited and that tax liability is assessed against the correct taxpayer or legal representative.