2016 (10) TMI 1241 - AT - Income Tax

Reopening of assessment u/s 147 - assessment passed in the name of dead person - addition on account of enhanced compensation and assessing the same as capital gain and also not granting the exemption under section 10(37) - Held that - Notice under section 148 dated 25.03.2013 issued is invalid and have not been served upon deceased assessee or the legal heirs which is essential to make re-assessment order. No valid re-assessment order have been passed being it is passed in the name of dead person. In this view of the matter we set aside and quash notice under section 148 of the Act as well as the re-assessment order under section 143(3)/147 dated 28.02.2014. The ld. CIT(Appeals) was therefore not justified in upholding the re-opening of the assessment in the matter. Resultantly we quash the impugned order as well. - decided in favour of assessee.

Summary

Issues Involved:
1. Validity of notice under section 148 and assessment order under section 143(3)/147.
2. Service of notice and opportunity of being heard.
3. Addition of Rs. 7,24,46,572/- as capital gain and exemption under section 10(37).

Issue-wise Detailed Analysis:

1. Validity of Notice under Section 148 and Assessment Order under Section 143(3)/147:
The assessee challenged the validity of the notice under section 148 and the subsequent assessment order under section 143(3)/147, asserting that the notice was issued to a deceased individual, Shri Yoginder Singh, who had expired on 08.04.2008. The Assessing Officer (AO) issued the notice on 25.03.2013, which was returned with remarks indicating the addressee had expired. The AO continued proceedings without bringing the legal heirs on record, deeming the assessment order invalid and nullity. The Tribunal held that the notice under section 148 issued to a dead person is invalid and the assessment order passed in the name of the deceased without legal heirs is void.

2. Service of Notice and Opportunity of Being Heard:
The assessee argued that the notice under section 148 was never served upon the deceased or the legal heirs, thus violating the principles of natural justice. The Tribunal noted that the AO was aware of the death of the assessee and the identity of the legal heirs from previous assessment records. Despite this, the AO failed to issue the notice to the legal heirs and proceeded to pass the assessment order in the name of the deceased. The Tribunal emphasized that valid service of notice is a jurisdictional requirement, and in this case, the notice was not served as per legal provisions, making the reassessment proceedings null and void.

3. Addition of Rs. 7,24,46,572/- as Capital Gain and Exemption under Section 10(37):
The assessee contested the addition of Rs. 7,24,46,572/- as capital gain and the denial of exemption under section 10(37). The CIT(A) upheld the addition and disallowed the exemption, following the order for the assessment year 2007-08. However, since the Tribunal quashed the reassessment proceedings on the grounds of invalid notice and assessment order, the addition on merit was not decided, as it became academic.

Conclusion:
The Tribunal quashed the notice under section 148 and the reassessment order under section 143(3)/147, deeming them invalid and void due to being issued in the name of a deceased person without bringing legal heirs on record. Consequently, all additions made in the reassessment order were deleted, and the appeal of the assessee was allowed.