2025 (7) TMI 256 - HC - Income Tax

Delay caused in filing the return of the deceased - Refund claim made by the petitioner in the capacity as legal representative of the deceased - Definition of legal representative as provided under Section 2(29) of the IT Act and Section 2(11) of the CPC - liability and assessment of income tax in the hands of the legal representative of a deceased person. HELD THAT - It is not in dispute that petitioner is the son of the deceased. He comes under the definition of Legal Representative as contained under Section 2(29) of the IT Act and Section (11) of CPC as mentioned hereinabove. The will dated 28/07/1996 (Annex.-P/2) has not been challenged by any of the family member of the petitioner. The Division Bench of this Court in the case of Raghunathdas Kakani 1979 (9) TMI 53 - MADHYA PRADESH HIGH COURT has observed that Section of IT Act creates as fiction and provides for assessment by legal representative on behalf of the deceased which says although the assessee was dead a fiction is created whereunder he is kept alive for the purposes of payment of the tax and the legal representative is made responsible for the payment thereof. It is not disputed that an executor is also included in the term legal representative because the said term is defined to have the same meaning as assigned to it in Clause (ii) of Section 2 of the CPC which states that legal representative means a person who in law represents the estate of a deceased person. The executor is a person who in law represents the estate of the deceased person. We are of the considered view that the respondent has committed an error in raising a doubt with regard to the capacity of the petitioner as legal representative of the deceased assessee and passing the impugned order rejecting his claim for assessment on behalf of the deceased. Ex consequentia this petition has substance succeeds and is hereby allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

- Whether the petitioner, as the executor of the will of the deceased, qualifies as the "legal representative" under Section 2(29) of the Income Tax Act, 1961 (IT Act) and Section 2(11) of the Code of Civil Procedure (CPC) for the purposes of filing income tax returns and claiming refunds on behalf of the deceased.

- Whether the respondent was justified in refusing to exercise powers under Section 119(2)(b) of the IT Act to condone the delay in filing the income tax return for the Assessment Year (AY) 1995-96 by the petitioner as legal representative.

- The applicability and interpretation of Section 159 of the IT Act regarding liability and assessment of income tax in the hands of the legal representative of a deceased person.

- Whether the impugned order rejecting the refund claim and refusing to condone the delay was legal, proper, and in accordance with relevant statutory provisions and binding judicial precedents.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Status of the Petitioner as Legal Representative under the IT Act and CPC

Relevant legal framework and precedents: Section 2(29) of the IT Act defines "legal representative" by reference to Section 2(11) of the CPC, which includes any person who in law represents the estate of a deceased person, including an executor of a will. Section 159 of the IT Act imposes liability on legal representatives for tax dues of the deceased. Judicial precedents considered include:

• Raghunathdas Kakani v. Addl. CIT: Section 159 creates a legal fiction whereby the deceased is deemed alive for tax purposes, and the legal representative (including executor) is liable for payment of tax.
• CIT v. A.M.L. Price: The executor is the legal representative for all purposes, and the deceased's property vests in the executor.
• CIT v. G.B.J. Seth: Affirmed the status of executor as legal representative under the IT Act.

Court's interpretation and reasoning: The Court held that the petitioner, as executor appointed under a valid and uncontested will, squarely falls within the definition of legal representative. The Court emphasized that the respondent erred in doubting the petitioner's capacity as legal representative. The legal fiction created by Section 159 mandates that the executor is responsible for assessment and payment of tax on behalf of the deceased.

Key evidence and findings: The petitioner produced the duly executed will appointing him as executor. The will was not challenged by any family member. The petitioner filed returns for AYs 1996-97 and 1997-98 within the prescribed period, which were accepted by the assessing authority without disputing his representative capacity.

Application of law to facts: The petitioner's status as legal representative was established by the will and accepted in prior assessments. The statutory definitions and judicial precedents confirm that the petitioner was entitled to act and be assessed as legal representative.

Treatment of competing arguments: The respondent's doubt regarding the petitioner's legal representative status was rejected as contrary to statutory provisions and settled case law.

Conclusion: The petitioner is the legal representative of the deceased under the IT Act and CPC and is entitled to file returns and claim refunds accordingly.

Issue 2: Refusal to Condone Delay under Section 119(2)(b) of the IT Act

Relevant legal framework and precedents: Section 119(2)(b) empowers the Commissioner of Income Tax to condone delay in filing returns and accept belated returns in appropriate cases. Circulars No.670 dated 26/10/1993 and order F.No.225/208/96-ITA-II dated 12/10/1993 issued by the CBDT provide administrative guidance on condonation of delay and acceptance of belated returns.

Court's interpretation and reasoning: The Court held that the respondent erred in refusing to exercise discretion under Section 119(2)(b) to condone delay in filing the return for AY 1995-96, especially since the petitioner was acting as legal representative and had a legitimate claim for refund of Tax Deducted at Source. The refusal was contrary to the statutory mandate and CBDT instructions.

Key evidence and findings: The petitioner filed an application on 04/12/1998 requesting condonation of delay and refund claim based on the circulars and CBDT order. The respondent rejected the application by order dated 15/07/2004, communicated in 2006, without proper appreciation of the petitioner's status or the relevant legal provisions.

Application of law to facts: Given the petitioner's established status as legal representative and the statutory discretion under Section 119(2)(b), the refusal to condone delay was unjustified. The petitioner had a right to have the delay condoned and refund processed.

Treatment of competing arguments: The respondent's opposition to condonation was not supported by legal provisions or precedents, and the Court found the impugned order illegal and without jurisdiction.

Conclusion: The respondent is directed to condone the delay under Section 119(2)(b) and proceed with the refund claim.

3. SIGNIFICANT HOLDINGS

- "Section 159 of the Act creates a fiction and provides that where a person dies his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased. Therefore, although the assessee was dead, a fiction is created whereunder he is kept alive for the purposes of payment of the tax and the legal representative is made responsible for the payment thereof. It is not disputed that an executor is also included in the term 'legal representative' because the said term is defined to have the same meaning as assigned to it in Clause (ii) of Section 2 of the CPC which states that 'legal representative' means a person who in law represents the estate of a deceased person. The executor is a person who in law represents the estate of the deceased person."

- The Court established the principle that an executor appointed under a valid will is a legal representative for the purposes of the IT Act and CPC and is entitled to file returns and be assessed accordingly.

- The refusal by the Commissioner to condone delay under Section 119(2)(b) in filing the return of the deceased was held to be illegal and without jurisdiction, especially when the petitioner was acting as legal representative and had a legitimate refund claim.

- The impugned order dated 15/07/2004 rejecting condonation and refund claim was quashed, and the respondent was directed to condone the delay and proceed with the refund claim.