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Commissioner of Income Tax –VIII, Chennai Versus Shri M. Hemanathan

2016 (4) TMI 258 - MADRAS HIGH COURT

Revision orders u/s 263 - order passed against a dead person - Held that:- The contention of the Department loses sight of one important distinction between a case where the proceedings are initiated against a person, who is alive, but continued after his death and a case of proceedings initiated against a dead person himself. If the proceedings had been initiated against a person, who was alive, and they were continued after his death after putting his legal heirs on notice, those proceedings, .....

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ad. It was the assessee's son, who appeared and perhaps cooperated. Therefore, the primary condition for the invocation of Section 292BB is absent in the case on hand.

As we have pointed out earlier, the original order of assessment was a scrutiny assessment passed under Section 143(3) on 23.6.2011. After two years, the Commissioner sought to invoke Section 263. The assessee had died in the meantime on 13.6.2013. The show cause notice under Section 263 was issued on 6.9.2013.We can gi .....

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), the deeming fiction could have been taken advantage of by the Department. It is too late in the day for the Department to take advantage of the same. Thus the very initiation of the proceedings against the dead person and the continuation of the same despite having noticed the factum of death of the assessee, cannot be approved. - Decided in favour of assessee - Tax Case Appeal No. 199 of 2016 - Dated:- 23-3-2016 - V. Ramasubramanian And M. Duraiswamy, JJ. For the Appellant : Mr. R. Swaminath .....

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x Act on a dead person without noting that the Commissioner of Income Tax has impleaded the legal heirs of the assessee? and (2) Whether on the facts and circumstances of the case, the Tribunal was right in not considering the crucial fact that the notice under Section 263 of the Income Tax Act was served on the legal representative and the opportunity of being heard was given to the legal representative and his authorised representative appeared and attended the hearings before the Commissioner .....

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sessee participated in the proceedings, produced books of accounts and presented his case through an authorised representative. Thereafter, the Assessing Officer passed an order dated 23.6.2011, recomputing the income and ultimately arriving at the conclusion that an amount of ₹ 57,162/- was due as refund by the Department to the assessee. It must be noticed that this is a case of scrutiny assessment. 4. After two years of passing of the assessment order, the Commissioner of Income Tax iss .....

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ion dated 23.9.2013. 6. It appears that thereafter the Department served the very same show cause notice on the son of the deceased assessee through a messenger. Left with no alternative, the son engaged the services of an authorised representative, who participated in the proceedings under Section 263. 7. Eventually, an order was passed by the Commissioner on 21.3.2014, sustaining the show cause notice, setting aside the scrutiny assessment order dated 23.6.2011 and remitting the matter back to .....

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efore us. 9. The contentions of Mr.M.Swaminathan, learned Standing Counsel for the Revenue are three fold namely (i) that the Tribunal was wrong in setting aside the order under Section 263 as a nullity only on the basis that it was passed against a dead person without realising that the legal heir had participated in the proceedings (ii) that under Section 292BB, the notice issued against a dead person, cannot be taken to be a nullity under certain circumstances and (iii) that under Section 159 .....

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tire proceedings are a nullity. 12. But unfortunately, the said contention loses sight of the settled position that any proceeding initiated against a dead person is a nullity. The contention of the learned Standing Counsel for the Department loses sight of one important distinction between a case where the proceedings are initiated against a person, who is alive, but continued after his death and a case of proceedings initiated against a dead person himself. If the proceedings had been initiate .....

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d after his death against the legal heirs. Hence, the first contention is rejected. 13. The second contention revolves around Section 292BB of the Act, which reads as follows : "292BB. Notice deemed to be valid in certain circumstances. Where an assessee has appeared in any proceeding or co- operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon .....

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uld show that the same would apply only to two types of proceedings namely (i) proceedings, in which, the assessee had appeared and (ii) any inquiry, in which, the assessee had cooperated. 15. In the case on hand, the assessee was dead. It was the assessee's son, who appeared and perhaps cooperated. Therefore, the primary condition for the invocation of Section 292BB is absent in the case on hand. 16. Section 292BB is in place to take care of contingencies where an assessee is put on notice .....

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y initiation of proceedings is against a dead person. Hence, the second contention cannot also be upheld. 17. The third contention revolves around Section 159(2). It will be useful to extract Section 159 in entirety. It reads as follows : "159. Legal representatives.-(1) 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. (2) For the purpos .....

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the death of the deceased ; (b) any proceeding which could have been taken against the deceased if he had survived, may be taken against the legal representative; and (c) all the provisions of this Act shall apply accordingly. (3) The legal representative of the deceased shall, for the purposes of this Act, be deemed to be an assessee. (4) Every legal representative shall be personally liable for any tax payable by him in his capacity as legal representative if, while his liability for tax remai .....

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ive. (6) The liability of a legal representative under this section shall, subject to the provisions of Sub-Section (4) and Sub-Section (5), be limited to the extent to which the estate is capable of meeting the liability." 18. Sub-Section (1) of Section 159 would apply to a case where a liability has already crystallised. The death of an assessee would not absolve the legal heirs of the assessee of any liability that the assessee had incurred during his life time. In the case on hand, the .....

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the death. Clause (a) of Sub-Section (2) uses the expression 'before his death'. Therefore, Clause (a) would not apply to the case on hand. 20. Clause (b) is probably more advantageous to the Revenue, if at all it could be taken advantage by the Revenue. Clause (b) attempts to save the situation where the right of the Revenue to proceed against the assessee was available at the time when the assessee had passed away. Take for instance cases where the Appellate Authority has decided an is .....

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ad. The Income Tax Officer's letter dated 23.9.2013 informing his superior that the notice under Section 263 returned with the endorsement of the Postal Department to the effect that the addressee was dead, clinches the fact. Despite being put on notice that the noticee was dead, the Department chose to pursue the very same notice. In such circumstances, Clause (b) of Sub-Section (2) of Section 159 cannot be taken advantage of by the Department. 22. Sub-Section (3) of Section 159 contains a .....

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in terms of Sub-Section (3) and hence, his participation would pre-empt him from taking objection to the fact that the notice was addressed to a dead person. 24. Though at first blush, the contention appears to be well founded, we do not think that the Department can raise it in this case. As we have pointed out earlier, the original order of assessment was a scrutiny assessment passed under Section 143(3) on 23.6.2011. After two years, the Commissioner sought to invoke Section 263. The assessee .....

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159. If the Department had issued the notice addressed to the legal heir himself, by taking recourse to Section 159(3), the deeming fiction could have been taken advantage of by the Department. It is too late in the day for the Department to take advantage of the same. 26. Mr.M.Swaminthan, learned Standing Counsel drew our attention to the decision of the Madhya Pradesh High Court in Smt.Kaushalyabai Vs. CIT [238 ITR 1008] and contended that once the legal heir of the deceased assessee had parti .....

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refore, the proceedings were initiated under Section 147. In the meantime, the assessee expired on 12.1.1981. Notices were issued on 3.3.1981 and they were received by the legal heirs. In response to the notices, the legal heirs actually filed returns for all these years under protest. 28. Therefore, there are two reasons as to why we cannot go by the ratio decidendi in Kaushalyabai. The first is that in response to the notices, the assessee's legal heirs filed returns of income. In other wo .....

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