TMI Blog2022 (1) TMI 781X X X X Extracts X X X X X X X X Extracts X X X X ..... eye of law, as discussed above - in the absence of a valid notice, the AO has no authority to assume the jurisdiction to assess the tax liability, therefore continuation of the proceeding under the Income Tax Act, pursuant to such invalid notice, in the name of dissolved (dead) company, is without authority of law. Therefore, impugned notice as well as the proceedings taken pursuant thereto, therefore, cannot be sustained. Therefore, we quash the consequential order passed by the ld PCIT under section 263. Revision u/s 263 - Ad hoc disallowance of 10% of the land development expenses - HELD THAT:- Hon ble Supreme Court in the case of Alagendran Finance Ltd. [ 2007 (7) TMI 304 - SUPREME COURT ] held that in respect of an issue which was not subject-matter of reassessment, the limitation under section 263(2) would run from the date of original assessment and revisional proceedings initiated in respect of such issue beyond the period of two years from the date of original assessment were barred by limitation. However, in assessee s case the issue of land development expenses is there in the order framed by Assessing Officer u/s 143(3) r.w.s. 254 of the Act; which is subject t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one opinion by another opinion. Therefore, the order of the Ld. Pr. C.I.T. cannot be sustained on the principle of erroneous nature of the order of the A.O., as it is not erroneous. Based on the above discussion on assessee`s facts as well as on various precedents applicable to assessee s facts, we are of the view that revisionary jurisdiction exercised by the Ld. Pr. C.I.T. u/s. 263 of the Act was not in tune with the facts and evidences on record duly explained to the Ld. A.O. and verified by him and that being so the order passed u/s. 263 of the Act on such erroneous stand is liable to be quashed. Therefore, we quash the order of the ld. PCIT u/s 263 - Decided in favour of assessee. - I.T.A No.401 And 402/SRT/2018 - - - Dated:- 18-11-2021 - Shri Pawan Singh, Hon'ble Judicial Member And Shri Arjun Lal Saini, Hon'ble Accountant Member For the Assessee : Shri Rasesh Shah, C.A. For the Revenue : Shri H.P. Meena, CIT/ DR ORDER PER DR. A. L. SAINI, AM: In these two appeals, assessee has challenged the correctness of the order passed by the Learned Principal Commissioner of Income Tax ( ld PCIT), under section 263 of the Income Tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said to be in conformity with or according to the intent and purposes of the Act. In this regard, it may be noted that a notice under section 148 of the Act is a jurisdictional notice, and existence of a valid notice under section 148 is a condition precedent for exercise of jurisdiction by the Assessing Officer to assess or reassess under section 147 of the Act. The want of a valid notice affects the jurisdiction of the Assessing Officer to proceed with the assessment and thus, affects the validity of the proceedings for assessment or reassessment. A notice issued under section 148 of the Act against a dead person is invalid, unless the legal representative submits to the jurisdiction of the Assessing Officer without raising any objection. Therefore, where the legal representative does not waive his right to a notice under section 148 of the Act, it cannot be said that the notice issued against the dead person is in conformity with or according to the intent and purpose of the Act which requires issuance of notice to the assessee, whereupon the Assessing Officer assumes jurisdiction under section 147 of the Act and consequently, the provisions of section 292B of the Act would no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout raising any objection. 24. We are of the view that the same principle as referred to above would apply even to a notice issued to a dead assessee under section 153C of the Act. It is not in dispute that the legal heir of late Bhupendrabhai Desai had not participated in the proceedings. All that the legal heir of late Bhupendrabhai Desai did was to inform the Assessing Officer about the death of his father and requested to drop the proceedings. It is true that although the father passed away in the year 2017, yet the legal heir did not inform the department up to October 2019. However, at the same time, we should not overlook the fact that even after coming to know about the demise of late Bhupendrabhai, the department could have issued a valid notice to the legal heir as the period of limitation of 21 months had not expired. We fail to understand what prevented the department from issuing a valid notice to the legal heir within the prescribed time period. 25. In the aforesaid context, we may refer to a recent pronouncement of the Supreme Court in the case of Pr. CIT v. Maruti Suzuki India Ltd. [2019] 107 taxmann.com 375/265 Taxman 575. The ratio of this decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notices were served upon the successor Maharaja and the assessment order was passed describing the assessee as His Highness late Maharaja of Patiala . The successor appealed against the assessment contending that since the notices were sent in the name of the Maharaja of Patiala and not to him as the legal representative of the Maharaja of Patiala, the assessments were illegal. The Bombay High Court held that the successor Maharaja was a legal representative of the deceased and while it would have been better to so describe him in the notice, the notice was not bad merely because it omitted to state that it was served in that capacity. Following these two decisions, this Court in Jai Prakash Singh held that an omission to serve or any defect in the service of notices provided by procedural provisions does not efface or erase the liability to pay tax where the liability is created by a distinct substantive provision. The omission or defect may render the order irregular but not void or illegal. Jai Prakash Singh and the two decisions that it placed reliance upon were evidently based upon the specific facts. Jai Prakash Singh involved a situation where the return of income had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said Mr.S.Veerappan, can be compelled to participate in the proceedings and respond to the impugned notice. The fact that the said Mr.S.Veerappan died on 26-1-2010 is not in dispute. If this fact is not disputed, then the notice issued in the name of the dead person is unenforceable in the eye of law. 15. The Department seeks to justify their stand by contending that they were not intimated about the death of the assessee, that the legal heirs did not take any steps to cancel the PAN registration in the name of the assessee and that therefore, the Department was justified in directing the petitioner to cooperate in the proceedings pursuant to the impugned notice. 16. The settled legal principle being that a notice issued in the name of the dead person is unenforceable in law. If such is the legal position, would the Revenue be justified in contending that they, having no knowledge about the death of the assessee, are entitled to plead that the notice is not defective. In my considered view, the answer to the question should be definitely against the Revenue. 17. This Court supports such a conclusion with the following reasons : Admittedly, the limitation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by her, the notice was issued on a dead person. However, the fact regarding the death of the assessee could not be disputed by the Department. The Department continued the proceedings under section 147/148 of the Act and at that stage, the son of the deceased approached the High Court of Delhi. The High Court of Delhi pointed out that what was sought to be done by the Income Tax Officer was to initiate proceedings under section 147 of the Act against the deceased assessee for the assessment year 2008-09, for which, the limitation for issuance of notice under section 147/148 of the Act was 31-3-2015 and on 2-7-2015 when the notice was issued, the assessee was already dead and if the Department intended to proceed under section 147 of the Act, it could have done so prior to 31-3-2015 by issuing the notice to the legal heirs of the deceased and beyond that date, it could not have proceeded in the matter even by issuing notice to the legal representatives of the assessee. The decision in Vipin Walia fully supports the case of the petitioner herein. 22. The decision in the case of Vipin Walia was followed in the decision of the High Court of Gujarat in the case of Rasid Lala, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they are entitled to plead that the notice is not defective. 30. We shall now deal with the argument canvassed by Mr. Bhatt as regards section 2(31) of the Act, which defines the term person . The argument of Mr.Bhatt is that the legal heir of late Bhupendrabhai Desai would fall within the ambit of person as defined under section 2(31) of the Act and person includes a body of individuals. We may only observe that this definition of the term person referred to above does not include the legal representatives of persons who are since deceased. 31. In the aforesaid context, we may refer to and rely upon a decision of the Supreme Court in the case of Shabina Abraham (supra). In Shabina Abraham (supra), the question before the Supreme Court was, whether an assessment proceeding under the Central Excises and Salt Act, 1944, can continue against the legal representatives/estate of a sole proprietor/manufacturer after he is dead. 32. A similar argument was canvassed by the learned counsel appearing for the Revenue by placing reliance on the definition of the term person under the General Clauses Act, 1897. We quote the relevant observations of the Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means the person who is liable to pay the duty of excise under this Act . The present tense being used, it is clear that the person referred to can only be a living person as was held in Ellis C.Reid, AIR 1931 Bom 333. Further, the only extension of the definition of assessee under the Central Excises and Salt Act is that it would also include an assessee's agent, which has nothing to do with the facts of the present case. It is well settled that a means and includes definition is exhaustive in nature and that there is no scope to read anything further into the said definition. 34. The Supreme Court, in a plethora of judgments, has taken the view that if the person sought to be taxed comes within the letter of the law, he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the State, seeking to recover the tax, cannot bring the citizen within the letter of the law, the citizen is free, however, apparently within the spirit of law the case might otherwise appear to be. The Supreme Court, in CST v. Modi Sugar Mills Ltd., AIR 1961 SC 1047, observed thus : In interpreting a taxing statute, equitable considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SRT/2018, for assessment year 2007-08, in case of M/s Maloo Finance and Builders Private Limited. 10. Succinct facts are that in assessee`s case (Ms. Maloo Finance Builders Pvt Ltd), the original assessment under section 143(3) was passed on 30.12.2009. The Land Development expenses of ₹ 3,30,89,500/- was discussed and adjudicated by assessing officer, vide para 3 and para 8 of assessment order, wherein assessing officer made ad-hoc disallowance @ 10% of the land development expenses of ₹ 3,30,89,500/-. 11. Then after, the Assessment order was framed by assessing officer in pursuance of direction of Tribunal under section 254 of the Act, vide assessment order dated 31.03.2016, framed by Assessing Officer under section 143(3) r.w.s 254 of the Act. In the said assessment order, under section 143(3) r.w.s 254 of the Act, the Assessing Officer has adjudicated the issue of land development expenses and made ad hoc addition @10% of land development expenses ₹ 3,30,89,500/- . 12. After this, under section 263 of the Act, a revision order was passed on 28.03.2018 by ld PCIT. The Ld PCIT has exercised the jurisdiction under section 263 of the Act, to revis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cussed and adjudicated in the original assessment under section 143(3) of the Act, and has been travelled, from the original assessment order dated 30.12.2009 to the assessment order framed by the assessing officer as per the direction of the Tribunal, under section 254 r.w.s 143(3) of the Act, dated 31.03.2016. The ld PCIT has not exercised his jurisdiction u/s 263 of the Act, within two year from the end the financial year in which the order sought to be revised was passed, so far land development expenses is concerned, as this issue was adjudicated in the original assessment order framed u/s 143(3) dated 30.09.2009. Thus, ld PCIT has violated the provisions of section 263(2) of the Act, as the revision was made after the expiry of two years. 16. We note that ld. PCIT has exercised the jurisdiction under section 263 of the Act in respect of the order of assessing officer which was framed by him under section 254 r.w.s 143(3) of the Act, dated 31.03.2016. Thus, we note that ld. PCIT has exercised his jurisdiction within two years from the end of the financial year 31.03.2016, and therefore he has not violated the provisions of section 263(2)of the Act, as the revision order h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation.-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) (b) ** ** ** (c)where any order referred to in this sub-section and passed by the Assessing Officer had been the subject-matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstandin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We note that in assessee s case the original assessment was framed by the Assessing Officer u/s 143(3) of the Act, dated 30.12.2009. In the said assessment order, the Assessing Officer has discussed and adjudicated the issue relating to land development expenses and the Assessing Officer disallowed 10% of the land development expenses which comes to ₹ 33,08,950/- (10% of ₹ 3,30,89,500). Then after, the assessee carried the matter in appeal before Ld. CIT(A), who has deleted the addition of ₹ 33,08,950/- (vide order of Ld. CIT(A) dated 21.01.2011 in appeal No. CAS-I/272/09-10). 20. Aggrieved by the order of Ld. CIT(A), the Revenue filed the appeal before the Tribunal (vide ITA No.863/AHD/2011 for A.Y 2007-08). The Tribunal remitted the matter back to the file of the Assessing Officer to decide the issue of land development expenses afresh. 21. Therefore, Assessing Officer as per the direction of the Tribunal framed the assessment order u/s 143(3) r.w.s. 254 of the Act dated 31.03.2016. The Assessing Officer again made ad hoc disallowance of 10% of the land development expenses of ₹ 3,30,89,500/- which comes to ₹ 33,08,950/-. The Ld. PCIT has e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. Therefore, doctrine of merger would apply in a case of this nature. Hence, we reject the plea taken by Ld Counsel of the assessee. 24. On merits, we note that while framing the assessment order under section143 (3) r.w.s 254 of the Act, dated 31.03.2016, the assessing officer made adequate enquiry. The assessee appeared before the assessing officer and submitted letter dated 19.01.2016 and sought adjournment. Thereafter, assessing officer, based on the material available on record adjudicated the issue by making ad-hoc disallowance @ 10% of land development expenses of ₹ 3,30,89,500/- which comes to ₹ 33,08,950/-. Therefore, assessing officer has applied his mind and made the disallowance @ 10% of land development expenses, hence, order passed by the assessing officer should not be erroneous. Therefore, in the assessee`s case under consideration, it is the appraisal of the same records which are already with the Ld. A.O. and the Ld. Pr. C.I.T. took a different view than adopted by the A.O. on the same set of facts, which is not permissible u/s 263 of the Act. In the above circumstances, the view taken by the A.O. was one of the possible views and the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Ranka Jewellers vs. Addl. CIT (328 ITR 148) relying on the decisions of Hon ble Supreme Court in the cases of Malabar Industrial Co. Ltd. vs. CIT (supra) and CIT vs. Max India Ltd. [(2007) 295 ITR 282 (SC)], has held that once the issue was considered by the A.O., the remedy of the revenue could not lie in invoking of the jurisdiction u/s 263 of the Act. Therefore, the order of the Ld. C.I.T. was definitely outside the purview of section 263 of the Act. As noted above, the exercise aimed at ascertaining the correct income of the assessee has been fulfilled by the Ld. A.O. by exercising his quasi-judicial functions vis-a-vis passing the assessment order u/s.143(3) r.w.s 254 of the Act. Therefore, certainly it is not a case wherein adequate enquiries at the assessment stage were not carried out or assessment was made in haste. However, what is an opinion formed as a result of these enquiries and verification of the materials is something which is in exclusive domain of the Assessing Officer, and even if Ld. Pr. Commissioner does not agree with the results of such enquiries, the resultant order cannot be subjected to revision proceedings. It is a settled position in law that provis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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