2011 (7) TMI 1254 - AT - Income Tax

Summary

Issues Involved:
1. Validity of assessment order passed in the name of a deceased person.
2. Addition of interest income on REC Bonds on a protective basis.

Summary:

Issue 1: Validity of assessment order passed in the name of a deceased person

The assessee challenged the validity of the assessment order on the grounds that it was passed in the name of a deceased person. The original return of income was filed on 23.9.2004, and the return was processed u/s 143(1). During the assessment proceedings for A.Y. 2005-06, the Assessing Officer noticed discrepancies in the claim u/s 54EC for A.Y. 2004-05 and issued a notice u/s 148 on 24.12.2007. The assessee, who had passed away on 28.11.2007, had the return filed by the legal heir, Dr. Avinash Vyas. The Assessing Officer issued notices and passed the assessment order in the name of the deceased person, which the assessee contended was a nullity.

The CIT(A) dismissed the appeal, stating that the legal heir had voluntarily submitted to the jurisdiction of the Assessing Officer, and the mistake was a typographical error protected by section 292B. However, the Tribunal held that the assessment order passed against a dead person is a nullity, citing the Hon'ble Supreme Court's decision in CIT Vs. Amarchand N. Shroff 48 ITR 59. The Tribunal quashed the assessment, allowing Ground No.1 raised by the assessee.

The Tribunal also referenced the Hon'ble Supreme Court's decision in Kapurchand Shrimal Vs. CIT 131 ITR 451, stating that the appellate authority has the duty to correct all errors in the proceedings under appeal. The Assessing Officer is at liberty to initiate fresh proceedings or continue from where the irregularities intervened, if permissible under the law.

Issue 2: Addition of interest income on REC Bonds on a protective basis

The assessee challenged the addition of Rs. 63,081 made by the Assessing Officer on a protective basis, being proportional additional interest on REC Bonds. The Assessing Officer treated the interest from the entire investment of Rs. 4,94,70,000 as income of the assessee, while the assessee had offered to tax only interest income of Rs. 2,52,324 corresponding to REC Bonds of Rs. 3,95,76,020 in the revised return. The CIT(A) confirmed the addition.

Both parties agreed that the issue was consequential to the outcome of the appeal in ITA No.3538/Mum/2010 for A.Y. 2004-05. Since the Tribunal quashed the assessment in ITA No.3538/Mum/2010, the ground raised by the assessee in ITA 3539/Mum/2010 was allowed.

Conclusion:

In the result, both appeals filed by the assessee were allowed. Order pronounced in the open Court on 20.07.2011.