2010 (1) TMI 866 - AT - Income Tax

Enhanced compensation and interest paid - capital gain and enhanced compensation u/s 45(5) has been assessed - assessee expired and notice u/s 148 dated 29.2.2007 was issued in the name of his widow, who participated in the assessment proceedings - besides widow, the deceased has two daughters and a son Aryaman Veer Singh. It was argued that notice u/s 148 was not served on all the legal heirs - Held that - issue was not examined by the ld. CIT(Appeals) as he cancelled the assessment order - matter remanded to CIT (Appeals)

Summary

Issues:
Appeal against cancellation of assessment due to legal representatives of deceased not brought on record.

Analysis:
1. The appeal by the revenue was against the order of CIT (Appeals) canceling the assessment for the year 2000-01 as all legal representatives of the deceased were not included in the proceedings. The deceased, whose land was acquired by HUDA, had his compensation enhanced posthumously. The Assessing Officer assessed the total amount, including long-term capital gains and interest on enhanced compensation. However, the assessment was challenged by the assessee before the CIT (Appeals) on the grounds that not all legal heirs were served notice under section 148. The CIT (Appeals) found the assessment to be bad in law as it was only made on one legal heir, the widow, and relied on legal precedents to declare the assessment null and void.

2. The revenue challenged the CIT (Appeals) decision, arguing that the objection regarding all legal heirs not being included was not raised before the Assessing Officer. They contended that since the widow participated in the proceedings, the estate of the deceased was adequately represented. Various legal decisions were cited in support of this argument. The assessee, on the other hand, supported the CIT (Appeals) decision.

3. During the proceedings, attention was drawn to section 292B of the Income-tax Act, which states that no return of income or assessment shall be invalid merely due to any mistake or defect if it is in conformity with the intent of the Act. Considering this provision, the issue arose whether the notice and assessment, though not served on all legal heirs, were in line with the Act's intent, especially if the children were minors represented by their mother. The Supreme Court's decision in a related case was referenced, highlighting the confusion in the assessment regarding capital gains and enhanced compensation under section 45(5). The ITAT set aside the CIT (Appeals) order, remanding the matter for a fresh decision in accordance with the law and observations made.

In conclusion, the ITAT remanded the case to the CIT (Appeals) for a fresh decision, considering the applicability of section 292B and the proper representation of all legal heirs, especially if minors were involved, in assessing the capital gains and enhanced compensation as per the Income-tax Act.