2016 (4) TMI 258 - HC - Income Tax

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, under certain circumstances, may be saved. Such a situation is also contemplated in civil proceedings and a provision is made in the Civil Procedure Code itself under Order XXII Rule 4. Therefore, the cases where the very proceedings are initiated against a dead person stand apart from those proceedings where they are initiated against a live person, but continued after his death against the legal heirs. Hence, the first contention is rejected. 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. 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 give the benefit to the Department that they were not aware of the death of the assessee on that date. But, this notice dated 6.9.2013, sent by post, returned with the endorsement that the addressee was dead. Thereafter, the Department served the very same notice on the legal heir through a messenger. Therefore, the Department cannot now take advantage of Sub-Section (3) of Section 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. 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

Summary

Issues Involved:
1. Validity of the Tribunal's decision to quash the order of the Commissioner of Income Tax (CIT) under Section 263 of the Income Tax Act, 1961, on a deceased person.
2. Consideration of the fact that the notice under Section 263 was served on the legal representative and the opportunity of being heard was given to the legal representative.

Detailed Analysis:

Issue 1: Validity of the Tribunal's Decision

The Tribunal quashed the order of the Commissioner of Income Tax passed under Section 263 of the Income Tax Act, 1961, on the grounds that it was issued against a deceased person. The Revenue contended that the legal heir had participated in the proceedings, and thus, the proceedings should not be considered a nullity. However, the court emphasized the settled position that any proceeding initiated against a dead person is a nullity. The distinction was made between proceedings initiated against a live person and continued after their death, and those initiated against a dead person. Since the proceedings in this case were initiated against a dead person, the Tribunal's decision to quash the order was upheld.

Issue 2: Service of Notice and Opportunity of Being Heard

The Revenue argued that under Section 292BB of the Income Tax Act, the notice served on the legal heir and their participation in the proceedings should validate the notice. However, the court clarified that Section 292BB applies only when the assessee has appeared or cooperated in the proceedings. Since the original assessee was deceased, Section 292BB was not applicable. The court further analyzed Section 159(2) of the Act, which allows proceedings to continue against legal representatives if initiated before the death of the assessee. In this case, the proceedings were initiated after the death of the assessee, and the Department was aware of the death. Therefore, the notice served on the legal heir did not cure the defect of initiating proceedings against a dead person.

Conclusion:

The court concluded that the very initiation of proceedings against a dead person and the continuation of the same despite being aware of the death cannot be approved. The tax case appeal was dismissed, and the questions of law were answered against the Department.