2017 (10) TMI 99 - HC - Income Tax

Higher compensation for the land acquired for implementation of the Krishna Water Project - the land owner K.Veerasamy passed away, the petitioner was directed by the Court to disburse the amount to the legal heirs of the deceased land owner - arrears of income tax - notice under section 226(3) - Held that - Unfortunately, the petitioner is no more and therefore, there cannot be summons by the respondent for enquiry to establish that he had paid the enhanced compensation amount to Mr.K.V.Lakshmipathi on 20.12.2003 and to the other legal heirs on different dates and according to the deceased writ petitioner, he has got receipt to establish the same. Thus, considering the peculiar facts and circumstances of the case, the writ petition is disposed of, directing the respondent to issue notice to the legal heirs of the writ petitioner as well as the legal heirs of the deceased land owner, call them for enquiry, in which the respondent shall verify the original receipt obtained by the petitioner and if satisfied, exonerate the petitioner/legal heirs from any claim and if there is arrears of tax payable by the original land owner, liberty is granted to the Income Tax department to proceed against the legal heirs of the original land owner.

Summary

Issues:
1. Validity of the impugned notice issued by the Income Tax department regarding arrears of income tax.
2. Disbursement of enhanced compensation to legal heirs of deceased land owner.
3. Verification of payment and exoneration of petitioner/legal heirs.
4. Proceeding against legal heirs for arrears of tax payable by original land owner.

Analysis:
1. The petitioner, an Advocate, secured additional compensation for a landowner in a case related to the Krishna Water Project. Following the landowner's demise, the petitioner was directed to disburse the compensation to the legal heirs. Subsequently, the Income Tax department issued a notice claiming arrears of income tax from the deceased landowner. The court noted that the petitioner had deposited the compensation amount in his bank account, and the question of the notice's correctness did not arise due to the petitioner's demise.

2. As the petitioner had passed away, the court directed the respondent to issue notices to the legal heirs of both the petitioner and the deceased landowner. The purpose was to conduct an enquiry to verify the disbursement of the compensation amount. The court emphasized the need to establish the facts before the appropriate authority, especially regarding the receipt of payment by the legal heirs.

3. Considering the circumstances, the court disposed of the writ petition by instructing the respondent to conduct an enquiry involving the legal heirs. The respondent was tasked with verifying the original receipts provided by the deceased petitioner to potentially exonerate the petitioner's legal heirs from any claims. Additionally, if there were arrears of tax owed by the original landowner, the Income Tax department was granted liberty to pursue the legal heirs for payment.

4. The court addressed the standing counsel's submission that a specific amount remained in the petitioner's bank account. It was decided that this amount would stay deposited until further orders were issued by the respondent. Consequently, the writ petition was disposed of without any costs being imposed, concluding the legal proceedings related to the disbursement of compensation and the tax arrears issue.