2019 (5) TMI 341 - AT - Income Tax

Assessment of income of the estate of a deceased person u/s 168 - status of executor - Special provisions which deal with the Executors of the Estate of a Deceased person - Assessee to be treated as an individual or BOI/AOP - wrong status in ITR - HELD THAT - We note that the executor/assessee due to ignorance of law has first of all applied for PAN in the status of BOI and thereafter while filing the return of income electronically faced the glitches/problem in the software, which has automatically taken the status of the executor as that of Firm; and consequently there was mismatch between the return of income as well as 143(1) intimation. In this case, the law is very clear, if there only one executor then the executor shall be treated as an individual and where there is more than one executor the executors shall be treated as an Association of person (AOP). And since Shri Narendra Kumar Khajanchi is discharging his duties as an Executor, the contingency mentioned in the Will of late Shri Hemraj Khajanchi has not risen and so Shri Narendra Kumar Khajanchi is the only Executor of the Will, and, therefore, the status of executor in this case is that he shall be treated as an individual and not as AOP as erroneously classified by AO. It is true that the confusion has arisen to start with because of the ignorant action of the assessee when he applied for the PAN in the status of BOI and thereafter glitches in the software of department as discussed above. However, it has to be kept in mind that there is no estoppel against law. Shri Narendra Kumar Khajanchi is the only executor of the Will and is discharging his duties as an Executor, and therefore has to be treated in the status as an individual as per sec. 168 and when he is treated as an individual according to applicable tax slab during AY 2011-12 the assessee is having only business income to the tune of ₹ 46,741/- which falls below the threshold exemption limit of ₹ 1,60,000/- and, therefore, no tax is payable as per law. Thus the appeal of the assessee is allowed.

Issues:
1. Interpretation of sec. 168 of the Act regarding the treatment of Executors of the Estate of a Deceased person for tax purposes.
2. Classification of the assessee's status as an individual/BOI under sec. 168 of the Act.
3. Rectification application under sec. 154 and the erroneous classification by the AO as AOP.
4. Discrepancies in the return of income status and the intimation u/s. 143(1) of the Act.

Issue 1: Interpretation of sec. 168 of the Act
The judgment delves into the provisions of sec. 168 of the Act, which govern the taxation of the income of the estate of a deceased person in the hands of the executor. It highlights that if there is only one executor, the executor is to be treated as an individual, while if there are multiple executors, they are considered an association of persons (AOP). The judgment emphasizes the importance of correctly determining the status of the executor based on the number of executors involved.

Issue 2: Classification of the assessee's status
The case involves the assessee, acting as the Executor of the Will of a deceased person, who mistakenly applied for PAN as a Body of Individuals (BOI) and faced software glitches while filing returns, resulting in an erroneous classification as a Firm. The judgment clarifies that as per the Will, only one executor was appointed, making the assessee eligible to be treated as an individual, not an AOP as wrongly classified by the AO. The judgment stresses the need for accurate classification based on the specific circumstances and legal provisions.

Issue 3: Rectification application under sec. 154
The judgment discusses the rectification application filed by the assessee under sec. 154, where the AO incorrectly classified the status of the assessee as AOP. It points out that the Will clearly designates only one executor, thereby necessitating the correct treatment of the executor as an individual. The judgment underscores the importance of rectifying such errors to ensure accurate tax assessment and compliance with legal requirements.

Issue 4: Discrepancies in return status and intimation u/s. 143(1)
The judgment highlights the discrepancies between the return of income status and the intimation u/s. 143(1) of the Act, where the status was erroneously shown as Firm instead of individual. It emphasizes the need for proper assessment procedures and the importance of aligning the status of the executor with the legal provisions to avoid such discrepancies. The judgment concludes by allowing the appeal of the assessee based on the correct interpretation of sec. 168 and the individual status of the executor.

In conclusion, the judgment provides a detailed analysis of the issues related to the classification of the assessee's status as an individual/BOI under sec. 168 of the Act, highlighting the importance of accurate legal interpretation and classification for tax purposes. It emphasizes the need for rectification of errors and adherence to statutory provisions to ensure fair and lawful tax assessment.

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