2022 (5) TMI 931 - AT - Income Tax

Revision u/s 263 - initiation of revisional proceedings and consequential order under Section 263 is in the name of a deceased person - HELD THAT - The issue of validity of a notice and proceedings held subsequent thereto against a dead person is no longer res integra - in the case of Dharamraj 2022 (1) TMI 844 - DELHI HIGH COURT has examined the issue in length and held that the notice issued against a death person is null and void and all consequent proceedings/orders being equally tainted are liable to be set aside. We find considerable merit in the plea on behalf of the legal heir for the assessee that the entire proceedings beginning from issue of show cause notice and culminating in revisional order u/s 263 is a non-est exercise and cannot be given effect in law regardless of the fact whether the revenue was privy to death or otherwise. When a competent Court or authority holds such an order as invalid or sets it aside, the impugned order becomes null and void. Once it is concluded that the order in question is null and void, it is not for the adjudicating authority to advise the Commissioner as to what should he do Hence, in the absence of any opportunity to the assessee, for which the fault is attributable squarely to the PCIT is fatal and such defect being incurable, the revisionary order passed under Section 263 of the Act is also required to be quashed independently on this ground also - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the revisional proceedings initiated under Section 263 of the Income Tax Act, 1961 against a deceased person.
2. Whether the assessment order under revision was erroneous and prejudicial to the interest of the Revenue.
3. Validity of the show cause notice issued beyond the limitation period.
4. Adequacy of the opportunity provided to the assessee for defending the case.

Issue-wise Detailed Analysis:

1. Legality of the Revisional Proceedings Initiated Against a Deceased Person:
The appellant contended that the revisional proceedings initiated under Section 263 of the Income Tax Act, 1961 were invalid as the show cause notice dated 20.03.2021 was issued to a deceased person, Vas Dev, who had expired on 04.12.2020. The Tribunal referenced the Hon’ble Delhi High Court's judgments in *Dharamraj vs. ITO* and *Savita Kapila vs. ACIT*, which held that notices issued to a deceased person are null and void. Consequently, all subsequent proceedings/orders based on such notices are equally tainted and invalid. The Tribunal found considerable merit in this contention and concluded that the entire proceedings from the issuance of the show cause notice to the revisional order under Section 263 were nonest and could not be given effect in law.

2. Erroneous and Prejudicial Assessment Order:
The PCIT had opined that the assessment order dated 15.11.2018 was erroneous and prejudicial to the interest of the Revenue due to discrepancies in the assessee's submissions regarding the sale of agricultural land. The PCIT noted that the land sold was a capital asset and subject to Capital Gain tax, contrary to the assessee's claim. However, the Tribunal did not delve deeply into this issue due to the primary finding that the proceedings were invalid from the outset due to being initiated against a deceased person.

3. Validity of Show Cause Notice Issued Beyond Limitation Period:
The appellant argued that the initial show cause notice dated 20.03.2021, fixing the hearing on 05.04.2021, was issued beyond the limitation period, rendering it invalid. The Tribunal observed that the PCIT had rectified this by issuing a revised notice on 25.03.2021, fixing the hearing within the limitation period. The Tribunal found no merit in the appellant's plea that the initial notice's defect was incurable, as the revisional authority was entitled to rectify such errors.

4. Adequacy of Opportunity Provided to the Assessee:
The appellant contended that the revised show cause notice provided inadequate opportunity for the assessee to defend the case, as it fixed the hearing for the immediate next date, 26.03.2021, without any further opportunity. The Tribunal criticized the PCIT's casual approach, emphasizing the importance of the principle of natural justice, which mandates reasonable opportunity for the assessee to be heard. The Tribunal cited the case of *Tata Chemicals Limited vs. DCIT*, where it was held that orders passed in violation of the audi alteram partem rule are nullities. The Tribunal concluded that the lack of opportunity was a fatal defect, rendering the revisional order void ab initio and nonest in law.

Conclusion:
The Tribunal set aside and quashed the impugned revisional order passed under Section 263 of the Income Tax Act, 1961, on the grounds of being initiated against a deceased person and the lack of adequate opportunity provided to the assessee. The appeal of the assessee was allowed.