1991 (12) TMI 100 - AT - Income Tax

Summary

Issues involved: Appeal against penalties levied on deceased under section 271(1)(a) and section 271(1)(c) by the Income Tax Officer (ITO).

Summary:

Issue 1: Penalty under section 271(1)(a)
The deceased's assessment was completed, and notices were issued posthumously. The trustees, as legal representatives, were penalized for defaults of the deceased. The ITO did not serve hearing notices to the trustees as required by section 282. The tribunal held that penalizing legal representatives for deceased's defaults is illogical and unfair. Notices under section 274 were found to be ambiguous and lacked precise details of defaults. The tribunal emphasized that penalty proceedings are quasi-criminal and should not extend to legal representatives for deceased's actions. The penalties under section 271(1)(a) were canceled due to non-application of mind by the ITO and lack of clarity in the notices.

Issue 2: Penalty under section 271(1)(c)
The ITO penalized the trustees under section 271(1)(c) without ensuring they were aware of the deceased's reasons for defaults. The tribunal found the penalties unsustainable as the ITO did not establish a clear default by the deceased. Legal representatives cannot be penalized for quasi-criminal offenses committed by the deceased. The tribunal cited the principle that crimes die with the offender and extended it to quasi-criminal penalty proceedings. The penalties under section 271(1)(c) were canceled due to serious non-compliance with mandatory provisions of section 274 and section 282.

Conclusion:
The tribunal canceled the penalties and directed the ITO to refund any collected amounts from the trustees. The appeals were allowed in favor of the trustees, emphasizing the importance of fair and logical application of penalty provisions in tax law.