1984 (10) TMI 88 - AT - Income Tax

Summary

Issues Involved:
1. Legality of imposing penalty on the legal heirs of a deceased assessee.
2. Delay in the levy of penalty.
3. Merits of the penalty imposition.

Issue-wise Detailed Analysis:

1. Legality of Imposing Penalty on Legal Heirs of Deceased Assessee:

The primary issue in this case was whether the penalty for concealment of income could be imposed on the legal heirs of the deceased assessee under the Indian Income-tax Act, 1922. The Commissioner (Appeals) had accepted the contention that penalty could not be levied on the legal representative, referring to the difference in the relevant provisions of the 1922 Act and the 1961 Act. However, the Tribunal disagreed with this conclusion. It was noted that the decision of the Madras High Court in CWT v. V. Varadarajan and the Madhya Pradesh High Court in CWT v. Abdul Mazid Khan, which were relied upon by the Commissioner (Appeals), were cases under the Wealth-tax Act, 1957, which had specific provisions excluding the imposition of penalty on legal representatives. The Tribunal emphasized that under the 1922 Act, penalty could be considered as an additional tax, and the legal representative of the deceased assessee could be liable for penalty. The Tribunal referred to several Supreme Court decisions, including C.A. Abraham v. ITO and CIT v. Bhikaji Dababhai & Co., which supported the view that penalty could be imposed on legal representatives. The Tribunal concluded that the Commissioner (Appeals)'s decision was not sustainable and that penalty proceedings could be continued against the legal representatives.

2. Delay in the Levy of Penalty:

The second issue was whether the penalty proceedings were initiated after an unreasonable lapse of time. The Commissioner (Appeals) had relied on the argument that there had been an inordinate delay in the levy of penalty. However, the Tribunal found that the delay was not unreasonable given the circumstances. It was noted that the addition itself was being contested by the assessee and was ultimately confirmed by the Supreme Court in 1972. The Tribunal pointed out that the delay was due to the non-communication of the Supreme Court's judgment to the Tribunal and the subsequent order of the Tribunal to the ITO. The Tribunal concluded that the delay was not fatal and that the revenue was not to be blamed for the delay.

3. Merits of the Penalty Imposition:

The third issue was whether the penalty was justified on merits. The ITO had levied the penalty on the ground that the Supreme Court had confirmed the addition, and therefore, the decision of the Tribunal and the Patna High Court had become irrelevant. The Commissioner (Appeals) had accepted the assessee's contention, relying on the decision in Anwar Ali's case, that it could not be said that the disputed amount represented the income of the assessee. The Tribunal reviewed the facts of the case, which were summarized from the Supreme Court's decision in S.P. Jain's case. The Supreme Court had concluded that the Rana was a mere name-lender for the assessee and that the amount invested in the shares was the income of the assessee. The Tribunal concluded that the assessee had concealed the particulars of his income or deliberately furnished inaccurate particulars thereof and was liable to penalty within the meaning of section 28(1)(c). The Tribunal disagreed with the Commissioner (Appeals) and upheld the penalty as levied by the ITO.

Conclusion:

The Tribunal set aside the order of the Commissioner (Appeals) and restored the order of the ITO, thereby upholding the imposition of penalty on the legal representatives of the deceased assessee for concealment of income.