1993 (4) TMI 116 - AT - Income Tax

Assessing Officer, Assessment Of Income, Assessment Order, Assessment Proceedings, Legal Representative, Set On

Summary

Issues Involved:
1. Validity and legality of the assessment made by the ITO on the deceased assessee.
2. Compliance with procedural requirements under section 159 of the IT Act, 1961.
3. Representation of the estate of the deceased by all legal representatives (LRs).
4. Proper issuance of notices to all LRs of the deceased.

Issue-wise Detailed Analysis:

1. Validity and Legality of the Assessment:
The primary issue in the appeals was the validity and legality of the assessment made by the Income Tax Officer (ITO) on the deceased assessee. The deceased, who had not filed a return for the assessment year 1985-86, was assessed posthumously. The widow of the deceased filed the return, and the ITO completed the assessment on the deceased's total income. The assessment's legality was challenged on the grounds that not all LRs were made party to the proceedings. The CIT(A) initially found this to be a procedural irregularity and set aside the assessment for fresh proceedings, directing the ITO to issue notices to all LRs.

2. Compliance with Procedural Requirements Under Section 159:
Section 159 of the IT Act, 1961, extends the legal personality of a deceased person for tax assessment purposes, ensuring that the estate of the deceased is properly represented. The doctrine of "audi alteram partem" mandates that no person shall be condemned unheard. The ITO must issue notices to all LRs of the deceased to ensure proper representation. Failure to comply with these procedural steps can render the assessment null and void. In the first round, the ITO failed to issue notices to all LRs, leading the CIT(A) to set aside the assessment for redoing.

3. Representation of the Estate by All Legal Representatives:
The estate of the deceased must be represented by all LRs. The ITO, in the second round, issued notices to only five out of seven LRs, and those notices were sent in one envelope to an incorrect address. The CIT(A) found this insufficient and highlighted the need for individual notices to all LRs. The failure to issue notices to all LRs, including two minor daughters, was deemed a significant procedural lapse. The ITO's actions were not considered bona fide or diligent, leading to the conclusion that the assessment was not properly conducted.

4. Proper Issuance of Notices to All LRs:
The ITO's failure to issue individual notices to all LRs, despite clear directions from the CIT(A), was a crucial issue. The ITO's conduct in not issuing requisite notices to all LRs individually and at their residential addresses was found to be lacking in bona fides and diligence. The LRs had objected to the assessment process, indicating they had not waived their rights. The appellate tribunal emphasized that procedural lapses, especially those affecting the representation of the estate, could not be overlooked.

Conclusion:
The appellate tribunal concluded that the ITO's assessment in the second round deserved to be annulled due to the procedural lapses and failure to issue notices to all LRs. The CIT(A)'s order in the first round was sustained, while the order in the second round was cancelled, and the assessment made by the ITO was annulled. The appeal by the assessee was allowed, and the revenue's appeal was dismissed. The tribunal emphasized the importance of compliance with procedural requirements under section 159 and the need for proper representation of the estate by all LRs.