2024 (4) TMI 1075 - AT - Income Tax

Penalty proceedings for a default committed by a deceased - proceedings to be continued against the legal representatives or not? - Levy of penalty u/s 271B for non-furnishing of Tax Audit Report TAR within the prescribed time limit u/s 44AB r.w.s. 139(1) - HELD THAT - As s/s (4) of section 159 of the Act only empowers recovery of the tax liability to the extent of estate of deceased assessee succeeded by LR. The conjoint reading of s/s (1) and s/s (4) of section 159 suggests that in case of death of assessee, the tax subject to estate of deceased assessee delved could only be recovered (if any) from the legal representative. Conversely nothing other than tax can be fastened to the estate succeeded by the LR. The honourable High Courts and Apex Court in catena of judicial precedents has held that penalty proceedings are quasi-criminal in nature. In criminal jurisprudence, a crime dies with a man and the legal representative of the deceased offender or criminal cannot be penalised for the offences or crimes committed by the deceased. As such penalty proceedings are different and distinct in nature than tax while tax are price paid for buying civilisation whereas the penalties are levied for the contumacious conduct of the wrong doer therefore such penalty proceedings abate on the death of the assessee. If recovery of , penalty is permitted against the estate of deceased, then it would clearly lead to permitting the enforcement of crime against the right of LR in succeeded estate. In view of the decision of Taraknath Gayen and others 1987 (5) TMI 37 - HIGH COURT OF CALCUTTA Omwati Vs UOI 1971 (11) TMI 53 - HIGH COURT OF JUDICATURE AT ALLAHABAD as held that, the penalty amount is not recoverable from the legal representatives of accused; as imposition of penalty is intended to penalise the accused, therefore, recovery of penalty from the legal representatives would amount to punishing the legal representatives. It is also in our knowledge that the co-ordinate benches in similar circumstance deleted the penalty in viz; Bhuban Mohan Mitter Charitable Trust 1991 (12) TMI 100 - ITAT CALCUTTA-D and in Bhagwansingh Shriramsingh L/H Dinesh Bhagwan Singh 2006 (5) TMI 270 - ITAT MUMBAI Thus as per restriction placed in s/s (4) of section 159 of the Act and further adopting the reasoning laid in Taraknath Gayen and others Vs CEGAT Omwati Vs UOI (supra) we set-aside the impugned order and direct the Ld. AO to delete the penalty. Decided in favour of assessee.

Summary

Issues involved:
The judgment deals with the challenge to the levy of penalty under section 271B of the Income-tax Act, 1961 by the National Faceless Appellate Centre for the assessment year 2017-18.

Summary:

1. Background and Penalty Initiation (Issue 1):
The individual assessee, engaged in the business of running a petrol pump, faced penalty proceedings under section 271B for not furnishing the Tax Audit Report within the prescribed time limit. Despite multiple opportunities, the assessee failed to establish a reasonable cause for the delay in filing the report. The penalty was imposed by the Assessing Officer, and the appeal was dismissed by the National Faceless Appellate Centre.

2. Legal Representative's Liability (Issue 2):
The appeal raised a legal ground regarding the sustainability of the penalty under section 271B upon the death of the assessee. The judgment analyzed the liability of legal representatives of deceased assessees under section 159 of the Act. It was established that penalty proceedings initiated and concluded during the lifetime of the deceased assessee could be recovered from the estate succeeded by the legal representative.

3. Decision and Precedents (Issue 3):
The judgment delved into the nature of penalty proceedings, highlighting that penalties are distinct from taxes and are intended to penalize contumacious conduct. Citing judicial precedents, including decisions by the Calcutta High Court and the Allahabad High Court, it was concluded that recovery of penalties from legal representatives would amount to punishing them. Therefore, the penalty was set aside, and the Assessing Officer was directed to delete the penalty.

In conclusion, the appeal of the assessee was allowed, and the penalty under section 271B was directed to be deleted in light of the legal representative's liability and the nature of penalty proceedings.