2024 (5) TMI 534 - AT - Income Tax

Validity of order passed u/s. 147 against deceased assessee - responsibility of legal representative u/s 159 - Addition u/s 68 - bogus LTCG - HELD THAT - As per the settled principle of law no order can be passed against a dead person and thus any proceedings taken against the deceased assessee shall be continued against the legal representative from the stage at which it stood on the date of the death of the deceased. A.O despite having been intimated about the fact that the assessee had expired failed to implead his legal heir and framed the assessment in the name of the deceased assessee. In a case where an assessee dies pending any assessment proceedings the provisions of Section 159 of the Act get attracted. Accordingly it is incumbent on the A.O to ensure compliance with sub-section (2) of Section 159 before any order is passed. As decided in DALUMAL SHYAMUMAL 2004 (11) TMI 57 - MADHYA PRADESH HIGH COURT as the A.O had framed the assessment in the name of the assessee (since deceased) therefore assessment so framed was a nullity. However once the assessment order was held to be nullity then the Tribunal should have given a consequential direction as contemplated u/s. 159 of the Act to the A.O so that proper assessment order could be passed. Thus we hold the order passed by the A.O u/s. 147 r.w.s. 144B as nullity and remand the matter to the file of the A.O for ensuring compliance with Section 159(2) for passing appropriate orders of assessment after validly putting to notice the legal representative/representatives of the deceased assessee.

Summary

Issues Involved:
The issues involved in the judgment are:
1. Denial of exemption u/s. 10(38) and addition u/s. 68 on long term capital gain on sale of equity shares.
2. Validity of assessment made u/s. 147 on a deceased person.

Issue 1: Denial of Exemption u/s. 10(38) and Addition u/s. 68:
The assessee filed a return for A.Y. 2015-16 with an exempt income of Rs. 8,67,760/- from long term capital gain (LTCG) on sale of shares. The Assessing Officer (A.O) reopened the case under Sec. 147 based on suspicions of a bogus LTCG claim. The A.O, in the assessment order dated 28.03.2022, denied the exemption u/s. 10(38) and added Rs. 8,61,760/- u/s. 68 of the Act. The Commissioner of Income Tax (Appeals) upheld this addition, stating that the appellant failed to provide any evidence to support the claim of genuine LTCG. The CIT(A) relied on various findings and case laws to support the decision, ultimately dismissing the appeal.

Issue 2: Validity of Assessment on a Deceased Person:
The legal heir of the deceased assessee challenged the assessment made u/s. 147 on the deceased person's name. The authorized representative argued that as the assessee had passed away during the assessment proceedings and the A.O was duly informed about this, the assessment on a deceased person was invalid. The legal representative cited legal precedents and Section 159(2) of the Act, emphasizing that no order can be passed against a dead person, and any proceedings should continue against the legal representative. The A.O, despite being aware of the death of the assessee, failed to involve the legal heir in the assessment process. The representative's contentions were supported by the judgment of the Hon'ble High Court of Madhya Pradesh in a similar case. Following the legal provisions and precedents, the Tribunal held the assessment order passed on the deceased person as nullity and remanded the matter to the A.O for proper assessment after notifying the legal representative of the deceased assessee.

This judgment addresses the denial of exemption on LTCG and the addition under Sec. 68, as well as the validity of an assessment made on a deceased person, emphasizing the importance of involving legal representatives in such cases to ensure due process and compliance with the law.