2024 (6) TMI 27 - AT - Income Tax

Order passed in the name of the deceased assessee - Deduction u/s. 54F denied - assessee had expired way back but the said fact was withheld by the legal heirs of the deceased assessee and was neither brought to the notice of the department nor the CIT(A) - assessee had made an investment of Rs. 12 lac in a new house property during the period 10.10.2014 to 21.04.2015, i.e. after the lapse of a period of 2 years 4 months from the date of sale of the capital asset, and had neither utilized the sale consideration for the purchase or construction of a new house property before the due date of filing of his return of income nor deposited the same in the Capital gain account scheme. HELD THAT - Admittedly, it is a matter of fact borne from the record that the assessee, had expired on 01.10.2020 (copy of death certificate placed on record). The legal heirs of the assessee (since deceased) had not brought the aforesaid fact to the knowledge of the department. The legal heirs of the assessee (since deceased) had withheld the aforesaid information from the first appellate authority although the appeal was disposed of by him after 3 years (approximately) from the date of death of the assessee, i.e. on 28.02.2024. We find substance in the claim of the DR that as the CIT(A) had passed an order in the name of the deceased assessee as the legal heirs had failed to bring the said fact to his notice, therefore, the said order suffers from a fundamental defect. In a case where an assessee dies pending any proceedings before the department, the provisions of Section 159 of the Act get attracted. Accordingly, it is incumbent on the department to ensure compliance with Section 159 before any order is passed. An analogy can be drawn in Dalumal Shyamumal 2004 (11) TMI 57 - MADHYA PRADESH HIGH COURT observed that as the A.O. had framed the assessment in the name of the assessee (since deceased), therefore, the assessment so framed was a nullity. However, the Hon ble High Court was of the view that once the assessment order was held to be a nullity, then the Tribunal should have given a consequential direction as contemplated u/s. 159 to the A.O. so that a proper assessment order could be passed. Assessment order passed in the name of the deceased assessee (expired on 01.10.2020), therefore, the order so passed by him suffers from a fundamental defect and cannot be sustained. Also, deprecate the conduct of the legal heirs of the assessee (since deceased), who despite the lapse of a substantial time had not brought the aforesaid fact to the notice of the CIT(A), NFAC, Delhi. Be that as it may, hold the order passed by the CIT(Appeals), as a nullity and remand the matter to his file with a direction to dispose of the appeal afresh after impleading the legal heirs of the deceased assessee on record. CIT(Appeals) shall afford a reasonable opportunity of being heard to the legal heirs of the assessee (since deceased) in the course of de-novo appellate proceedings. Appeal of the assessee is allowed for statistical purposes

Summary

Issues involved: Appeal against order passed by ADDL/JCIT(Appeals)-2, Ludhiana, dated 28.02.2024, arising from order passed by A.O u/s 143(3) r.w.s. 147 of the Income-tax Act, 1961 for assessment year 2013-14.

Grounds of Appeal:
1. The basis of reasons recorded not added in reassessment proceedings, leading to invalid reassessment u/s. 147.
2. Disallowance of deduction u/s. 54F despite timely investment by the assessee.
3. Request for leave to alter grounds at the time of hearing.

Details of Judgment:
1. The A.O initiated proceedings u/s. 147 based on cash deposits by the assessee. Notice u/s. 148 was issued, and the assessee filed the return declaring income. A.O. declined deduction u/s. 54F due to investment timing, resulting in income determination.
2. Assessee's appeal to CIT(Appeals) dismissed due to non-participation. Assessee appealed further.
3. Assessee's representative argued against A.O.'s jurisdiction, citing lack of adverse inferences on cash deposits issue. Claimed addition on deduction u/s. 54F was invalid.
4. Departmental Representative highlighted a fundamental defect in CIT(Appeals) order due to failure to disclose the assessee's death.
5. Tribunal found the CIT(Appeals) order to be a nullity due to the deceased status of the assessee, remanding the matter for fresh proceedings involving legal heirs.
6. Citing Section 159, the Tribunal emphasized the need for compliance before passing orders against a deceased assessee, referencing a relevant High Court judgment.
7. The Tribunal allowed the appeal for statistical purposes, directing a de-novo appellate process involving legal heirs.

This judgment highlights the importance of procedural compliance and legal representation in tax matters, ensuring fairness and adherence to statutory provisions even in the event of the assessee's demise.