2012 (12) TMI 408 - AT - Income Tax

Whether assessment order passed by AO after death of the assessee is valid or not - Assessee filed ROI on 31-10-2006 Assessment was finalized on 31-12-2008 by the AO Assessee was passed away on 23-10-2008 i.e. two month before completion of assessment Assessment order passed by the AO was of a deceased person Held that - As the assessment order passed after the death of the assessee was not a valid assessment. AO is directed to pass fresh assessment order after affording reasonable opportunities of hearing to the legal heirs of the assessee.

Issues Involved:
1. Deletion of disallowance of legal and professional charges.
2. Deletion of disallowance of salary expenses.
3. Deletion of disallowance of various expenses against compensation.
4. Deletion of addition as unexplained expenditure.
5. Deletion of disallowance of salary and wages.
6. Deletion of disallowance of expenses paid to sister concerns.
7. Deletion of disallowance of freight charges.
8. Deletion of disallowance of unexplained expenditure under Section 69C.
9. Deletion of disallowance of depreciation on closing stock.
10. Confirmation of treating cash receipts as cash credit.
11. Confirmation of capitalizing expenses incurred on purchase of pipes.
12. Confirmation of commission expenses.
13. Setting aside the issue of TDS verification.
14. Confirmation of charging interest under Sections 234A, 234B, 234C, and 234D.
15. Confirmation of penalty proceedings under Section 271(1)(c).
16. Confirmation of penalty provisions under Sections 269SS and 269T.

Detailed Analysis:

1. Deletion of Disallowance of Legal and Professional Charges:
The Assessing Officer (AO) disallowed Rs. 1,75,400 on account of legal and professional charges. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted this disallowance, but the AO contended that no details and documentary evidence supporting the expenditure were furnished by the assessee. The Tribunal found this issue directly related to the main assessment order and remitted it back to the AO for fresh adjudication.

2. Deletion of Disallowance of Salary Expenses:
The AO disallowed Rs. 36,74,422 on account of salary expenses, arguing that the assessee neither carried out any business activity nor established the nexus of the said expenses. The CIT(A) deleted this disallowance. The Tribunal noted that this issue is directly related to the main assessment order and remitted it back to the AO for fresh adjudication.

3. Deletion of Disallowance of Various Expenses Against Compensation:
The AO disallowed expenses of Rs. 1,12,27,810 claimed against compensation received from M/s. R.M. Bhutter & Co., asserting that the expenses were only to reduce receipts by book entries. The CIT(A) deleted this disallowance. The Tribunal found this issue directly related to the main assessment order and remitted it back to the AO for fresh adjudication.

4. Deletion of Addition as Unexplained Expenditure:
The AO added Rs. 2,63,45,966 as unexplained expenditure under Section 69, citing unverifiable expenses without supporting documentary evidence. The CIT(A) deleted this addition. The Tribunal noted that this issue is directly related to the main assessment order and remitted it back to the AO for fresh adjudication.

5. Deletion of Disallowance of Salary and Wages:
The AO disallowed salary of Rs. 1,42,40,864 and wages of Rs. 2,52,00,000, citing self-made, unnumbered, and unsupported internal vouchers. The CIT(A) deleted this disallowance. The Tribunal found this issue directly related to the main assessment order and remitted it back to the AO for fresh adjudication.

6. Deletion of Disallowance of Expenses Paid to Sister Concerns:
The AO disallowed Rs. 21,80,005 paid to sister concerns under Section 40A(2)(b), arguing no business connection existed between the assessee and the sister concern. The CIT(A) deleted this disallowance. The Tribunal noted that this issue is directly related to the main assessment order and remitted it back to the AO for fresh adjudication.

7. Deletion of Disallowance of Freight Charges:
The AO disallowed Rs. 14,37,765 on account of freight charges, citing lack of supporting bills and vouchers. The CIT(A) deleted this disallowance. The Tribunal found this issue directly related to the main assessment order and remitted it back to the AO for fresh adjudication.

8. Deletion of Disallowance of Unexplained Expenditure Under Section 69C:
The AO disallowed Rs. 15,76,255 as unexplained expenditure under Section 69C, citing lack of supporting evidence. The CIT(A) deleted this disallowance. The Tribunal noted that this issue is directly related to the main assessment order and remitted it back to the AO for fresh adjudication.

9. Deletion of Disallowance of Depreciation on Closing Stock:
The AO disallowed Rs. 32,86,955 on account of depreciation on closing stock, arguing no provision exists for such depreciation under Section 32 read with relevant rules. The CIT(A) deleted this disallowance. The Tribunal found this issue directly related to the main assessment order and remitted it back to the AO for fresh adjudication.

10. Confirmation of Treating Cash Receipts as Cash Credit:
The CIT(A) confirmed treating Rs. 5,00,000 as cash receipts received on account of marriage arrangements as cash credit under Section 68. The Tribunal noted that this issue is directly related to the main assessment order and remitted it back to the AO for fresh adjudication.

11. Confirmation of Capitalizing Expenses Incurred on Purchase of Pipes:
The CIT(A) confirmed capitalizing expenses incurred on the purchase of pipes and added Rs. 5,33,570 to the total income, treating it as capital in nature. The Tribunal found this issue directly related to the main assessment order and remitted it back to the AO for fresh adjudication.

12. Confirmation of Commission Expenses:
The CIT(A) confirmed commission expenses amounting to Rs. 13,02,317 under Section 40(a)(ia), citing late payment of TDS. The Tribunal noted that this issue is directly related to the main assessment order and remitted it back to the AO for fresh adjudication.

13. Setting Aside the Issue of TDS Verification:
The CIT(A) set aside the issue of TDS verification to the AO with a direction to verify the position relating to TDS and make disallowance as provided in Section 40(a)(ia). The Tribunal found this issue directly related to the main assessment order and remitted it back to the AO for fresh adjudication.

14. Confirmation of Charging Interest Under Sections 234A, 234B, 234C, and 234D:
The CIT(A) confirmed charging interest under Sections 234A, 234B, 234C, and 234D. The Tribunal noted that this issue is directly related to the main assessment order and remitted it back to the AO for fresh adjudication.

15. Confirmation of Penalty Proceedings Under Section 271(1)(c):
The CIT(A) confirmed penalty proceedings under Section 271(1)(c). The Tribunal found this issue directly related to the main assessment order and remitted it back to the AO for fresh adjudication.

16. Confirmation of Penalty Provisions Under Sections 269SS and 269T:
The CIT(A) confirmed penalty provisions under Sections 269SS and 269T, despite the Additional Commissioner of Income Tax having dropped the penalty proceedings. The Tribunal noted that this issue is directly related to the main assessment order and remitted it back to the AO for fresh adjudication.

Conclusion:
The Tribunal set aside the assessment order passed by the AO on the deceased person and directed the AO to pass a fresh assessment order after affording reasonable opportunities of hearing to the legal heirs of the assessee. Consequently, all related appeals filed by the AO and the assessee were remitted back to the AO for fresh adjudication. Appeals were partially allowed for statistical purposes.

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