2014 (6) TMI 113 - AT - Income Tax

Interpretation of section 159(1) of the Act Legal representatives - Held that - Section 159(1) clearly shows that it is by a legal fiction created in the provision that the legal representative of a deceased person had been made liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased - only those proceedings for making assessment or levying any sum may be taken against the deceased, so that they may be continued after his death, which have been taken in his lifetime - In his lifetime such proceedings would necessarily be taken against and in the name of the deceased - if the deceased had died before any such proceedings could have been taken against him, the proceedings may be taken against the legal representative of the deceased under the provisions of Sub-clause (b) of Sub-section (2) of Section 159 - assessment under the Act can only be made against an individual assessee who must be a living person. Also in CIT v. Amarchand N. Shroff 1962 (10) TMI 51 - SUPREME COURT it has been held that the individual has ordinarily to be a living person and there could be no assessment on a dead person revenue could not bring any material to show that the assessment order was passed after issuing any notice to the legal representative of the deceased individual Decided against Revenue.

Summary

Issues:
1. Assessment order passed after the death of the assessee.
2. Applicability of Section 159 of the Income Tax Act.
3. Legal representative's liability in case of deceased assessee.
4. Validity of assessment on a deceased person.

Analysis:
1. The appeal was against the CIT(A)'s order restricting the addition of undisclosed income and deleting disallowed expenses. The respondent, the deceased assessee, was not represented as the notice was returned "deceased." The Departmental Representative pointed out the assessee's death before the assessment order was passed, suggesting the need to bring legal representatives on record for assessment.

2. The Tribunal noted the death certificate showing the assessee's demise before the assessment order. Referring to Section 159 of the Income Tax Act, it highlighted the legal representative's liability to pay any sum the deceased would have been liable for. The provision deems legal representatives as assessees and allows proceedings against them as if against the deceased.

3. Citing case law, the Tribunal emphasized that assessment on a dead person is invalid. Legal representatives become liable only if proceedings were initiated during the deceased's lifetime. Without evidence of notice to the legal representative, the Tribunal found the Revenue's appeal unsustainable and dismissed it, maintaining that an assessment on a deceased individual is null and void in law.

4. The judgment underscored the legal fiction created by Section 159, making legal representatives liable for the deceased's tax obligations. It clarified that assessments can only proceed against living individuals and reiterated that assessments on deceased persons are legally invalid. The Tribunal's decision rested on the absence of evidence regarding notice to the legal representative, leading to the dismissal of the Revenue's appeal.