2019 (10) TMI 827 - AT - Income Tax

Validity of the assessment framed u/s 147 made on the dead person - whether the notice under section 143(2) under the Act was issued before the death of the assessee? - HELD THAT - The statutory notice under section 143(2) was issued before the death of the assessee. It is the settled law that the proceedings under section 143(3) of the Act cannot become fatal if the notice was issued under section 143(2) of the Act on the live person at that relevant time but died subsequently. Regarding this, we find support and guidance from the order of Hon ble ITAT in the case of Shri Ishwar Bhai-Magan Bhai Desai Vs. ITO 2018 (4) TMI 1209 - ITAT AHMEDABAD Thus we hold that the proceedings under section 143(3) of the Act cannot become invalid in the given facts and circumstances. Addition on account of income from undisclosed sources - addition on account of income from undisclosed sources - HELD THAT - Assessee failed to furnish the details of the parties who have deposited the cheque in his bank account. Similarly, the assessee also failed to furnish the details of the party to whom he issued the cheques. Thus in the absence of sufficient documentary evidence about the details of the parties, it is not possible to ascertain the nature of the transactions. Accordingly, we are not impressed with the argument of the assessee. The peak credit is applied where the assessee can correlate the deposits viz a viz withdrawal from the bank. As the assessee failed to establish the correlation between the deposit of cheques as well as cheques withdrawn from the bank. Therefore we are reluctant to apply the peak credit theory in the given facts and circumstances. No reason to interfere in the finding of the learned CIT-A. Hence the ground of appeal of the assessee is dismissed.

Summary

Issues Involved:
1. Validity of the assessment framed under section 147 of the Income Tax Act.
2. Legality of passing an assessment order in the name of a deceased person.
3. Addition of income from undisclosed sources.

Issue-wise Detailed Analysis:

1. Validity of the assessment framed under section 147 of the Income Tax Act:

The assessee challenged the validity of the assessment framed under section 147 on the ground that there was no reason to believe that income had escaped assessment. However, the assessee's representative did not advance any arguments on this issue during the hearing. Consequently, the tribunal dismissed this ground of appeal.

2. Legality of passing an assessment order in the name of a deceased person:

The assessee contended that the assessment framed under section 147 was invalid as it was made on a deceased person. The tribunal examined whether the statutory notice under section 143(2) was issued before the death of the assessee. It was conceded that the notice was indeed issued before the assessee's death. The tribunal referred to the judgment in the case of Shri Ishwar Bhai-Magan Bhai Desai Vs. ITO, which held that proceedings under section 143(3) do not become invalid if the notice was issued to a live person who subsequently died. The tribunal also referenced the case of Sky Light Hospitality LLP, where the Hon’ble Delhi High Court held that an assessment order passed in the name of a non-existing person is illegal. Despite this, the tribunal concluded that the assessment proceedings in the present case were valid since the notice was issued while the assessee was alive. Therefore, the tribunal dismissed this ground of appeal.

3. Addition of income from undisclosed sources:

The assessee challenged the addition of ?1,72,100/- out of the total addition of ?1,96,100/- on account of alleged income from undisclosed sources. The assessee failed to explain the source of deposits during the assessment proceedings. The legal heir of the assessee argued that the documents could not be submitted earlier due to the assessee's demise and insufficient time provided by the AO. The legal heir claimed that the cash deposit was from the sale of agricultural produce and invoked the "Peak Credit and Telescoping Theory."

The CIT (A) partially upheld the AO's order, allowing only ?1,100/- as peak credit and confirming the addition of ?1,71,000/- due to the failure to provide evidence of the transactions. The tribunal found that the assessee failed to furnish details of the parties involved in the cheque deposits and withdrawals, making it impossible to ascertain the nature of the transactions. Consequently, the tribunal upheld the CIT (A)'s decision and dismissed the appeal.

Combined Result:

The tribunal dismissed all the appeals of the assessee, upholding the orders of the CIT (A) in all respects. The tribunal pronounced the order on 08/04/2019 at Ahmedabad.