2021 (7) TMI 119 - HC - Income Tax

Validity of the Order of assessment passed after the death of the assessee - scope of section 159 - Responsibility of legal representatives of the deceased assessee - HELD THAT - From perusal of Section 159(2) of the Act, it is evident that the aforesaid provision expressly provides that death of the party is of no consequence and proceeding under the Act can proceed against legal representatives of the assessee and proceedings initiated against the deceased assessee shall be deemed to be the proceeding initiated against legal representatives of the assessee from the inception which could be continued from the stage of his death. The concept of abatement of the proceeding is not contemplated under the provisions of the Act. Section 159(2)(a)(b) and Section 159(3) of the Act create a legal fiction. It is well settled rule of statutory interpretation that in interpreting a provision creating a legal fiction, the court is to ascertain for what purpose the fiction is created, and after ascertaining this, the Court is to assume all those facts and consequences which are incidental or inevitable corollaries to the giving effect to the fiction. A division bench of this court in Smt.V.Rukmini 2010 (8) TMI 505 - KARNATAKA HIGH COURT while dealing with the question whether an appeal under Section 260A of the Act abates on account of death of the assessee during the pendency of the appeal, while dealing with scope and ambit of Section 159 of the Act has held that the concept of abatement is excluded, from the provisions of the Act which is evident from Section 159(2) of the Act. In the instant case, admittedly, after conclusion of the submissions, before an order was passed by the Assessing Officer, the assessee expired. Therefore, by virtue of Section 159(2) of the Act, the proceeding could not have held to have been abated and could have been continued against the legal representatives. Section 159(2)(a) of the Act creates a legal fiction therefore, full effect has to be given to the same. It is not a case where the proceedings were initiated against the assessee who had already expired. Therefore, the proceeding could have been held to be ab initio void. Order passed by the tribunal is quashed and the matter is remitted to the Assessing Officer to issue notice to the legal representatives of the deceased assessee.

Summary

Issues:
Validity of assessment order passed after the death of the assessee under Section 260A of the Income Tax Act, 1961 for the Assessment Year 2005-06.

Analysis:
1. The appeal was filed by the revenue challenging the Tribunal's decision regarding the assessment order passed after the death of the assessee. The Assessing Officer concluded the hearing before the assessee's death, and the order of assessment was passed posthumously. The legal representatives contended that the order against a deceased person is null and void, as the legal heirs were not brought on record. The Tribunal annulled the assessment orders for the relevant years, citing the death of the assessee. The revenue argued that Section 159 of the Act provides for continuing proceedings against legal heirs and urged for a fresh assessment after affording an opportunity to the legal representatives.

2. The legal representatives, on the other hand, maintained that the order against a deceased person is invalid, emphasizing that the Assessing Officer did not record the legal representatives' details. They argued that Section 159 does not apply to proceedings initiated under Section 153A. They also claimed to have informed the Assessing Officer about the death of the assessee. Citing various legal precedents, they supported their stance that the Tribunal's decision should not be interfered with.

3. The Court analyzed Section 159 of the Act, which mandates that legal representatives are liable for the deceased's tax obligations. The provision allows for the continuation of proceedings against legal heirs as if initiated against the deceased. The Court highlighted that the Act does not provide for abatement of proceedings due to the assessee's death. Referring to legal interpretations of statutory fictions, the Court emphasized the importance of giving full effect to Section 159(2)(a) and held that the proceedings were not void ab initio. Relying on a previous judgment, the Court concluded that the appeal favored the revenue, and the Tribunal's order was quashed.

4. Consequently, the Court set aside the Tribunal's decision and directed the Assessing Officer to notify the legal representatives of the deceased assessee for a fresh assessment. The appeal by the revenue was allowed, emphasizing the applicability of Section 159 in continuing proceedings against legal heirs post the assessee's demise.