2021 (12) TMI 807 - AT - Income Tax

Reopening of assessment u/s 147 - legality of the re-assessment proceedings - Assessment against legal heir of Late assessee V.C. Mehta - HELD THAT - As during the search operation information relating to the HSBC bank account was brought to the notice of Mr. Anoop Mehta, who is one of the legal heir of Late Vrajlal C. Mehta. Mr. Anoop acknowledges the information brought to his notice by the Department and he referred the same information to the executer of the estate of late Shri Vrajlal C. Mehta. This fact was disclosed to the revenue and the AO also acknowledges the same. The Revenue also initiated the proceedings in the name of executors of estate of Late V.C. Mehta in A.Ys. 2006-07 2007-08. For this AY in 2006-07, the AO completed the re-assessment in the name of Anoop Mehta as legal heir. This is clearly an initiation of proceedings with wrong jurisdiction similar to AY 2007-08. We observe that in AY 2007-08, the Co-ordinate Bench has quashed the order passed by AO and findings of Ld. CIT(A). We also observed from the record that in AY 2006-07, AO accepted the RoI filed by the executors of Late Vrajlal C. Mehta under the PAN of Late Shri Vrajlal C. Mehta. But the assessment order was passed in the name of Shri Anoop V. Mehta as a legal heir of Late Vrajlal C. Mehta. Since the issue was already decided by the Co-ordinate bench and the Executors of the Estate also declared the income and paid the relevant taxes on the same amount which is the subject matter in this appeal. Therefore, we do not see any reason to interfere with the findings of ld. CIT(A). Therefore, we are inclined to dismiss the grounds raised by the Department.

Summary

Issues Involved:
1. Legality of the re-assessment order.
2. Correct jurisdiction and assessment of the right person.
3. Credit for taxes paid in earlier assessment years.

Detailed Analysis:

1. Legality of the Re-assessment Order:
The Revenue's appeal challenges the order of the Commissioner of Income Tax (Appeals)-51, Mumbai, which quashed the assessment order passed by the Assessing Officer (AO) in the name of Shri Anoop Mehta as the legal heir of Late Shri Vrajlal C. Mehta. The CIT(A) observed that the AO issued a notice under section 148 of the Income Tax Act, 1961, in the name of Anoop Mehta, but the return of income and all compliances during the assessment proceedings were made by the Executors of the Estate of Late Vrajlal C. Mehta. The AO accepted the income declared by the Estate but erroneously passed the assessment order in the name of Anoop Mehta, leading to the conclusion that the order was bad-in-law.

2. Correct Jurisdiction and Assessment of the Right Person:
The CIT(A) and the ITAT both highlighted that the AO did not assume the correct jurisdiction, assessing the wrong person. The ITAT in the case for AY 2007-08 had previously quashed the assessment order, holding that the AO should have assessed the Estate of Late Vrajlal Mehta, not Anoop Mehta as the legal heir. The relevant portion of the ITAT order stated: "The assessment framed on the Legal heir, i.e., on Shri Anoop Mehta as legal heir of late Vrajlal C Mehta in respect of income arising after the date of death is not in accordance with the provisions of sec. 159 r.w.s. 168 of the Income tax Act, 1961." The CIT(A) followed this precedent, noting that the facts and circumstances were the same for AY 2006-07.

3. Credit for Taxes Paid in Earlier Assessment Years:
The Executors of the Estate had already declared the income and paid taxes for the relevant amounts in AY 2012-13. The CIT(A) noted that the AO did not give credit for these taxes when passing the order in the name of Anoop Mehta. The Executors had revised the returns for AY 2006-07 and AY 2007-08, offering the income in the correct years as per the base note provided by the AO. The CIT(A) held that the assessment should be in the name of the Estate, and the taxes paid in AY 2012-13 should be credited accordingly.

Conclusion:
The ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s order that quashed the assessment made in the name of Anoop Mehta as the legal heir. The ITAT emphasized that the correct entity to be assessed was the Estate of Late Vrajlal Mehta, following the precedent set in the case for AY 2007-08. The ITAT also noted that since the assessment was bad-in-law, there was no need to proceed on the merits of the case. The appeal by the Revenue was dismissed, and the order was pronounced in the open court on 25/11/2021.