2022 (8) TMI 1278 - HC - Income Tax

Assessment against legal heir of the deceased assessee - petitioner is the sister's son of the deceased assessee - cash deposit by the deceased assessee, is treated as unexplained investment under section 69 and brought to tax under section 115BBE - Penalty issued u/s 271AAC(1), section 274 r/w section 271F and section 156 - HELD THAT - Respondent passed the assessment order inter alia , holding that the cash deposit by the deceased assessee, is treated as unexplained investment under section 69 and brought to tax under section 115BBE of the Income Tax Act. Pursuant to the same, the respondent also issued demand notices along with penalty against the appellant. Challenging the said orders and notices, the appellant invoked the jurisdiction under Article 226 of the Constitution of India by filing WP which was dismissed by the learned Judge, by the order impugned herein. Judge, upon considering the rival submissions, was of the view that whether the appellant has gained anything from the deceased assessee through his bank accounts and if so, whether the said amount belongs to the original assessee or somebody and within the said amount, the tax due would be covered or not, are the factual matrix, which cannot be gone into, in the writ jurisdiction. Further, the learned Judge categorically observed that there is no violation of the principles of natural justice, as the appellant has also been issued with show cause notice and after providing due opportunity to the appellant, the respondent passed the assessment order and notices impugned in the writ petition. Having held so, the learned Judge correctly dismissed the writ petition by relegating the appellant to go before the appellate authority by filing a quantum appeal, which in the opinion of this court, does not call for any interference. Appellant raised a plea that the time granted by the learned Judge for filing the statutory appeal has already expired and hence, the same may be extended. In view of the above submission made by the learned counsel for the appellant, which has not been seriously opposed on the side of the respondent, this court, considering the facts and circumstances of the case, permits the appellant to prefer an appeal before the Commissioner (Appeals), within a period of two weeks from the date of receipt of a copy of this order

Summary

Issues:
Challenge to assessment order under Income Tax Act, 1961 for assessment year 2017-18 and consequential notices of demand and penalty. Appellant's status as legal representative of deceased assessee and violation of principles of natural justice.

Analysis:

Issue 1: Appellant's Legal Representative Status
The appellant contested being the legal heir of the deceased assessee, arguing that he was not a class I or class II legal heir as per the Hindu Succession Act, 1956. The appellant claimed ignorance of the deceased's financial affairs and that the proceeds went to the deceased's wife as per the relevant laws. The appellant also challenged the assessment order's failure to establish his legal representative status under the Income Tax Act, 1961 and Civil Procedure Code, 1908. Reference was made to the Bengal Immunity Company Ltd v. State of Bihar case to limit legal fictions' scope. The appellant highlighted the lack of opportunity to be heard before the impugned orders were passed. The appellant sought to set aside the orders and allow the appeal.

Issue 2: Respondent's Justification
The respondent argued that there was no arbitrariness or breach of natural justice in passing the assessment order and related notices. It was contended that the assessment was done in accordance with the law and based on the available records. The respondent maintained that the assessment and penalties imposed were justified and affirmed by the learned Judge, requiring no intervention from the court.

Judgment
The court noted the relationship between the deceased assessee, his wife, and the appellant. Despite the appellant's claim of not being the legal heir, the respondent treated him as such, issuing show cause notices and subsequently passing the assessment order and demand notices. The court observed that the factual aspects of the case, such as financial gains from the deceased, were beyond the writ jurisdiction. It was found that the principles of natural justice were not violated, as the appellant was given an opportunity to respond to the show cause notice before the impugned orders were issued. The court upheld the learned Judge's decision to dismiss the writ petition and direct the appellant to pursue a quantum appeal before the appellate authority. The appellant's plea for an extension of time to file the appeal was granted, and the intra-court appeal was disposed of without costs.

This detailed analysis covers the legal issues, arguments presented by both parties, and the court's reasoning leading to the judgment.