2018 (6) TMI 167 - AT - Income Tax

Tribunal validates assessment on deceased person; heirs' participation crucial. Disallowance under Section 54F upheld.

The Tribunal upheld the validity of the assessment order issued to a deceased person, emphasizing that the legal heirs' participation in the proceedings ... Notice u/s 143(2) in the name of deceased - validity of assessment - information of death to the department - liability of legal heirs - Held that:- AO was never informed about the death of the assessee before the issuance of the notice under section 143(2) of the Act. After issuance of the notice under section 143(2) of the Act, the legal heirs of the assessee started appearing along with their authorised representatives and joined the proceedings before the AO. Therefore, the ratio laid down in this case will not apply to the facts of the present case. In other cases also, the AO was timely informed about the death of the assessee. Despite having knowledge of the death of the assessee, the AO has continued with the proceedings against the deceased person. No legal infirmity in the assessment order. Claim of deduction u/s 54F denied - investment made in the new property -proof of residential house construction within a period of one year from the date of sale of immovable property- Held that:- Assessee could not place the evidence for construction of residential house within a prescribed period before the sale of immovable property. Rather, he could not place any evidence to demonstrate that he has incurred such expenditure in construction of properties either in the form of bills and vouchers or agreement with the contractor. In the absence of any documentary evidence, the contention of the assessee cannot be accepted that he has constructed the residential house within a period of one year from the date of sale of immovable property. Therefore, we find ourselves in agreement with the observations of the CIT(A) that assessee is not entitled for deduction under section 54F - Assessee appeal dismissed Issues Involved:1. Validity of Assessment Order issued to a deceased person.2. Disallowance of Deduction under Section 54F of the Income Tax Act.Issue-wise Detailed Analysis:A. Invalid Assessment Order:1. The primary issue revolves around the validity of the assessment order passed by the Assessing Officer (AO) on the deceased assessee, Appanna Seetharamu. The notice under section 143(2) was issued on 03.09.2014, while the assessee had died on 19.02.2014. Subsequent notices under section 142(1) were also issued in the name of the deceased on 01.06.2015 and 24.08.2015.2. The appellant argued that issuing notices to a deceased person renders the assessment invalid. The AO was aware of the death of the assessee but failed to issue notices to the legal representatives.3. The CIT(A) rejected the appellant's contention, stating that the legal heir had not informed the AO about the death of the assessee before the issuance of the notice under section 143(2) / 142(1). The CIT(A) noted that there is no provision in the Income Tax Act requiring the legal heir to voluntarily inform the AO about the death of the assessee.4. The appellant cited several judicial precedents, including the Honorable Madras High Court in CIT vs M Hemanathan, which held that any proceeding initiated against a dead person is a nullity. The ITAT-Delhi in Bimla Devi Vs ITO and ITAT-Mumbai in Avinash V Vyas Vs. ITO also supported this view.5. The Tribunal acknowledged these precedents but distinguished the present case on the grounds that the AO was not informed of the death of the assessee before issuing the notice under section 143(2). The legal heirs participated in the proceedings, and the assessment was completed in the name of the deceased through the legal heirs.6. The Tribunal concluded that the assessment order was valid as the AO issued the notice based on the return filed by the assessee when he was alive. The legal heirs' participation in the proceedings validated the assessment.B. Deduction under Section 54F:1. The second issue pertains to the disallowance of deduction under section 54F. The AO disallowed the exemption claimed by the assessee, stating that the purchase of a vacant plot does not qualify for exemption under section 54F.2. The assessee claimed exemption of Rs. 78,87,695/- under section 54F for the construction of a residential house and the purchase of a vacant plot. The construction of the house at Bidadi was completed before the filing of the return, and the vacant plot was purchased with the intention of constructing a residential house.3. The CIT(A) confirmed the disallowance, noting that the assessee could not demonstrate with evidence that he constructed the residential house within the prescribed period.4. The Tribunal upheld the CIT(A)'s decision, stating that the assessee failed to provide documentary evidence, such as bills, vouchers, or agreements with contractors, to support the claim of construction within the stipulated period. Therefore, the assessee was not entitled to the deduction under section 54F.Conclusion:The Tribunal dismissed the appeal, upholding the validity of the assessment order and the disallowance of the deduction under section 54F. The judgment emphasized the importance of proper notification to the AO about the death of the assessee and the necessity of documentary evidence to support claims for deductions.Pronounced in the open court on 31st May, 2018.