2021 (7) TMI 191 - AT - Income Tax

Tribunal quashes reassessment order, deems reopening invalid. Emphasizes need for concrete reasons and statutory compliance.

Raj Kumar Wadhwa Versus The D.C.I.T., Circle Patiala

The Tribunal allowed the appeal, quashing the reassessment order. The reopening under Section 147 was deemed invalid as the reasons for income escapement ... Validity of Re-opening of assessment u/s. 147 - assessee had expired during the pendency of assessment proceedings - violation of the procedure prescribed in law - HELD THAT:- Legislature has prescribed u/s. 159(2), that where an assessee expires during pendency of proceedings, the proceedings have to be continued with the legal heir and assessment is to be framed in the name of the legal heir. In the facts of the present case, which stand recorded by the AO also in his assessment order, the AO we find has failed to follow the statutorily prescribed procedure. That despite the AO being duly informed on 08-01-2014, that the assessee had expired on 21-07-13 and that his wife was the legal heir, he continued the assessment proceedings, issuing notice u/s. 142(1) of the Act on 18-02-2014, in the name of the deceased assessee, and further even went on to frame the assessment and issue the demand notice dated 28-02-2014, in the name of the deceased assessee. The aforestated facts stand noted in the assessment order itself and have remained uncontroverted before us. As evident therefore that the assessment framed in the present case is not in accordance with law. The reliance placed by assessee on the decision of Dhalumal Shyamumal [2004 (11) TMI 57 - MADHYA PRADESH HIGH COURT] is apt, wherein in identical set of facts where the assessee had expired during the pendency of assessment proceedings, which fact was duly intimated to the AO, who despite the same, issued no notice to the legal representatives of the assessee and framed the assessment in the name of the deceased assessee, the Hon'ble High court held that the order so passed was a nullity having been passed against a dead person. The Hon'ble High court held that it was the duty of the AO to have followed the procedure prescribed in law in such cases u/s. 159. The non compliance by the AO of the statutorily prescribed procedure, applicable in the facts of the present case, cannot be said to be a mere technical error as held by the Ld. CIT(A). - Decided in favour of assessee. Issues Involved:1. Validity of reopening the case under Section 147 of the Income Tax Act.2. Validity of the assessment framed in the name of a deceased person.Detailed Analysis:1. Validity of Reopening the Case under Section 147:The assessee challenged the reopening of the case under Section 147 of the Income Tax Act, arguing that the reasons recorded for reopening were insufficient for forming a belief of income escapement. The reasons cited by the Assessing Officer (AO) included disallowed expenses against liasoning receipts and low household expenses from a previous assessment year (2006-07). The AO noted that the disallowances were deleted by the Commissioner of Income Tax (Appeals) [CIT(A)], but the department had not accepted this order.The Tribunal agreed with the assessee, noting that the AO's belief of escapement of income was based on information that no longer survived, as the disallowances were deleted by the CIT(A). The Tribunal emphasized that the belief of escapement should be based on the entirety of the information available, not selectively. The Tribunal found that the AO's reasons for reopening were based on mere suspicion rather than concrete information, making the reopening invalid.2. Validity of Assessment Framed in the Name of a Deceased Person:The assessee's legal representative contended that the assessment framed in the name of the deceased was void ab initio, as the assessee had died during the pendency of the reassessment proceedings. The legal representative had informed the AO about the death, but the AO continued issuing notices and framed the assessment in the name of the deceased.The Tribunal noted that the procedure prescribed under Section 159 of the Income Tax Act, which requires proceedings to be continued with the legal representative and the assessment to be framed in their name, was not followed. The Tribunal cited the Madhya Pradesh High Court's decision in CIT Vs. Dhalumal Shyamumal, which held that an assessment order passed against a deceased person without following the prescribed procedure is a nullity.The Tribunal rejected the CIT(A)'s view that the error was merely technical and held that the assessment framed on a dead person was not sustainable in law. The assessment was quashed on this ground.Conclusion:The Tribunal allowed the appeal of the assessee, quashing the reassessment order on both grounds:1. The reopening of the case under Section 147 was invalid due to insufficient reasons for forming a belief of income escapement.2. The assessment framed in the name of a deceased person was void ab initio, as the statutory procedure under Section 159 was not followed.