2022 (9) TMI 1189 - AT - Income Tax

Tribunal upholds Income Tax Act revision, dismisses appeal on deceased person's notice validity. Legal rep participation suffices.

The tribunal upheld the revision under section 263 of the Income Tax Act, dismissing the appeal challenging the validity of the notice issued in the name ... Revision u/s 263 by CIT - valid assumption of jurisdiction - revision being invalid as the notice u/s. 263 was issued in the name of a deceased person - HELD THAT:- Section 159, it explains, does not bear upon the jurisdiction of the taxing authority, but deals with matters incidental to it. The decision in Sumantbhai C. Munshaw (Decd.), [1980 (7) TMI 68 - GUJARAT HIGH COURT]a treatise on the subject, is, thus, consistent with the binding decisions in Kaushalyabai (1997 (3) TMI 20 - MADHYA PRADESH HIGH COURT] and Premium Capital Markets & Investment Ltd. (2005 (1) TMI 54 - MADHYA PRADESH HIGH COURT) i.e., in principle. In Swaran Kanta v. CIT [1988 (11) TMI 91 - PUNJAB AND HARYANA HIGH COURT] the mention of the name of the deceased in the heading of the order, in proceedings, validly initiated, and concluded on the LR, whose is deemed by law (s.159) to be an assessee, was held as valid notwithstanding that the title of the order was not happily worded, which though would not make it invalid for that reason and, besides, is saved by s. 292B. The foregoing explains our decision in non-acceptance of the assessee’s case. We may, before parting, also advert to the decision in Guduthur Brothers v. ITO [1960 (7) TMI 5 - SUPREME COURT]wherein the Apex Court per it’s larger Bench decision explained that where a notice remained undisposed, it did not cease to be operative, and the AO had the jurisdiction to continue the proceedings from the stage where the illegality had occurred. Notice u/s. 143(2) was for limited scrutiny, i.e., qua cash deposited during demonetisation period it was not proper on the part of the revisionary authority to, in exercise of the revisionary power, question the absence of verification in assessment qua agricultural income, disclosed by the assessee - The objection is, to our mind, not maintainable, both on facts and in law. This is as agricultural income is surely one of the sources of cash deposited by the assessee, to verify which the return was selected for scrutiny. Two, that the assessee does not own any agricultural land is an admitted fact. It is only where the land is either owned or taken on rent (as per revenue record), that the income from agricultural activity could be said to be agricultural. The AO ought to have, therefore, exceeded his ambit to verify the veracity of the claims as to agricultural income, exempt u/s. 10, i.e., besides being in explanation of the source of the cash deposit. He having not done so, by seeking the approval of his range head, as enjoined upon him by the Board Circular, binding on him, the said authority was competent to, in exercise of his revisionary jurisdiction, require the AO to examine the same, setting aside the assessment for the purpose. On facts, we approve of the observations by the Pr. CIT being in respect of the infirmities observed by him qua the assessee’s explanation in respect of her claim for agricultural income of Rs. 7.01 lacs. The AO, who abysmally failed to do so in the original proceedings, shall question the assessee in the matter keeping the same in mind, though not limited thereto, and neither being bound thereby, inasmuch as it is an open set aside - That is, he shall decide per a speaking order, issuing definite findings of fact upon due enquiry/verification, observing the principles of natural justice. Revision in the instance case is, in our view, attracted under clauses (a), (b) & (c) of Explanation 2 to s. 263(1). We decide accordingly, declining interference. - Decided against assessee. Issues:1. Validity of revision under section 263 due to notice issued in the name of a deceased person.2. Jurisdictional aspects regarding the assumption of jurisdiction under section 263.3. Proper exercise of revisionary power by questioning the absence of verification in assessment regarding agricultural income disclosed by the assessee.Issue 1: Validity of Revision under Section 263The appeal challenges the revision order under section 263 of the Income Tax Act, 1961, as the notice was issued in the name of a deceased person, leading to the argument that the proceedings were null and void. The appellant contends that a fresh notice should have been issued on the legal representative of the deceased. However, the tribunal finds the challenge not valid in law, citing precedents where participation in proceedings by the legal representative was deemed sufficient, and non-acceptance of the deceased's status as a procedural irregularity rather than a nullity.Issue 2: Jurisdictional AspectsThe tribunal further discusses the aspect of jurisdiction, emphasizing that the notice under section 263 is not a jurisdictional notice but serves to provide an opportunity for the assessee to be heard. The tribunal refers to various judgments to support the view that the absence of communication regarding the death of the assessee to the assessing authority does not invalidate the proceedings, as long as the legal representative is impleaded and given a chance to be heard.Issue 3: Exercise of Revisionary PowerRegarding the absence of verification in the assessment of agricultural income, the tribunal upholds the revisionary authority's power to question this aspect, especially when the assessing officer failed to verify the claims. The tribunal highlights that agricultural income must be properly verified, and the assessing officer should have sought approval to examine this aspect, as mandated by the Board Circular.In conclusion, the tribunal dismisses the assessee's appeal, upholding the revision under section 263 based on the grounds of lack of inquiry and the proper exercise of revisionary power. The tribunal directs the assessing officer to re-examine the agricultural income claim and issue a speaking order with definite findings of fact. The decision is based on the clauses of Explanation 2 to section 263(1), and no interference is warranted.