2023 (3) TMI 716 - AT - Income Tax

Tribunal affirms Commissioner's order under Income Tax Act, dismisses appeal.

The Tribunal upheld the Principal Commissioner's order under Section 263 of the Income Tax Act, finding the assessment erroneous and prejudicial to ... Revision under section 263 of the Income Tax Act - Jurisdiction to issue notice and pass revision order after death of the assessee - Service of notice on legal representative versus all legal heirs - Assessment erroneous and prejudicial to the interests of Revenue - Assessing Officer's duty to enquire into declared sale consideration and receipt of advancesRevision under section 263 of the Income Tax Act - Jurisdiction to issue notice and pass revision order after death of the assessee - Validity of the show-cause notice issued under section 263 and of the revision order where the assessee died after issuance of the notice but before passing of the revision order - HELD THAT: - The Tribunal found that the Principal Commissioner issued the show-cause notice while the assessee was alive and, after the assessee's death, took steps to obtain the death and legal heir certificates and issued a hearing notice to the legal heir before passing the revision order. The Court held that the procedure adopted - issuing notice when the assessee was alive, seeking and accepting legal heir documentation, and addressing the revision order to the legal heir - satisfies the requirements for exercising jurisdiction under section 263. The argument that an order passed after the assessee's death is invalid was rejected as contrary to the procedural steps taken by the Commissioner and the record showing notice and opportunity to the legal heir. [Paras 7, 8]Notice and revision order under section 263 were validly issued and sustained despite the assessee's death occurring after issuance of the notice; additional grounds on this point are dismissed.Service of notice on legal representative versus all legal heirs - Jurisdiction to issue notice and pass revision order after death of the assessee - Whether the Commissioner was required to serve the section 263 notice and hearing notice on all legal heirs rather than on the principal legal heir - HELD THAT: - The Tribunal held that it was sufficient for the Commissioner to serve the notice on the legitimate legal heir (the wife), who was brought on record after production of the legal heir certificate and death certificate, and that there was no requirement to bring every married legal heir on record before passing the revision order. The contention that notice to only one legal heir rendered the revision void was held to be an afterthought and not tenable in law. [Paras 8]Service of notice on the principal legal heir was sufficient; there was no legal infirmity in issuing the revision order without serving every legal heir.Assessment erroneous and prejudicial to the interests of Revenue - Assessing Officer's duty to enquire into declared sale consideration and receipt of advances - Whether the assessment order was erroneous and prejudicial to the interests of Revenue because the Assessing Officer failed to examine (a) discrepancy between sale consideration offered for long-term capital gains and market value reflected in the sale deed, and (b) unexamined advances received from a third party - HELD THAT: - On review of the assessment order, the Tribunal observed that the Assessing Officer, though issuing notices under sections 143(2) and 142(1), did not address or seek information specifically regarding the alleged short computation of sale consideration vis-a -vis market value and did not investigate the balance amount shown as advance received from the third party. There was no record of enquiry or questionnaire on these specific defects. The Tribunal agreed with the Principal Commissioner that these omissions rendered the assessment erroneous and prejudicial to revenue, thereby justifying exercise of revisionary power under section 263 and directing reassessment after giving the assessee an opportunity. [Paras 9, 10]The assessment was held to be erroneous and prejudicial to the interests of Revenue for lack of inquiry into the sale consideration discrepancy and the advances; the section 263 revision directing re-assessment was sustained.Final Conclusion: The Tribunal dismissed the appeal, holding the section 263 show-cause notice and revision order validly issued and the impugned assessment to be erroneous and prejudicial to revenue; the revision order directing the Assessing Officer to redo the assessment after affording opportunity to the legal heir is sustained. Issues Involved:The issues involved in this case are: Delay in filing appeal due to Covid-19 pandemic, Validity of notice issued under section 263 of the Income Tax Act against a deceased person, Applicability of Section 50C and Section 56, Correct issuance of notice under Section 263, Jurisdiction of the Principal Commissioner of Income Tax to invoke Section 263.Delay in Filing Appeal:The appeal filed by the assessee was delayed by 64 days due to the outbreak of the Covid-19 pandemic. The delay was condoned, and the appeal was admitted for adjudication.Validity of Notice Issued Under Section 263 Against a Deceased Person:The assessee raised concerns regarding the notice issued under section 263 against a dead person. It was argued that the notice should have been issued in the name of the correct person, especially after the death of the assessee. The legal representative of the deceased should have been the recipient of such notices, as per the provisions of the Act.Applicability of Section 50C and Section 56:The assessee contested the applicability of Section 50C and Section 56. It was argued that the assessment under these sections was erroneous and prejudicial to the interest of revenue. The guidelines used for valuation should not be the sole reason for deeming the assessment as incorrect.Correct Issuance of Notice Under Section 263:The issue of correct issuance of notice under Section 263 was raised by the assessee. It was contended that the notice should have been issued to the legal representative of the deceased assessee as per the provisions of the Act. The failure to do so rendered the notice invalid and the subsequent actions based on it void.Jurisdiction of Principal Commissioner to Invoke Section 263:The Principal Commissioner's jurisdiction to invoke Section 263 was questioned by the assessee. It was argued that the invocation of this section based on audit objections or recommendations is not valid. The Principal Commissioner should exercise this power only if the assessment order is found to be erroneous and prejudicial to the interests of revenue upon examination of records.Conclusion:After considering the arguments presented by both sides, the Tribunal upheld the order passed by the Principal Commissioner under Section 263 of the Income Tax Act. The Tribunal found that the assessment order was indeed erroneous and prejudicial to the interest of revenue as the defects pointed out by the Principal Commissioner were not addressed by the Assessing Officer. The appeal filed by the assessee was dismissed, and the order was pronounced on 15th March 2023 at Chennai.