Assessment order quashed for continuing proceedings against deceased person despite legal heirs' notification under section 143(3)

ITAT Surat quashed an assessment order under section 143(3) where proceedings continued against a deceased person. The assessee's legal heirs informed the AO about the death during assessment stage, but the AO proceeded to frame the assessment order on 29.12.2019 despite this notification on 18.06.2019. The tribunal held this violated settled legal principles, following Dharamraj judgment, and allowed the appeal by quashing the assessment order as bad in law.

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Issues Involved:

1. Validity of assessment proceedings initiated against a deceased person.
2. Addition of Rs. 59,56,500/- under Section 68 of the Income-Tax Act, 1961.
3. Legality of the cash deposits during the demonetization period.
4. Applicability of tax at the maximum rate under Section 115BBE of the Income-Tax Act, 1961.

Summary:

1. Validity of Assessment Proceedings Initiated Against a Deceased Person:

The assessee's legal heirs informed the Assessing Officer about the death of the assessee during the assessment stage. Despite this, the Assessing Officer framed the assessment order on 29.12.2019. The Tribunal held that the assessment order is against the settled position of law and should be quashed, referencing the Hon'ble Delhi High Court's judgment in the case of Dharamraj vs. Income Tax Officer, which states that proceedings against a dead person are null and void. The Tribunal quashed the assessment order framed under section 143(3) of the Act, dated 29.12.2019.

2. Addition of Rs. 59,56,500/- under Section 68 of the Income-Tax Act, 1961:

The assessee claimed that the cash deposits during the demonetization period were from the retail sale of petrol and diesel. However, the Assessing Officer rejected this contention, noting that the assessee was not authorized to accept Specified Bank Notes (SBN) as per the Gazette Notification No.2653 dated 08.11.2016, which only allowed public sector oil marketing companies to accept SBN. Consequently, the Assessing Officer added Rs. 59,56,500/- as unexplained cash credit under Section 68 of the Act.

3. Legality of the Cash Deposits During the Demonetization Period:

The Tribunal noted that the assessee failed to provide details of the SBN in the opening cash-in-hand and could not substantiate the claim that the cash deposits were from business receipts. The Assessing Officer's addition of Rs. 59,56,500/- was upheld by NFAC/Ld.CIT(A) on the grounds that the assessee was not legally authorized to accept SBN during the demonetization period.

4. Applicability of Tax at the Maximum Rate under Section 115BBE of the Income-Tax Act, 1961:

The Assessing Officer charged the unexplained cash credit of Rs. 59,56,500/- at the maximum rate of 60% under Section 115BBE of the Act, as the assessee failed to prove the genuineness of the petrol or diesel sale during the demonetization period. The Tribunal did not delve into the merits of this issue as the assessment order itself was quashed.

Conclusion:

In conclusion, the Tribunal quashed the assessment order framed on the deceased person, rendering all other issues on merits of the additions academic and infructuous. The appeal of the assessee was allowed.

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