Penalty liability of legal heir barred where deceased assessee's return default was already complete under the Gift-tax Act.

Penalty under section 17(1)(a) of the Gift-tax Act, 1958 could not be sustained against a legal heir for a deceased assessee's delayed gift-tax return. The default in filing had already been committed by the deceased, and there was no material showing any notice to, or independent default by, the legal representative. Section 19, dealing with tax liability through a legal representative, was held inapplicable to penalty for late filing, and section 13(1) did not create any legal fiction extending penalty liability to the heir for an already completed default. In the absence of express statutory authority, penalty proceedings could not validly continue against the legal representative.

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Issues: Whether penalty under section 17(1)(a) of the Gift-tax Act, 1958 could be sustained against the legal heir for the deceased assessee's delayed filing of the gift-tax return.

Analysis: The return was admittedly filed after the due date, but the default was committed by the deceased assessee before death. The legal heir only filed the return later and there was no material to show that any notice was issued to, or default committed by, the legal heir. Section 19 of the Gift-tax Act, 1958, dealing with tax liability of a deceased person through the legal representative, was held inapplicable to penalty for late filing. Section 13(1) imposed the filing obligation, but no legal fiction was found in the Act making the legal representative liable for penalty for a default already completed by the deceased. The reasoning of the cited authorities was followed to hold that penalty proceedings could not be validly continued or imposed against the legal representative in such circumstances.

Conclusion: Penalty under section 17(1)(a) of the Gift-tax Act, 1958 could not be levied on the legal heir for the deceased assessee's default; the issue was decided in favour of the assessee.

Final Conclusion: The penalty order was quashed and the assessee's appeal succeeded.

Ratio Decidendi: In the absence of an express statutory fiction creating liability, penalty for a default in filing a return committed by a deceased assessee cannot be imposed on the legal representative.

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