Estate recovery of penalty barred where section 271B penalty against a deceased assessee is quasi-criminal and not tax liability.

Section 159 permits penalty proceedings to be initiated or continued against a legal representative for a deceased assessee's default, but recovery from the inherited estate is confined to tax liability. Because penalty is quasi-criminal and meant to punish the wrongdoer, it cannot be recovered from the estate of the deceased assessee merely because the proceedings were completed during lifetime. The tribunal therefore held that the section 271B penalty, though imposed before death, was not recoverable from the estate and directed deletion of the penalty.

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Issues: Whether a penalty imposed under section 271B of the Income-tax Act, 1961 can be sustained and recovered from the estate of a deceased assessee when the penalty proceedings were initiated and concluded during the assessee's lifetime.

Analysis: The liability of a legal representative under section 159 of the Income-tax Act, 1961 extends to sums that the deceased assessee would have been liable to pay, and the provision is broader than the corresponding language in section 24B of the Income-tax Act, 1922. On that basis, penalty proceedings for a default committed by a deceased person may be started or continued against the legal representative. However, section 159(4) limits recovery from the estate to tax liability. Penalty is treated as quasi-criminal in nature and is imposed to punish the wrongdoer, so recovery of penalty from the legal representative's inherited estate would amount to penalising the legal representative for the deceased's default. Since the penalty was already imposed during the assessee's lifetime, the issue was confined to recoverability from the estate, and that recovery was held impermissible.

Conclusion: The penalty under section 271B could not be recovered from the estate of the deceased assessee, and the impugned penalty order was set aside with a direction to delete the penalty.

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