2024 (9) TMI 363 - AT - Income Tax

Revenue cannot proceed under section 263 against deceased assessee without including legal heir

ITAT Delhi quashed a revision order under section 263 passed against a deceased assessee. The Revenue failed to proceed against the legal heir of the ... Revision order u/s 263 on a deceased person - Revenue has not proceeded against the Legal Heir of the assessee - HELD THAT:- The law is well settled by various authoritative judicial pronouncements that any proceedings initiated and order passed against a dead person would be nullity. Revenue could not controvert the fact that what is stated by the Legal Heir of the assessee, is not correct. Therefore, as per law laid down in the case of ITO vs Durlabhbhai Kanubhai Rajpara [2019 (10) TMI 933 - SC ORDER] hold that the order is nonest in the eyes of law. Hence, same is quashed being illegal. Grounds raised by the assessee are accordingly, allowed. Issues Involved:1. Validity of the order passed under section 263 of the Income Tax Act, 1961, on a deceased person.2. Assumption of jurisdiction by the Principal Commissioner of Income Tax (Pr. CIT) under section 263.3. Adequacy of inquiry and verification by the Assessing Officer (AO).4. Fairness and adequacy of opportunity provided to the assessee.5. Directions for further inquiry on unsecured loan transactions.Issue-Wise Detailed Analysis:1. Validity of the Order Passed on a Deceased Person:The primary issue raised by the appellant is the legality of the order passed by the Pr. CIT under section 263 on a deceased person. It was contended that the order is 'ab-initio void' as it was issued after the death of the assessee, who passed away on 12.09.2023. The appellant informed the Pr. CIT of the death through a communication dated 17.01.2024. Despite this, the Pr. CIT issued the order on 26.03.2024 without bringing the legal heir on record.The tribunal cited several precedents, including the Delhi ITAT's decision in the case of Smt. Sangeeta Saini v. ITO, where it was held that an order passed under section 263 on a deceased person is invalid. The tribunal also referred to the Gujarat High Court's decision in Bhupendra Bhikhalal Desai v. ITO, which held that such orders are null and void. Additionally, the Supreme Court's ruling in ITO v. Durlabhbhai Kanubhai Rajpara reinforced that notices issued to a deceased person are invalid.2. Assumption of Jurisdiction by the Pr. CIT under Section 263:The appellant argued that the Pr. CIT's assumption of jurisdiction under section 263 was 'bad in law' as the original assessment order was neither erroneous nor prejudicial to the interest of the revenue. The tribunal noted that the Pr. CIT failed to conduct an independent inquiry before assuming jurisdiction, making the order unsustainable.3. Adequacy of Inquiry and Verification by the AO:The Pr. CIT set aside the original assessment order for lack of proper inquiry and verification. The appellant contended that the AO had adequately inquired into the matter, as evidenced by the submission of bank statements and confirmations from loan creditors. The tribunal found that the Pr. CIT's assumption that the AO did not conduct an adequate inquiry was incorrect.4. Fairness and Adequacy of Opportunity Provided to the Assessee:The appellant argued that the Pr. CIT passed a 'pre-mediated order' without affording a fair and adequate opportunity to the assessee. The tribunal observed that the Pr. CIT summarily dismissed the submissions made by the assessee during the proceedings, further rendering the order unsustainable.5. Directions for Further Inquiry on Unsecured Loan Transactions:The Pr. CIT directed the AO to make further inquiries into the creditworthiness of parties from whom unsecured loans were availed. The appellant contended that this direction was based on an incorrect appreciation of facts, as all necessary documents, including confirmations and affidavits from loan creditors, were already furnished. The tribunal agreed that the direction for further inquiry was unsustainable.Conclusion:The tribunal concluded that the order passed by the Pr. CIT under section 263 was 'nonest in the eyes of law' and quashed it. The appeal of the assessee was allowed, and the order was pronounced in the open court on 05th September 2024.