TaxTMI 
TaxTMI 
1997 (7) TMI 216
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....ecord and responded to various notices of the A.O. The assessment was completed on Shri Birendra Prasad as legal heir of late Shri Nageshwar Prasad somewhere in the month of March 1984 (date is not mentioned in the copy of the assessment order forming part of the appeal record). The income was computed in a sum of Rs.1,82,925. The assessment was the subject matter of appeal proceedings. However, we are not concerned with the additions in this appeal. After the completion of assessment the A.O. intended to impose penalty on the legal heir, Shri Birendera Prasad on the basis of penalty proceedings initiated under section 271(1)(c) of the Act. At the time of completion of the assessment the deceased assessee's son, Shri Birendra Prasad submitted a detailed reply to the A.O. through its advocate as per letter dated 5-3-1986 a copy of which is filed on the appeal record. In this reply letter the L/H of the deceased assessee pleaded for dropping of the penalty proceedings as the concealment of income or furnishing of inaccurate particulars of income was not deliberately made by his deceased father, viz., the deceased assessee. According to the L/R of the deceased assessee the mistake in ....
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....(1)(c) on the present assessee who is the son and one of the L/R of the deceased assessee. The deceased assessee as it appears from the facts did not act deliberately or contumaciously in failing to file correct taxable income in the original return filed by him on 31-10-1974. If the deceased assessee had dishonest intention to evade tax he would not have suo moto filed revised return on 16-8-1976 declaring higher income. In addition to the reasons given by the A/C we are further of the view that the son of the deceased assessee was a representative assessee before the A.O. under section 159 of the Act cannot be penalised under section 271(1)(c) of the Act for the alleged offence of concealment of income or furnishing of inaccurate particulars of such income. Whatever causes the deceased assessee, Shri Nageshwar Prasad had he has taken it alongwith him to the heavenly abode and it is, not lawfully proper or justified to expect and demand from the living persons, viz., the legal representatives as to why the deceased assessee committed the offence concealing the income or furnishing inaccurate particulars of such income. There might have been reasonable or sufficient causes with the....
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.... took place against him. The penalty order was also passed against legal heir Shri Birendra Prasad when a penalty of Rs.28,934 was imposed under section 271(1)(c) of the Act. The penalty was cancelled by the C.I.T. (A) on 22-3-1990. 10. My learned brother has held that legal heirs cannot be penalised for defaults of the deceased, relying on a decision of the Calcutta Bench of the Tribunal in Bhuban Mohan Mitter Charitable Trust's case. In this decision, it has been observed that in criminal jurisprudence a crime dies with a man and the legal representative of the deceased offender or criminal cannot be penalised for the offences or crimes committed by the deceased. If this cardinal principle of criminal jurisprudence is also applied to the penalty proceedings under the Income-tax Act, which are quasi-criminal in nature, then the quasi-crimes also die alongwith the deceased and, therefore, it will be highly irrational, harsh and inequitable to penalise or punish the legal representative in respect of the quasi-crime committed by the deceased. 11. In this regard, I shall like to state that it is well settled that the Income-tax Act, 1961, is a self contained code exhaustive of ....
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....been made from the legal position obtaining under section 24(B) of the Indian Income-tax Act, 1922 in this regard under the old Act of 1922, the liability on the legal representative was confined to the tax payable only, the words "any tax" have been used. In the circumstances, the liability did not extend to penalty or any other sum. However, in the I.T. Act, 1961, the words "any tax" have been replaced by the words "any sum". The use of different words cannot be without any intention and effect must be given to their meaning. I hold that the words "any sum" are wide enough to include penalty under section 271(1)(c) also. The above, decision finds support from three well known commentaries of Income-tax Law. In Kanga & Palkhiwala's The law and Practice of Income Tax, the learned commentators have observed as below: "Penalty on legal representative -- Section 24B of the 1922 Act imposed a liability on the legal representative only in respect of the tax payable by the deceased, and not penalty or any other sum. Therefore penalty proceedings could not be started or continued against the legal representative for any default committed by the deceased. But now penalty proceedings for....
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....the Wealth-tax Act. In that connection, the following observation was made at page 84: "Section 159 of the I.T. Act, 1961, provides for continuance of proceedings, inter alia, for imposing penalty against the legal representatives. But this section has not been made applicable to proceedings under the W.T. Act." 19. I have held that penalty proceedings could be validly initiated against the legal heirs for default of the deceased. The merits of the case will now be discussed. 20. The income finally assessed as per assessment order dated 28-1-1984 was Rs.1,82,925. The original return as the basis for concealment, it will be seen that since the return was filed on 31-10-1974, the law applicable during the period 1-4-1964 to 31-3-1976 will be applicable in respect of the penalties under section 273(1)(iii). According to Explanation I to sub-section (1) existing during that period, where the total income returned was less than 80% of the total income assessed, the assessee should, unless he proves that failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have been guilty of concealment or furnishing inaccura....
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....ed and who is deemed as an assessee as per Sec. 159 of the I.T. Act, 1961 can be penalised under section 271(1)(c) of the Act for the alleged offence by the deceased in concealing the true income chargeable to tax? (2) Whether, on the facts and in the circumstances of the case, the son and one of the legal representatives of the deceased assessee is obliged in law to answer and explain to the satisfaction of the Assessing Officer that there were reasonable causes with his deceased father for committing the alleged act of concealing income for which he as L/R is charged? (3) Whether the son and one of the L/Rs of the deceased assessee is obliged and burdened in law to rebut the presumption of concealment of income as prescribed and laid down in Explanation 1 to section 271(1)(c) of the I.T. Act, 1961? (4) When imposition of penalty under section 271(1)(c) of I.T.Act, 1961 is considered as quasi-criminal in nature, then whether the quasi-crime alleged to have been committed by the deceased assessee has died and ended with the death of deceased offender or whether it survives for penalising the L/R and son of the deceased offender? (5) Whether with a view to maintaining ju....
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....the presumption of concealment of income as prescribed and laid down in Explanation 1 to section 271(1)(c) of the I.T. Act, 1961? (4) When imposition of penalty under section 271(1)(c) of I.T. Act, 1961 is considered as quasi-criminal in nature, then whether the quasi-crime alleged to have been committed by the deceased assessee has died and ended with the death of the deceased offender or whether it survives for penalising the L/R and son of the deceased offender? (5) Whether with a view to maintaining judicial discipline and consistency of view of various Benches of this Tribunal, the decision rendered in the case of Bhuban Mohan Mitter Charitable Trust should be followed in allowing this assessee's appeal? (6) Whether, in view of the decision of the coordinated Calcutta Bench 'B' of this Tribunal in the case of Bhuban Mohan Mitter Charitable Trust the matter should have been placed before the Hon'ble President of Income-tax Appellate Tribunal for constitution of a Special Bench as per the provisions of section 255(3) of the Act for deciding the controversy involved? These two sets of points of difference were put up before me for appointment of a Third Member as well....
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....estimate basis at Rs.20,000 and, thus, he disclosed a net income of Rs.1,01,453. However, the A.O. while completing the assessment made an addition of Rs.25,000 to his gross receipts and thus estimated the gross receipts from the profession at Rs.1,46,453. Under the head 'other sources' the assessee disclosed bank interest of Rs.19,572. The assessee furnished interest earned on fixed deposits as follows: ---------------------------------------------------------------------------- (i) In the name of Sri Nageshar Prasad Rs.13,200 (ii) In the joint names of Sri Nageshwar Prasad and Smt. Meera Prasad Rs. 5,100 (iii) In the joint names of Sri Nageshwar Prasad and Smt. Ahilya Rani  ....
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....ri Nageshwar Prasad and the balance in the hands of his daughters-in-law. Appreciating these contentions, the ld. CIT(A) held the following:-- "I feel that the Income-tax Officer has made cryptic addition without giving any reasons for doing so. In the face of past history of the case, I feel that in order to differ from the past history, the Income-tax Officer should try to muster some evidence in support of his view. He has not done such thing. I am, therefore, left with no alternative but to set-aside this point to the Income-tax Officer for reconsideration and for passing a speaking order after giving reasonable opportunity to the appellant of being heard and giving reasons in detail if he differs from the appellant's point of view." In order to implement the above directions, the A.O. reopened the assessment proceedings and refixed the case for hearing on the above item of income. However, since the assessee did not cooperate, the A.O. passed order under section 144 dated 2-2-1981. Subsequently, the L/Rs filed a petition under section 146 and got the ex parte order set aside by the order of the A.O. dated 20-4-1981. After the ex parte order was set aside again the assess....
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....rs, were known personally only to the deceased himself and there is no scope for others to know about them and all those causes and reasons were ultimately carried away by him to his grave and it is not lawful or proper or justified to expect and demand from his L/Rs as to why the deceased committed the offence of concealing his income or furnishing inaccurate particulars of income. The deceased might have reasonable and sufficient causes with him but since he was no more his L/Rs cannot be called upon to explain the cause and prove them to the satisfaction of the A.O. Had the deceased assessee been alive, perhaps he could have been in a position to explain the reasons and causes and satisfy the A.O. Penal provisions being quasi-criminal in nature die with the man. He very much relied upon the Calcutta 'D' Bench decision of the Tribunal in the case of Bhuban Mohan Mitter Charitable Trust (to which he himself was a party). In that case a view was taken that penal proceedings under the I.T. Act abate on the death of an assessee and, therefore, legal representative of a deceased assessee cannot be penalised for the offences and contraventions under the penal provisions of the I.T. Act....
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....default is committed by the legal representative." The Calcutta High Court in Sukumar Mukherjee v. CIT [1958] 33 ITR 231 held as per the Headnote that imposition of penalty on the son was valid. Giving out the reasons for their decision the Hon'ble Calcutta High Court held the following as part of the same: "Held, that the imposition of penalty on the son was valid. The effect of the provision of section 24B(2) of the Income-tax Act that the income of the deceased person may be assessed as if his legal representative were the assessee is to provide by necessary and unavoidable implication that the income is to be assessed as if it were the income of the legal representative. There is nothing in section 24B(2) to exclude the power of the Income tax Officer to impose a penalty on a legal representative. The existence of the power to impose penal is to be ascertained not from sections which provide for the making of assessments, such as section 23(1) or section 23(3) or section 23(4) or section 24B(2), but from the terms of section 28 itself. The effect of section 24B(2) is such that a penalty may be imposed under section 28 on the legal representative of an assessee fo....
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....n the case of Bhuban Mohan Mitter Charitable Trust. In view of my present finding, I hold in answer to point of difference No. (1) that penalty proceedings can be validly initiated in law on legal heirs when the return of income was filed by the deceased during his life time and when inaccurate particulars as to his income were furnished by the deceased in the said return. 8. Now let me take up the second point of difference, viz., whether in the facts and circumstances of this case, penalty under section 271(1)(c) is fit to be levied on the legal heirs of the deceased and whether the penalty should be upheld or cancelled on merits. 9. After perusing the orders of the ld. Members of the Division Bench and also after going through the whole record of the case and the relevant case law on the subject, I hold that this is not a fit case where penalty can be levied or sustained. Firstly, I have already noted from the assessment order dated 28-7-1977 which is the original assessment order that the initiation of proceedings under section 271(1)(c) was made only for a particular item of income, viz., interest income from fixed deposits. I have already extracted the exact portion of ....
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....rtion of the ITO's order is in clear contravention of the CIT(A)'s order or the order passed without complying with the specific directions given by the CIT(A) can be taken to be a legal order. 10. In Basudeo Prasad Agarwalla v. ITO [1989] 180 ITR 388, the Hon'ble Calcutta High Court was considering the duty of the ITO passing order in conformity with the directions given by the appellate authorities (in that case the ITAT) and held the following as per the Headnote of the decision:-- "The words 'pass such orders as the Tribunal thinks fit' include all the powers (except possibly the power of enhancement) which are conferred on the Appellate Assistant Commissioner in disposing of an appeal. Consequently, the Tribunal has authority under this section to direct the Appellate Assistant Commissioner or the Income-tax Officer to hold a further enquiry and dispose of the case on the basis of such enquiry. If the order of remand is open and authorities concerned, after remand, can exercise the jurisdiction in accordance with law, the High Court cannot regulate such action. But the Tribunal can give directions to the Income-tax Officer when passing an order of remand and if the scope....
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....that case penalty was imposed by the IAC on the ground of concealment of two items of income, namely unexplained items of hundi loans and certain amount which was said to be the wife's income, not correctly shown in the assessee's return. The Tribunal deleted additions of these two items. However, the Tribunal upheld the order of penalty on the basis of an amount in respect of which the assessee had given a false explanation as to the source. It was held that the Tribunal had no jurisdiction to uphold the imposition of penalty with reference to an amount which did not constitute the basis on which the penalty was imposed. The facts of the case before the Hon'ble Calcutta High Court were given in the following part of the Headnote of the decision: "Where penalty was imposed by the IAC on the ground of concealment of two items of income, namely the sum of Rs.1,25,000 representing hundi loans and an amount of Rs.6,594 said to be the wife's income not correctly shown in the assessee's return, and both these items were deleted in the quantum appeal and the Tribunal upheld the order of penalty on the basis of an amount of Rs.1,88,000 in respect of which the assessee had given a false ....
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....bsp; Rs. 20,000 (iii) Bank interest on F.Ds. Rs. 066 ------------- Rs. 26,666 ---------------------------------------------------------------------------- The ITO proceeded on the basis that the returned income is less than 80% of the finally assessed income. Finally assessed income excluding agricultural income which was e....