Late Shri Atulkumar Mansukhlal Shah Vs. ITO (ITAT Ahmedabad)
Facts of the Case and Contention of the Assessee
Brief facts of the case are that the assessee has filed its return of income on 29.5.2009 showing total income at Rs. 1,41,830/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued on 30.8.2010 which was duly served upon the assessee. In order to set assessment proceedings in motion, the ld.AO has issued notice under section 142(1) of the Act. On scrutiny of the details it came to the notice of AO that cash of Rs. 11,79,000/- was deposited in Punjab National Bank, Satellite Branch, Ahmedabad. Similarly, a sum of Rs. 25,95,000/- was deposited with HDFC Bank, Mithakhali Branch, Ahmedabad. The ld.counsel for the assessee while impugning the orders of Revenue authorities took us through section 159 of the Income Tax Act, 1961 and pointed out that as per sub-section (2) of section 159 notice upon legal heirs ought to have been issued by the AO, which the AO has failed to do so, and therefore, the assessment order is a nullity and deserves to be quashed.
Contention of the Revenue
ld.DR pointed out that a perusal of sub-clause (a) of Sub-section (2) and sub-section (3) of Section 159 would contemplates that if any proceedings taken against the assessee, who expired during the pendency of the proceedings, then the proceedings may be continued against legal representatives in the same capacity as if the assessee was alive, and the order could not be declared as nullity. At the most, it can be treated as a procedure illegality which can be cured by issuance of notice to the L/Rs.
Held by ITAT
A perusal of section 159 would indicate that any proceedings taken against an assessee before his death shall be deemed to have taken against the legal representatives which may be continued against the L/Rs. from the stage at which it stood on the date of the death of the assessee. A perusal of the record would indicate that a notice under section 143(2) was issued on 30.8.2010 when Shri Atulkumar M. Shah was alive. An opportunity to the assessee was given to make submission in support of his return, as required under section 143(2). This assessment proceedings was set in motion by the AO when the assessee was alive. Fact of death of the assessee was brought to the notice of the AO at the very fag end i.e. vide letter dated 23.12.2011. The AO has, though taken cognizance of this letter, but failed to issue notice to the L/Rs. so that they can put their defence before him. As far as two case laws cited by the ld.counsel for the assessee before us is concerned, in the case of CIT Vs. Dalumal Shyamulal (supra) it reveals that the assessee died on 11.7.1991 and assessment order was passed on 24.2.1993. The time gap would suggest that notice under section 143(2) appears to have been served upon the assessee after his death. Similarly a gap of more than two years is available in the case of Akhter Noorudinahmed Saiyed (supra). Considering these two factors, assessment must have been declared null and void in those cases. Facts are quite distinguishable with the facts of the present case. Therefore, in our opinion, there is no illegality committed by the AO. He only committed an irregularity and it is settled position that wherever any irregularity crept in the proceedings, the proceedings itself cannot be declared void, rather irregularity deserves to be rectified. Considering these aspects, we allow appeal of the assessee for statistical purpose. We set aside both the impugned orders and restore all issues to the file of the AO for adjudication afresh. The ld.AO shall re-determine income of the assessee on merit after considering plea of the assessee whether loss suffered by the assessee in share trading deserves to be set off against ultimate assessed income. The ld.AO shall issue notice to the legal representatives by providing reasonable opportunity of hearing, and thereafter pass assessment order.