Facts of the case:
The assessee’s husband was suffering from Cancer and was forced to sell his house property for his treatment. The AO while computing the total income of the assessee included the entire bank deposit in the name of her husband and the sale proceeds of the house property simply because the bank account was maintained jointly by assessee and her husband. The assessee in support of her claim explained that the deposits added by AO are out of the sale of house property belonging to the husband and also filed documents in the shape of ‘agreement to sale’. The assessee’s husband sold the house property for a sum of Rs.28.25 lakhs which was received by him partly by cash and partly by cheque and the assessee had no knowledge about how much was received by cash and how much by cheque. The original assessment was completed by the ITO, Ward-54(4), Kolkata and computed the total income at Rs.34,97,270/-, wherein he added the entire sale proceeds of her husband along with family pension etc., while computing the total income. The assessee filed a petition before CIT, Kol-XIX u/s. 264 of the Act and AO was directed to redo the assessment afresh.
Questions of Law
Whether on the facts and circumstances of the case, not taking section 159 into the consideration and making addition under section 69A was justified by the Ld. CIT(A)?
Contentions of the Revenue
According to the Revenue the return for the assessment year under dispute was signed and filed by Smt. Jharna Ghosh as an assessee and not by other heir, i.e., son. Even in the petition u/s. 264 of the Act filed before the CIT, the appellant has not raised the above issue. Even during set aside proceedings, the appellant never raised the issue of applicability of sec. 159 of the Act and treating the appellant as legal representative of the deceased husband, rather she tried to establish that there was no capital gain on the sale of house property and there was no unexplained cash deposits in the bank account jointly held by her with her husband. The appellant has also not filed any evidence or evidence from the Court by virtue of which the appellant should be treated as a legal representative. Further, it would not be out of the context to mention that in the balance sheet signed and filed by the appellant, the house property, bank account etc., have been disclosed as her assets/liabilities and the appellant did not deny the contents in the balance sheet inasmuch as the said balance sheet was part of I.T return filed by her under her signature, not as a legal representative but as an individual assessee. Therefore, it cannot be said that the assessment was made on a dead person, for which provisions of sec. 159 of the Act shall come into play while assessing the income and tax burden thereon for the assessment under dispute. Also the sale deed was not registered which could have more evidentiary value.
Contentions of the Assessee:
The appellant raised the issue of invoking of 159 of the Act because it relates to the liability of the legal representative of the deceased. According to sec. 159(2)(a) of the Act, any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of death of the deceased and for completing the proceedings by virtue of sec. 159(2)(c) of the Act, the provisions thereof are to be applied accordingly. Assessee further contended that according to section 159(3) legal representative of the deceased shall, for the purpose of this Act, be deemed to be an assessee. Therefore, the deceased is an original assessee and the legal representative becomes the deemed assessee for the purposes of completion of the proceedings and for recovery of any tax from the estate of the deceased in the hands of the legal representative.
Held by the Tribunal:
The Hon’ble Tribunal held that the property in question was sold by assessee’s late husband before his death and the receipts out of the sale proceeds are deposited in a joint bank account that of assessee and her late husband. Once this is the position the entire receipts are to be assessed in the hands of late husband although through legal heirs by adopting the procedure prescribed u/s. 159 of the Act. Neither the AO nor the CIT(A) has gone into this aspect despite the fact that the very issue was raised before the CIT(A). The, estate of the deceased person can be assessed by adopting the procedure prescribed u/s.159 of the Act. Accordingly, the receipts out of the sale proceeds of the house property of deceased husband added in the hands of the assessee by the AO and confirmed by CIT(A) was deleted and further the Hon’ble Tribunal held that the Revenue can take action on legal heirs to tax the estate of the deceased husband of the assessee after adopting the procedure prescribed u/s. 159 of the Act.