Case Law Details
Beantkaur Avtarsingh Juneja Vs ITO (ITAT Nagpur)
The case of Beantkaur Avtarsingh Juneja versus the Income Tax Officer (ITO), Nagpur, has sparked significant debate regarding the recoverability of income tax penalties from the legal representatives of deceased individuals accused of tax offenses. In a recent decision by the Income Tax Appellate Tribunal (ITAT) Nagpur, the issue was thoroughly examined, shedding light on crucial aspects of tax law and its application in such scenarios.
The crux of the matter revolved around the imposition of a penalty under section 271B of the Income-tax Act, 1961, for the non-furnishing of a Tax Audit Report (TAR) within the prescribed time limit. Beantkaur Avtarsingh Juneja, an individual running a petrol pump business, faced penalty proceedings due to the delay in submitting the TAR for the assessment year 2017-18. Despite several opportunities provided by the authorities, Juneja failed to establish a reasonable cause for the delay to the satisfaction of the appellate authority.
The appellate process culminated in a significant legal question: whether a penalty levied under section 271B of the Income Tax Act remains sustainable upon the death of the assessee. The ITAT examined two potential scenarios: where the assessee dies before the imposition of the penalty, and where the assessee dies after the penalty is imposed.
In cases where the penalty proceedings are initiated and concluded during the lifetime of the deceased assessee, the issue shifts to the recoverability of the penalty from the estate succeeded by the legal representative. Section 159 of the Income Tax Act addresses the liability of legal representatives, stating that they may be liable not only for tax payable by the deceased assessee but also for any penalty or interest.
However, the ITAT’s decision delved deeper into the nature of penalty proceedings, considering them quasi-criminal in nature. Drawing parallels with criminal jurisprudence, where crimes die with the offender, the tribunal emphasized the distinction between tax liabilities and penalties. While taxes represent the price paid for civilization, penalties are intended to penalize contumacious conduct.
Relying on judicial precedents and legal reasoning, the ITAT ruled that penalty proceedings abate upon the death of the assessee, and the penalty amount is not recoverable from the legal representatives of the accused. Permitting the recovery of penalties from legal representatives would effectively amount to punishing them for the offenses or actions of the deceased individual.
The tribunal’s decision not only provides clarity on the recoverability of penalties in such cases but also underscores the fundamental principles of justice and fairness within the realm of tax law. By recognizing the limitations imposed by law and precedent, the ITAT’s ruling upholds the rights of legal representatives while ensuring the equitable application of tax penalties.
In conclusion, the Beantkaur Avtarsingh Juneja case sets a precedent regarding the recoverability of income tax penalties from legal representatives of deceased individuals accused of tax offenses, emphasizing the need for a nuanced understanding of legal principles and their implications in such situations.
Case Laws on Penalty Liability in case of deceased person under Section 159 of Income Tax Act
| MADRAS HIGH COURT:-COMMISSIONER OF INCOME TAX, CENTRAL 1, VERSUS SMT. S. GOWRI, No.- T.C.A.Nos. 136 to 141 of 2019, Dated.- February 21, 2019[2019] 417 ITR 45 (Mad) | Penalty u/s 271(1)(c) levied on the legal representative/heirs – penalty was initiated assessee-husband but not concluded prior to his death – penalty in hand of wife – interpretation of Section 159 – HELD THAT:- Tribunal was perfectly justified in setting aside the said penalty against the assessee/wife of the deceased late Sri S. Shanmugam, by the impugned order, as the penalty proceedings in question were initiated originally against the assessee-husband only and were not concluded against the said assessee, prior to his death on 23.01.2011.
Since the provisions of Section 271 (1) (c) depend upon the guilty animus or mens rea on the part of the assessee concerned, naturally, as legal representative, the wife cannot be held liable to defend those penalty proceedings or be held guilty of any mens rea on the part of the husband. Therefore, unless the penalty proceedings are concluded against a living assessee, the legal heirs cannot be held liable to face those proceedings or pay any sum determined as penalty payable under Section 271 (1) (c) of the Act. – Decided in favour of the Assessee and against the Revenue |
| MADRAS HIGH COURT:-COMMISSIONER OF INCOME-TAX, CHENNAI VERSUS LATE DR. K.C.G. VERGHESE
No.- T.C.A. No. 854 of 2017,Dated.- February 20, 2018[2019] 416 ITR 155 (Mad) |
Penalty u/s 158BFA(2) on the legal representatives – block assessment proceedings – Held that:- Penal proceedings have been initiated, only after the withdrawal of the appeal, filed by the deceased assessee, before the Income Tax Appellate Tribunal, at the instance of the legal representative of the deceased assessee. If the word, “proceedings”, includes “penal proceedings”, then the same should have been taken before the death of the deceased. The assessee expired on 14.02.2006. Appeal came to be dismissed as withdrawn. Only after the withdrawal of the appeal, proceedings under Section 158BFA(2) have been initiated only on 31.03.2008, in the block assessment order.
A fiction is created whereby proceedings initiated against the deceased when he was alive, would continue against the legal representatives, as they have stepped into the shoes of the deceased, without there being any effect on the legality of the proceedings. Once this legal fiction comes into operation, then Clause (c) will have the consequential effect of applying all the provisions of the Act. In the case on hand, no penal proceedings have been initiated against the assessee, when he was alive. Assessment has not been done in the hands of the legal representatives and therefore, Section 159 of the Income-Tax Act, cannot be applied to the legal representative. The Tribunal has properly considered the facts, provisions and by applying the judgment of the Punjab and Haryana High Court in CIT v. Tikka Ram, through legal heir, Smt.Munni Devi held that there is no justifiable reason to impose penalty, on the legal representatives, under Section 158BFA(2) of the Income Tax Act. Going through the material on record, we concur with the same. – Decided against revenue |
| GUJARAT HIGH COURT,ASSISTANT COMMISSIONER OF INCOME- TAX VERSUS LATE SHRIMANT FP. GAEKWAD (THROUGH LEGAL HEIR)- No.- 598 to 608 of 2008 Dated.- September 2, 2008 [2009] 313 ITR 192 (Guj) | The returns were filed by the deceased assessee and there was no obligation on the legal representative to file the return of wealth. Pursuant to the returns of wealth filed by the deceased assessee, assessments were also completed and after issuance of penalty notice and during the pendency of penalty proceedings but before the penalty orders were passed, the deceased expired. Thus, the penalty orders passed on the legal representative are contrary to the provisions of law and he cannot be made liable to any penalty. |
| ALLAHABAD HIGH COURT:- KALAWATI DEVI VERSUS INCOME TAX OFFICE & ORS. No.-
[1981] 21 CTR 62 Dated.- May 2, 1980 |
In view of this clear legislative provision, it is not possible to contend that penalty proceedings under s. 271 of the IT Act could not be taken against the legal representatives of the deceased assessee who had furnished inaccurate particulars in the return filed by him. The case of Smt Yawarnnissa Begum vs. WTO (supra) relied upon by the petitioner, relate to penalty impasable under the provisions of the WT Act which Act does not contain a provision similar to that contained in s. 159 of the IT Act. The ratio decidendi of the said decision, is, therefore, not applicable to the present case.
21. As all the submission made by the learned counsel for the petitioner for impugning the validity of the assessment and the penalty orders have been found to be void on merit, the petition fails and is dismissed with costs. |
Extract of Section 159 of Income Tax Act, 1961
Legal representatives.
159. (1) Where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased.
(2) For the purpose of making an assessment (including an assessment, reassessment or recomputation under section 147) of the income of the deceased and for the purpose of levying any sum in the hands of the legal representative in accordance with the provisions of subsection (1),—
(a) 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 the death of the deceased;
(b) any proceeding which could have been taken against the deceased if he had survived, may be taken against the legal representative; and
(c) all the provisions of this Act shall apply accordingly.
(3) The legal representative of the deceased shall, for the purposes of this Act, be deemed to be an assessee.
(4) Every legal representative shall be personally liable for any tax payable by him in his capacity as legal representative if, while his liability for tax remains undischarged, he creates a charge on or disposes of or parts with any assets of the estate of the deceased, which are in, or may come into, his possession, but such liability shall be limited to the value of the asset so charged, disposed of or parted with.
(5) The provisions of sub-section (2) of section 161, section 162, and section 167, shall, so far as may be and to the extent to which they are not inconsistent with the provisions of this section, apply in relation to a legal representative.
(6) The liability of a legal representative under this section shall, subject to the provisions of sub-section (4) and sub-section (5), be limited to the extent to which the estate is capable of meeting the liability.
FULL TEXT OF THE ORDER OF ITAT NAGPUR
By this appeal challenges the DIN & order No. ITBA/NFAC/S/250/2022- 23/1047509176(1) dt. 18/11/2022 of the National Faceless Appellate Centre [‘NFAC’ hereinafter] for assessment year 2017-18 [‘AY’ hereinafter] passed u/s 250 of the Income-tax Act, 1961 [‘the Act’ hereinafter] confirming the levy of penalty u/s 271B of the Act.
2. Tersely stated facts of the case are that;
2.1 The assessee is an individual engaged in the business of running petrol pump. The assessee filed her return of income [‘ITR’ hereinafter] on 26/09/2018 which was summarily processed u/s 143(1) of the Act accepting the returned income however triggered a penalty proceedings u/s 271B for non-furnishing of Tax Audit Report [‘TAR’ hereinafter] within the prescribed time limit u/s 44AB r.w.s. 139(1) of the Act.
2.2 A penalty proceeding by issue of notice dt. 12/03/2020 u/s 274(1) r.w.s. 271B was initiated for non-furnishing TAR by the due of filing ITR for AY 2017-18 i.e. 07/11/2017. In response thereto the assessee neither made any submission nor any representation explaining reasonable cause beyond delay in filing TAR owning to which the Ld. AO culminated the proceedings by an order dt. 23/03/2020 imposing penalty of ₹1,50,000/- being to maximum permissible ceiling as against penalty @0.5%of total gross receipts/turnover ₹14,27,68,859/.
2.3 Aggrieved assessee carried the matter in appeal before first appellate authority u/s 246A(1)(a) of the Act. While dealing with assessee’s appeal the Ld. NFAC provided as much as six opportunities from January, 2021 to March, 2022, however, the assessee failed to effectively establish the reasonable cause beyond delayed filing of TAR to the satisfaction of the first appellate authority. The assessee’s reasoning that due to legal dispute over ownership of petrol pump books were in possession of her daughter and assessee had no access till the intervention of court could inspire no confidence and as such she failed in demonstrating reasonable cause in terms of section 273B of the Act. Consequently, the Ld. NFAC approbated the imposition and dismissed the appeal by placing reliance on ‘ITO Vs Gayatri Coal Supply’ 238 AT 16 (Patna), ‘CIT Vs Standard Mercantile Co.’ 160 ITR 613 (Patna) and ‘CIT Vs Mussadilal Ram Bharose’ [1987] 165 ITR 14 [Equi: 30 Taxman 546H].
2.4 Still aggrieved by the aforestated imposition of penalty the appellant assessee set-up this appeal on a solitary ground that the appellate authority erred in law and facts & circumstance in confirming the penalty u/s 271B of the Act.
3. The case was called twice; none appeared at the bequest of the assessee. In absence of appellant, with able assistance from Revenue we deem it fit to reject adjournment dt. 15/03/2024 which besides informing the appellant is no more cited no convincing reasons therein. Consequently we proceeded to adjudicate the matter ex-parte u/s 24 of the Income Tax Appellate Rules, 1963. [‘ITAT-Rules’].
4. We have heard Ld. DR Mr Marathi and subject to rule 18 of ITAT-Rules, perused the material placed on records. We note that, after having failed to prove her case on merits, the appellant without touching provisions of section 273B of the Act challenged the levy on legal ground. We are mindful note that, after having instituted instant appeal u/s 253(1)(a) of the Act on 11/01/2023, the appellant through former letter of adjournment informed to have died. In the event the only question remains before us is whether a penalty levied u/s 271B of the Act is sustainable upon the death of assessee.
5. On the subject matter of penalty, there could be two situations viz; (i) assessee dies before the imposition of penalty or (ii) assessee dies after the penalty is imposed. The imposition of penalty in cases falling in first scenario is no-more res-integra in the light of decision in ‘ACIT Vs Late Shrimant FB Gaekwad’ [2008, 313 ITR 192 Gujarat], ‘CIT Vs Dr. K.C.G. Varghese’ [2018, 92 com 400 & 2019, 416 ITR 155 (Mad.] which followed in ‘CIT Vs Smt S Gowni’ [2020, 116 taxmann.com 764 & 417 ITR 45, Madras], wherein it has been categorically held that, penalty proceedings could not initiated and concluded against the legal representative of the deceased assessee. The former ratio however cannot come to rescue the cases falling in the latter category.
6. Let us first analyse the provisions of section 159 of the Act which talks about the liability of legal representative [‘LR’ hereinafter of deceased assessee. Without reproducing the provision in verbatim, it shall suffice to state that, the word ‘any sum’ referred in s/s (1) of section 159 of the Act has been substituted in place of word ‘any tax’ which occurred in old section 24B of the Income Tax Act, 1922 so as to cover not only tax payable but also any penalty or interest. Therefore, the legal representatives of the deceased can also be liable to pay penalty on behalf of the deceased assessee pursuant to the provisions of Section 159(1) of the Act. This finds support in the ratio of Hon’ble Allahabad High Court in case of ‘Kalawati Devi Vs ITO’ [1981, 6 Taxman 252] wherein their Hon’ble Lordship have held that, section 159(1) clearly makes the legal representatives liable not only for the tax payable by the deceased-assessee but also for all sums which the deceased would have been liable to pay had he not died. Hence, penalty proceedings for a default committed by a deceased could be started or continued against the legal representatives, too. Similarly, the Hon’ble Kolkata High Court in ‘Smt. Tapati Pal Vs CIT’ [2002, 124 Taxman 123 Cal.] held that penalty proceedings for a default committed by deceased can be started or continued against the legal representative as against its earlier decision in ‘Taraknath Gayen and others Vs CEGAT’ [1987, 31 ELT 631 (Cal)].
7. In the instant case the penalty proceedings were initiated and culminated during the lifetime of the deceased assessee. Therefore, the only question thus, remains of its recovery from the estate if any succeeded by legal representative of deceased assessee. At this juncture it is worthwhile to note here that, s/s (4) of section 159 of the Act only empowers recovery of ‘the tax’ liability to the extent of estate of deceased assessee succeeded by LR. The conjoint reading of s/s (1) and s/s (4) of section 159 of the Act suggests that in case of death of assessee, ‘the tax’ subject to estate of deceased assessee delved could only be recovered (if any) from the legal representative. Conversely nothing other than tax can be fastened to the estate succeeded by the LR.
8. The honourable High Courts and Apex Court in catena of judicial precedents has held that penalty proceedings are quasi-criminal in nature. 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. As such penalty proceedings are different and distinct in nature than tax while tax are price paid for buying civilisation whereas the penalties are levied for the contumacious conduct of the wrong doer therefore such penalty proceedings abate on the death of the assessee. If recovery of , penalty is permitted against the estate of deceased, then it would clearly lead to permitting the enforcement of crime against the right of LR in succeeded estate.
9. In view of the decision of Hon’ble Calcutta High Court in ‘Taraknath Gayen and others Vs CEGAT’ [1987, 31 ELT 631 (Cal)] & ‘Omwati Vs UOI’ [2000, 125 ELT 136 (All.)] their Hon’ble Lordships have held that, the penalty amount is not recoverable from the legal representatives of accused; as imposition of penalty is intended to penalise the accused, therefore, recovery of penalty from the legal representatives would amount to punishing the legal representatives. It is also in our knowledge that the co-ordinate benches in similar circumstance deleted the penalty in viz; ‘Bhuban Mohan Mitter Charitable Trust Vs ITO [1993, 45 ITD 617 (Cal)] and in ‘Bhagwan singh Shriram Singh L/H Dinesh Bhagwan Singh Vs ITO’ [2006, 9 SOT 73 (Mum)]
10. In view of aforestated discussion and restriction placed in s/s (4) of section 159 of the Act and further adopting the reasoning laid in ‘Taraknath Gayen and others Vs CEGAT’ & & ‘Omwati Vs UOI’ (supra) we allow the legal ground arose in the instant appeal and in consequence set-aside the impugned order and direct the Ld. AO to delete the penalty.
11. In result, the appeal of the assessee is ALLOWED.
In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Thursday, 25th day of April, 2024.
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