Case Law Details
Hiraben Babubhai Patel Vs PCIT (ITAT Ahmedabad)
ITAT Ahmedabad held that notice issued under section 263 of the Income Tax Act in the name of a deceased person is invalid. Accordingly, order passed thereon is also invalide in the eyes of law.
Facts- The assessee filed return of income for the impugned assessment year declaring total income of ₹ 83,52,43,311/-. The assessment order was passed accepting the returned income of the assessee and no additions were made to the income declared by the assessee.
Thereafter, the Principal CIT initiated proceedings u/s. 263 of the Act, and after taking the submissions of the assessee on record, he held that the order passed by the assessing officer is erroneous and prejudicial to the interests of the Revenue for the reason that firstly, the assessee had offered capital gains of ₹ 85.80 crores on sale of shares of VSPL, however, on perusal of the sale agreement, it is seen that there is a non-compete clause, and therefore income/consideration for transfer of shares should have been offered as business income u/s. 28(va) of the Act. Secondly, the long-term capital loss shown by the assessee amounting to ₹ 14.08 lakhs has been wrongly claimed, since the assessee’s share in property transferred was only 50%, whereas loss has been claimed by the assessee @100%. Accordingly, the Principal CIT set aside the assessment order holding the same to be erroneous and prejudicial to the interests of the Revenue.
Conclusion- Held that at the time when the notice under section 263 of the Act dated 15-02-2019 was issued by the Principal CIT, the assessee had already expired (on 23-022018). Further, during the course of 263 proceedings, this fact was brought to the notice of the Principal CIT, and a specific request was made to drop the 263 proceedings, since the assessee had expired. However, the Principal CIT did not deal with this aspect in the order passed u/s 263 of the Act, by him. It is a well settled proposition that a notice issued /order passed in name of a dead person is not a valid notice/order. Accordingly, keeping in view the facts of the instant case and the decisions rendered by Hon’ble Supreme Court and Hon’ble High Court Gujarat High Court on this issue, we are of the considered view that the order passed under section 263 of the Act is not valid in the eyes of law, having been passed on a deceased person.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This is an appeal filed by the assessee against the order of the ld. Principal Commissioner of Income Tax, (PCIT), Ahmedabad, in proceeding u/s. 263 vide order dated 28/03/2019 passed for the assessment year 201415.
2. The assessee has taken the following grounds of appeal:-
“1. On the facts & in the circumstances of the case it is most respectfully submitted that the Ld. Principal Commissioner of Income Tax- 4 has erred in Law and on Facts in holding that the order passed u/s 143(3) of The Income Tax Act,1961 dated 15/11/2016 as erroneous and prejudicial to the interest of revenue and directing the Ld. Assessing Officer to make fresh assessment, by passing the Order U/s 263 of The Income Tax Act,1961 dated 28/03/2019.
2. On the facts & in the circumstances of the case it is most respectfully submitted that the Ld. Principal Commissioner of Income Tax-4 has erred in Law and on Facts by holding that non compete fees paid to all the share holders irrespective of the fact that said person holds technical knowledge of the business or not and attends the affairs of business or not, is in nature of non compete fees only and chargeable u/s 28(va) of the IT Act instead of treating the same in the nature of Sale consideration in respect of Shares.
3. On the facts & in the circumstances of the case it is most respectfully submitted that the Ld. Principal Commissioner of Income Tax-4 has erred in Law and on Facts by directing the Assessing Officer to make the inquiry in respect of the brokerage born by the appellant without giving any opportunity of being heard to the appellant.
4. Your appellant craves leave to add, to alter or to amend the grounds of appeal if occasion arises.”
3. The brief facts of the case are that the assessee filed return of income for the impugned assessment year declaring total income of ₹ 83,52,43,311/-. The assessment order was passed accepting the returned income of the assessee and no additions were made to the income declared by the assessee. Thereafter, the Principal CIT initiated proceedings under section 263 of the Act, and after taking the submissions of the assessee on record, he held that the order passed by the assessing officer is erroneous and prejudicial to the interests of the Revenue for the reason that firstly, the assessee had offered capital gains of Rs. 85.80 crores on sale of shares of VSPL, however, on perusal of the sale agreement, it is seen that there is a non-compete clause, and therefore income/consideration for transfer of shares should have been offered as business income under section 28(va) of the Act. Secondly, the long-term capital loss shown by the assessee amounting to ₹ 14.08 lakhs has been wrongly claimed, since the assessee’s share in property transferred was only 50%, whereas loss has been claimed by the assessee @100%. Accordingly, the Principal CIT set aside the assessment order holding the same to be erroneous and prejudicial to the interests of the Revenue.
4. The assessee is in appeal before us against the aforesaid order passed by Principal CIT. Before us, at the outset, the counsel for the assessee submitted that the order passed by Principal CIT u/s 263 of the Act is void ab initio since the same has been passed on a deceased person. The counsel for the assessee drew our attention to page 8, paragraph 3.5 of the order of PCIT and submitted that it has been specifically noted in the 263 order that the assessee had made a request to drop the 263 proceedings since the 263 proceedings have been initiated in the name of Shri Babu Bhai Patel (the assessee), who had passed away as on the date of initiation of 263 proceedings, and accordingly 263 proceedings are liable to be dropped. The counsel for the assessee submitted that Shri Babu bhai Patel had expired on 6th February 2018, whereas the 263 proceedings against the deceased assessee were initiated vide notice dated 15th February 2019. Therefore, at the time when the 263 proceedings were initiated against the assessee, he had already passed away. Further, despite the fact that vide submission dated 22nd February 2019, the assessee had submitted (para 3.5, page 10) that the 263 proceedings may be dropped since the assessee had already passed away, on the date of initiation of 263 proceedings, however, the Principal CIT did not address the objection to jurisdiction raised by the assessee in the 263 order. Accordingly, the counsel for the assessee relied on several judicial precedents in support of the contention that order passed in the name of deceased person/assessee is not valid in the eyes of law, and hence the 263 order passed by Principal CIT is liable to be set aside on grounds of jurisdiction itself. Without prejudice, on merits of the case, the counsel for the assessee also submitted that the view taken by the assessing officer is a legally tenable view and therefore, even on merits, the assessment order cannot be held to be erroneous and prejudicial to the interests of the revenue, looking into the facts of the instant case.
5. In response, the Ld. DR relied upon the observations made by the principal CIT in the 263 order.
6. We have heard the rival contentions and perused the material on record. Before going into the merits of the order passed under section 263 of the Act, we shall first deal with the assessee’s challenge to jurisdiction of the order passed under section 263 of the Act. It is a well-settled principle of law that no order can be passed in the name of a deceased person, and various Courts, including the Hon’ble Supreme Court and jurisdictional Gujarat High Court, have consistently taken a view that such order passed in the name of the deceased person, is not valid in the eyes of law.
6.1 In the case of ITO v. Bhupendra Bhikhalal Desai[2021] 131 taxmann.com 40 (SC), the original assessee, namely ‘B’, passed away on 23-4-2017.The Assessing Officer issued a notice under section 153C in name of ‘B’ on 29-3-2019. After receiving said notice legal heir informed Assessing Officer that his father, B had passed away and requested to drop proceedings as notice was issued to a dead person. The Assessing Officer rejected objections raised by legal heir on ground that no information was provided about demise of B and even after his death income tax returns were filed in name of B for relevant assessment years. The High Court by impugned order held that impugned notice under section 153C issued against dead person, is unenforceable in law and revenue could not contend that as they had no knowledge about death of assessee, they were entitled to plead that notice was not defective and, therefore, impugned notice as well as order were to be quashed and set aside. The Hon’ble Supreme Court held that Special Leave petition filed against impugned order by the Revenue, was to be dismissed.
6.2 In the case of ITO v. DurlabhbhaiKanubhaiRajpara[2020] 114 taxmann.com 482 (SC), pursuant to summons issued in name of assessee’s father under section 131(1A), assessee brought to notice of Revenue Authorities that his father had already died. Despite knowing said fact, Assessing Officer issued notice in name of assessee’s father under section 148 seeking to reopen assessment. The assessee thus filed petition before High Court contending that impugned notice was without any jurisdiction, which was issued against a dead person. The High Court held that no valid notice could be issued against a dead person and, thus impugned notice was required to be quashed and set aside.In light of the above facts, the Hon’ble Supreme Court held that SLP filed by the Revenue against order of High Court was to be dismissed.
6.3 In the case of Chandreshbhai Jayantibhai Patel v. ITO 101 taxmann.com 362 (Gujarat), the Gujarat High Court held that where original assessee died and thereafter Assessing Officer issued notice under section 148 in his name to reopen assessment and petitioner being heir and legal representative of deceased raised an objection that assessee had already expired and, therefore, notice in his name was not valid, merely because petitioner had informed Assessing Officer about death of assessee and asked him to drop proceedings, it could not be construed that petitioner had participated in proceedings and, therefore, provisions of section 292B would not be attracted and notice under section 148 was to be treated as invalid.
6.4 In the case of Urmilaben Anirudhhasinhji Jadeja v. ITO 117 taxmann.com 504 (Gujarat), the Gujarat High Court held that reopening notice under section 148 issued against a dead person would be a nullity and; proceedings pursuant to a reopening notice issued to a dead person could not be continued against legal representatives.
6.5 In the case of Smt. Madhuben Kantilal Patel v. UOI [2023] 148 taxmann.com 202 (Gujarat), the Hon’ble Gujarat High Court held that here petitioner-legal heir of assessee-deceased had supplied death certificate of assessee to concerned officer within a short period after her demise, impugned reopening notice issued subsequently under section 148 in name of deceased was illegal and thus liable to be set aside.
6.6 In the case of Inox Wind Energy Ltd.[2023] 148 taxmann.com 289 (Gujarat), the Hon’ble Gujarat High Court held that where amalgamated company brought facts of amalgamation to notice of Assessing Officer, show cause notice cum draft assessment order issued in name of nonexisting company would be void and same could not be said to be a procedural irregularity which could be cured under section 292B.
6.7 In the case of Krishnaawtar Kabra v. ITO [2022] 140 taxmann.com 423 (Gujarat), the Hon’ble Gujarat High Court held that reopening notice under section 148 issued upon deceased assessee was void ab initio and therefore, consequential proceedings and orders passed thereon were without any jurisdiction and were to be quashed and set aside.
6.8 In the case of Kanubhai Dhirubhai Patel v. ITO [2022] 139 taxmann.com 580 (Gujarat), the Hon’ble Gujarat High Court held that where Assessing Officer issued notice under section 148 to assessee to file return on 31-3-2021 and writ applicant, legal representative of assessee, had informed about death of assessee on 22-11-2020, since writ applicant had not surrendered to jurisdiction of Assessing Officer by submitting return in response to impugned notice and Assessing Officer had not issued notice to him as legal representative representing estate of deceased assessee, impugned notice issued by Assessing Officer was invalid and should be quashed.
6.9 In the case of Bharti Harendra Modi v. ITO 109 taxmann.com 389 (Gujarat), the original assessee, namely, BHM died on 26-5-2017. The Assessing Officer issued a reopening notice under section 148 in name of BHM on ground that on basis of information in Annual Information Return (AIR), it was found that said deceased assessee had sold one immovable property amounting to Rs. 82.89 lakhs but did not file any income tax return, thus, income to said extent had escaped assessment due to failure of BHM to submit her return of income. The Petitioner being heir and legal representative of BHM contended that BHM had already expired and, therefore, impugned notice in name of BHM was not valid. The Hon’ble High Gujarat Court held that a notice issued under section 148 in name of a dead person would not be a valid notice and therefore, the impugned notice issued under section 148 against BHM was to be quashed and set aside.
6.10 Now coming to the facts of the instant case, we observe that at the time when the notice under section 263 of the Act dated 15-02-2019 was issued by the Principal CIT, the assessee had already expired (on 23-022018). Further, during the course of 263 proceedings, this fact was brought to the notice of the Principal CIT, and a specific request was made to drop the 263 proceedings, since the assessee had expired. However, the Principal CIT did not deal with this aspect in the order passed u/s 263 of the Act, by him. It is a well settled proposition that a notice issued /order passed in name of a dead person is not a valid notice/order. Accordingly, keeping in view the facts of the instant case and the decisions rendered by Hon’ble Supreme Court and Hon’ble High Court Gujarat High Court on this issue, we are of the considered view that the order passed under section 263 of the Act is not valid in the eyes of law, having been passed on a deceased person. In the result, it is directed that the order passed under section 263 be set aside.
7. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 16-06-2023
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