Late Jagdish Vs ITO (ITAT Jaipur)
You’re Still Taxed After You’re Gone- But Your Heir Only Pays What’s in the Cupboard –Penalty Survives After Death but Legal Heir Liable Only to Extent of Inherited Assets – Section 159 Covers Tax & Penalty – Death Doesn’t Abate Penalty Proceedings- ITAT Jaipur
The late assessee, Shri Jagdish, was assessed for AY 2007-08, in which the AO made two additions: ₹ 3,80,000 as unexplained cash deposits, & ₹ 14,62,758 as Long-Term Capital Gains (LTCG) u/s 50C on sale of land. A penalty of ₹ 3,96,929 u/s 271(1)(c) was imposed for “concealment & furnishing inaccurate particulars.” In the first appeal, the CIT(A) deleted the penalty relating to LTCG (holding it a debatable issue) but sustained the penalty of ₹ 81,842 corresponding to the cash deposit addition. During appeal proceedings, Assessee had expired on 08.02.2018, & his legal heir, Shri Chajju Ram, was substituted.
Assessee’s Arguments
The legal heir argued that:
- The deceased had explained the cash deposits as arising from sales through a local broker & cash available from earlier land transactions, which were genuine & not disproved by the Department.
- Penalty proceedings are independent, & there was no deliberate concealment.
- Since the assessee had passed away, the penalty, being quasi-criminal, cannot be enforced on the legal heir.
- Section 159(4) limits a legal representative’s personal liability only to “tax” & not to “penalty”; hence, penalty recovery is not permissible after death.
- Reliance was placed on ITAT Nagpur in Beantkaur Avtarsingh Juneja v. ITO, where penalty recovery from heirs was held unenforceable.
Department’s Stand
