COMMISSIONER OF INCOME-TAX VS PRABHAWATI GUPTA
1999 P T D 4013
[Madhya Pradesh High Court (India)]
Before A. K. Mathur, C. J. and S. K. Kulshrestha, J
COMMISSIONER OF INCOME-TAX
versus
PRABHAWATI GUPTA and others
M. C. C. No.627 of 1989, decided on 15/02/1996.
Income-tax---
----Assessment---Death of assessee before proceedings -for assessment completed---Legal representatives not brought on record---Assessment void ab initio---ITO to proceed according to law under S.159(2) after giving opportunity of hearing to legal representative of deceased assessee---Indian Income Tax Act, 1961, S.159(2).
For the assessment year 1970-71, the assessment of the assessee who died on October 28, 1976, was purported to have been completed on March 24, 1976, on an income of Rs.45,000. On appeal to the Commissioner of Income-tax (Appeals) the widow of the assessee contended that the assessment was void ab initio since it was passed against a dead person. 'The Commissioner of Income-tax (Appeals) upheld the order of the Income-tax Officer on the ground that the assessment was completed on March, 24, 1976, when the assessee did not appear before the Income-tax Officer and nothing more remained to be done except passing the assessment order. On further appeal, the Tribunal held that the assessment order was void ab intio as it was passed against a dead person, that the assessment had not. been completed on March 24., 1976, that, in fact, on March-23, 1976, the Income-tax Officer required the assessee to furnish certain, information and the case was fixed for hearing on March 24, 1976, that on that date, Le, on March 24, 1976, the Income-tax Officer had recorded that none appeared and assessed the income of the deceased assessee at Rs.45,000, that, therefore, the case was not fixed on March 24, 1976, for final disposal, but no proceedings took place and as such it could not be said that the proceedings were concluded and only the assessment order remained to be passed, that therefore, the proceedings were incomplete and hence under the provisions of section 159(2) of the Income Tax Act, 1961, it was incumbent on the Income-tax Officer to have brought the legal heirs of the deceased assessee on record but it was not done. On a reference under section 256(2) of the Act, the Revenue contended that no order had been passed by the Tribunal for assessing the liability of the legal representatives of the deceased assessee though the Tribunal in its order had observed that "natural justice demanded that the assessment should go back to the Income-tax Officer to give sufficient opportunity to the legal representatives of the deceased assessee for stating their case".
Held, (i) that the assessee died before the proceedings for assessment were completed and, therefore, it was incumbent under section 159(2) of the Act on the part of the Income-tax Officer to have brought the legal representatives of the deceased assessee on record and proceeded from the stage from where it was left at the time of death of the deceased assessee. Since the proceedings had not been completed before the death of the deceased, the Tribunal had rightly held that the assessment should be completed under section 159(2) of the Act.
(ii) That though the Tribunal, after setting aside the order of the Commissioner of Income-tax (Appeals) had not passed a further order directing the Income-tax Officer to proceed with the assessment against the legal representatives of the deceased assessee, it was open to the Income-tax Officer to proceed according to law under section 159(2), if it was now possible to do so.
A. Adhikari for the Commissioner.
Nemo for the Assessee.
JUDGMENT
This is an income-tax reference under section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as the "Act"), and the following questions of law have been referred by the Tribunal for answer of this Court, which read as under:
"(1).Whether, on the facts and, in the circumstances of the case, the Tribunal was right in law in holding that the assessment order passed by the Income-tax Officer was, ab initio, void for omission to include the legal heirs of the deceased in the assessment order?
(2) Whether the Tribunal was right in setting aside the order of the Appellate Assistant Commissioner and in not passing further order directing the Income-tax Officer to proceed with the assessment against the legal representative of the assessee?"
The brief facts giving rise to this reference are thus: The assessee, the late H. C. Gupta, died on October 28, 1976, and the Income-tax Officer, Jabalpur, completed the assessment for the year 1970-71 on March 24, 1977, on an income of Rs.45,000 without impleading the legal representatives of the assessee. Aggrieved against the order of the Income-tax Officer, Smt. Sundarbai Gupta, widow of the deceased assessee, filed an appeal before the Commissioner of Income-tax (Appeals) with the contention that the assessment was void ab initio since passed against a dead person and, therefore, it should be quashed. The Commissioner of Income-tax (Appeals) held that the assessment was completed on March 24, 1976, when the assessee dad not appear before the Income-tax Officer and nothing more remained to be done except passing the assessment order. Thus, the Commissioner of Income-tax (Appeals) upheld the order of the Income-tax Officer. Thereafter, an appeal was preferred before the Tribunal and the Tribunal quashed the assessment order and held that the assessment order was ab initio void. as passed against a dead person. It was observed that the assessment had not been completed on March 24, 1976. It was also observed that it! fact, on March 23, 1976, the Income-tax Officer required the assessee to furnish certain information and the case was fixed for hearing on March 24, 1976. The next date, i.e. on March 24, 1976, the Income-tax Officer had recorded that none appeared and assessed the income of the deceased assessee at Rs.45,000. Therefore, it was held that the case was not fixed on March 24, 1976 for final disposal, but no proceedings took place and as such it cannot be said that the proceedings were concluded and only the assessment order remained to be passed. Therefore, the Tribunal held that the proceedings were incomplete; hence under the provisions of section 159(2) of the Income-tax Act, it was incumbent on the Income-tax Officer to have brought the legal heirs of the deceased assessee on record, but it was not done. Therefore, the Tribunal found that the order passed by the Income-tax Officer is ab initio void and tile order passed by the Commissioner of Income-tax in appeal filed by the assessee is also bad for remanding the case back to the Income-tax Officer for de novo assessment. Hence, the Tribunal allowed the appeal. Thereafter, the Revenue approached this Court for calling for the reference under section 256(2) of the Income tax Act, and on that basis, reference was called and the aforesaid questions of law were framed for answer of this Court.
We have heard learned counsel for the parties and perused the records. It is an admitted fact that the assessee died before the proceeding for assessment were completed. Since the proceedings had not beer completed and it was yet to be completed, 'therefore, it was incumbent under section 159(2) of the Act on the Income-tax Officer to have brought the legal representative of the deceased on record and proceeded from the stage where it was left at the time of death of the deceased. According to the findings of the Tribunal, the proceedings had not been completed before the death of the assessee; therefore, the Tribunal had rightly held that the assessment should be completed under section 159(2) of the Act. In this view of the matter, we are of the opinion that the view taken by the Tribunal is correct and both the questions are answered against the Revenue and in favour of the assessee.
Learned counsel for the Revenue had submitted that no order has been passed by the. Tribunal for assessing the liability of the legal representative of the deceased assessee though the Tribunal in para. 4 of the order has very clearly observed:
"In such circumstances natural justice demands that the assessment should go back to the Income-tax Officer to give sufficient opportunity to the legal representatives of the deceased for stating their case."
Therefore, the Tribunal was mindful of the fact that in such a situation, the case has to be remanded; though the Tribunal has not very specifically mentioned this part presumably the Tribunal may have credited this much to the Income-tax Officer that he will initiate the action under section 159(2) of the Act. Be that' as it may, if it is now possible under the law, then it is open for the Income-tax Officer to proceed according to law under section 159(2) of the Act. This reference is answered against the Revenue and in favour of the assessee.
M.B.A./3173/FC Reference answered.