Asa Ram, Kurukshetra vs Assessee

Asa Ram, Vs. The Income Tax Officer, L/H of Shingara Mal(Deceased), Ward 1, Village Karah Sahib, Kurukshetra. Pehowa, District Kurukshetra. PAN: ABBPT5610M (Appellant) (Respondent)

Appellant by : Shri Sudhir Sehgal Respondent by : Shri R.K.Gupta, DR

Date of hearing : 27.05.2015 Date of Pronouncement : 02.06.2015

PER BHAVNESH SAINI, J.M. :

This appeal filed by the assessee is directed against the

order of the learned Commissioner of Income Tax (Appeals),

Karnal dated 5.12.2013 for assessment year 2007-08,

challenging the levy of penalty under section 271(1)(b) of the

Income Tax Act.

2. The facts in brief, are that the penalty under section

271(1)(b) of the Act was levied as the assessee had failed to

attend the assessment proceedings before the Assessing

Officer and the Assessing Officer completed the assessment 2

under section 144/147 of the Act. During the assessment

proceedings, the legal heir of the assessee contended that the

assessee had already expired and notice might have been

received by the counsel and that he was under the bonafide

belief that the counsel might have attended the assessment

proceedings. The legal heir of the assessee also took the

ground that the appeal has been filed before the learned CIT

(Appeals). The Assessing Officer dismissed the contention

of the assessee as the legal heir Shri Asa Ram had attended

the proceedings alongwith the counsel on 5.12.2011 during

the assessment proceedings but there was no compliance

made on the subsequent date of hearing i.e. on 13.12.2011.

Further the assessee also failed to comply the show cause

notice dated 21.12.2011 fixing the hearing on 26.12.2011,

which resulted into ex-parte order dated 27.12.2011.

3. It was submitted before the learned CIT (Appeals)

that the impugned penalty order is illegal, arbitrary and bad

in law as it was passed on a dead person and that the penalty

cannot be imposed on a dead person. The learned CIT

(Appeals), however, noted that the legal heir of the assessee

Shri Asa Ram with counsel attended the proceedings before

the Assessing Officer on 5.12.2011 but no compliance was

made on subsequent notices issued for hearing fixed on

13.12.2011 and 26.12.2011. The learned CIT (Appeals) noted

that since the assessee failed to comply with the statutory

notices, therefore, penalty was correctly levied and

accordingly dismissed the appeal of the assessee. 3

4. We have heard the learned representatives of both

the parties, considered the material available on record and

gone through the findings of the authorities below. The copy

of the assessment order is placed on record, which was passed

under section 144/147 of the Act dated 27.12.2011 in the

name of Shri Sihngara Mal, the assessee through legal heir.

In the assessment order it was noted that the notice under

section 148 of the Act was issued on 21.3.2011 but not

complied with and notice under section 142(1) was issued to

furnish the return of income on or before 30.9.2011 but the

assessee did not make any compliance to this notice upto

3.11.2011. Further notice was issued under section 142(1) of

the Act and the assessee was required to make compliance on

or before 11.11.2011, copy of reasons was also supplied, in

which it was briefly explained that the assessee has not

shown interest income, labour charges and milling charges

totaling to sum of Rs.7,45,854/-. On 11.11.2011 written

reply signed by Shri Asa Ram, legal heir of the assessee was

received by the Assessing Officer intimating that his father

Shri Shingara Mal (assessee) had already expired on

21.4.2010 and that he is one of the major legal heir of his

father and original return already filed by his father may be

treated as return having been filed in response to notice

under section 148 of the Act. The Assessing Officer,

therefore, treated the return of income originally filed on

8.11.2007 as return filed in response to notice under section

148 of the Act. Thereafter statutory notices under section

143(2) and 142(1) of the Act were issued on 11.11.2011 fixing 4

the case for 5.12.2011, which was attended by the legal heir

of the assessee and the counsel and the case was adjourned to

13.12.2011 and they were required to furnish reply to the

reasons recorded under section 148 of the Act, copy of which

had already been supplied to them but no compliance has

been made. The Assessing Officer gave further opportunity to

the assessee by issuing notice dated 21.12.2011 under section

142(1) of the Act asking the assessee to file reply to the

reasons recorded under section 148 of the Act. In the

absence of any reply from the side of the assessee, the

Assessing Officer passed ex-parte assessment order and

addition of Rs.7,45,854/- was made to the income of the

deceased assessee.

5. In the background of these facts recorded in the

assessment order, the Assessing Officer levied penalty of

Rs.10,000/- for non-compliance of the notice under section

271(1)(b) of the Act specially for not complying the notice

issued on 21.12.2011 The learned CIT (Appeals) also

confirmed the penalty order and dismissed the appeal of the

assessee.

6. Considering the facts noted in the assessment order

and the impugned order, it is clear that the assessee

originally filled return of income on 8.11.2007 and assessee

expired on 21.4.2010. The notice under section 148 of the

Act for completion of the reassessment proceedings was issued

on 21.3.2011 and according to assessment order, it was

served on 26.3.2011 but no return has been filed upto 5

3.11.2011. When the assessee had already expired in April,

2010 and no intimation about the death of the assessee was

available to the Revenue Department prior to reply filed by the

legal heir of the assessee, there was no reason for making any

compliance to the notices issued by the Assessing Officer

under section 148 and 142(1) of the Act by the deceased

assessee. In the reasons recorded under section 148 of the

Act, the Assessing Officer recorded that the income escaped

assessment on account of income not shown on account of

interest income, labour charges and milling charges. The

legal heir Shri Asa Ram of deceased assessee filed reply before

the Assessing Officer on 11.11.2011 intimating that the

assessee Shri Shingara Mal had already expired on 21.4.2010

and he is one of the major legal heir of his father and also

stated that the return filed by his father originally may be

treated as return having been filed in response to notice

under section 148 of the Act. The Hon'ble Rajasthan High

Court in the case of CIT Vs. Pushpa Devi, 250 ITR 495 held as

under :

" H e l d , ( i ) t h a t t h e a c t i o n o f t h e I n c o me - t a x O f f i c e r i n n o t i s s u i n g n o t i c e t o a l l t h e l e g a l r e p r e s e n t a t i v e s wa s n o t bona f ide and diligent. L i t i g a t i o n wa s t h e d i r e c t r e s u l t o f d i s r e g a r d o f t h e b a s i c r e q u i r e me n t o f i s s u i n g n o t i c e t o a l l the legal representatives.

(ii) T h a t t h e a s s e s s m e n t o r d e r m a d e wi t h o u t n o t i c e to all the legal representatives of the deceased on submission of the returns suff ered from procedural irregularities only and wa s liable to be corrected by setting aside the order and directing that the notice be i s s u e d t o a l l t h e l e g a l r e p r e s e n t a t i v e s i n a c c o r d a n c e wi t h 6

l a w. T h e a s s e s s me n t wa s n o t v o i d a n d n o t l i a b l e t o b e annulled."

7. Considering the facts of the case in the light of the

above decision in the case of Smt.Pushpa Devi (supra), it is

clear that the Assessing Officer has not issued notice to all

the legal heirs of the assessee and further prior to intimation

of death of the deceased assessee, there was no question of

making any compliance of statutory notice by the deceased

assessee. The action of the Assessing Officer, therefore, not

issuing notice to all the legal representatives of the deceased

assessee was thus not bonafide and diligent. Further the

notices under section 143(2) and 142(1) of the Act were issued

for 5.12.2011 and on that date Shri Asa Ram son of the

deceased assessee appeared with the counsel and the case was

adjourned to 13.12.2011 on their request and they were

required to furnish the reply to the reasons recorded under

section 148 of the Act but no compliance was made as per the

Assessing Officer. Therefore, the Assessing Officer gave

further opportunity by issuing notice dated 21.12.2011 asking

the legal heir of the assessee to furnish requisite reply to the

reasons recorded under section 148 of the Act for completion

of the assessment. The scheme of the Income Tax Act

provides that on issue of notice under section 148 of the Act,

the assessee is required to furnish return of income in

compliance to the notice under section 148 of the Act and in

case the assessee objects to the reopening of the assessment

under section 148 of the Act, the assessee may file objection

to challenge the reopening of the assessment under section 7 148 of the Act. In the present case, the legal heir of the

assessee intimated the Assessing Officer about the death of

the deceased assessee and also requested to take the original

return of income filed by the deceased assessee as return

having been filed in response to notice under section 148 of

the Act, which the Assessing Officer had accepted and treated

the return filed under section 148 of the Act. Therefore,

there is no question of non-compliance of the notice either by

the deceased assessee or by his legal heir in filing the return

of income in response to notice under section 148 of the Act.

The Assessing Officer further issued notice for furnishing

reply to the reasons recorded under section 148 of the Act and

also issued notice on 21.12.2011 directing the assessee/LR to

furnish requisite reply to the reasons recorded under section

148 of the Act for which penalty under section 271(1)(b) of the

Act had been levied. We find no reason for levying of the

penalty in said circumstances against the assessee because no

provisions have been provided under section 148 of the Act for

filing any reply by the assessee to the reasons recorded under

section 148 of the Act. It is only when the assessee objects

to the reopening of the assessment may file objection in his

discretion. If the assessee does not object to the recording of

the reasons or reopening of the assessment under section

147/148 of the Act, the Assessing Officer may proceed with

the reassessment proceedings. Therefore, in our view, there

was no non-compliance on the part of the deceased assessee

or the legal heir to the notice issued on 21.12.2011.

Considering the above discussion it is clear that there was no 8

default on the part of the deceased assessee or the legal heir

to attract levy of penalty under section 271(1)(b) of the Act.

Further when all the legal heirs have not been served with the

notices as per law, the penalty should not have been imposed

against one of the legal heirs of the deceased assessee. We

may also note here that the assessee explained before the

learned CIT (Appeals) that the legal heirs of the deceased

assessee were involved in murder case and their key person is

behind the bars for the last five years and the family was busy

and tense in following-up the criminal case under section 302

IPC. Section 273B of the Act provides that no penalty under

section 271(1)(b) of the Act be imposable on the person or the

assessee, as the case may be, for any failure referred to in the

above provisions if the assessee proves that there was

reasonable cause for the said failure. The explanation of one

of the legal heirs of the deceased assessee clearly shows that

since the legal heirs of the deceased assessee were involved in

criminal case under section 302 IPC, therefore, there may not

be proper compliance from their side, though we have noted

that there was no non-compliance on the part of the deceased

assessee or the legal heir. It is well settled law that levy of

penalty is not automatic in each and every case and the facts

and circumstances of the case shall have to be taken into

consideration. The facts and circumstances of this case

clearly show that it is not a fit case of levy of penalty under

section 271(1)(b) of the Act.

9

8. Considering the totality of the facts & circumstances

and discussion above, we are of the view that it is not a fit

case for levy of penalty. We accordingly set aside the orders

of the authorities below and delete the penalty.

9. In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on this 2nd day

of June, 2015.

Sd/- Sd/-

(T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated : 2 n d June, 2015

*Rati*

Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.

Assistant Registrar, ITAT, Chandigarh