Smt. Bhavnaben K. Punjani vs. Principal Commissioner of Income-tax-2 [IT APPEAL NO.138 (RJT.) OF 2017]
The case involves an order under Section 144 r.w.s 147 of the I.T. Act, which added Rs. 12,25,500/- as Long Term Capital Gain to the assessee’s account. The assessee had sold an immovable property for Rs. 9,25,000/- in 2006, but the Stamp Duty Authority had adopted the property’s value at Rs. 21,50,000/- and charged stamp duty accordingly. This resulted in a difference of Rs. 12,25,000/- in the sale value declared by the assessee and adopted by the Stamp Duty Authority.
The assessee did not file a return of income under Section 139(1) of the Act, and the higher valuation of the property led to escapement of income. The AO reopened the assessment, and the best judgment assessment was passed on 23.02.2015, determining total income of Rs. 12,25,000/- on account of Long Term Capital Gain. The AO adopted the stamp duty valuation as the full value of consideration under Section 50C of the Act.
The PCIT ruled that the Ld. Assessing Officer did not ascertain the cost and year of acquisition of the capital asset during the assessment order, making it erroneous and prejudicial to the Revenue’s interest under Section 263 of the Income Tax Act 1961. The capital gain on the property was claimed to be chargeable to tax in AY 2003-04 under Section 53A of the Transfer of Properties Act, 1882. The assessee had no taxable income in AY 2003-04, and no return of income was filed. The PCIT found that these evidences were not produced during the assessment proceedings.
The assessment order was set aside, and the assessing officer was directed to work out the capital gain on the transfer of the capital asset after ascertaining the year of acquisition and cost of acquisition. The assessee is appealing against a PCIT order under Section 263 of the Act, which was framed in the name of a deceased person.
The counsel for the assessee argued that the original assessment order is bad in law and void ab initio, making it unconstitutional. The court ruled that the original order is void ab initio, making it unsuitable for revision under Section 263 of the Act. The counsel cited the Chandresh Bhai v. ITO 101 taxman.com case, which ruled that no order can be passed in the name of a deceased person.
The DR argued that the assessee had expired despite multiple notices, and no legal heir informed the Department. They relied on PCIT’s observation in the 263 order. The court found that the assessee expired on 15.10.2013, and the assessment order was passed on 16.02.2015 in his name. Therefore, the assessee had expired at the time the order was framed.
The legal heir of a deceased person is questioned about their obligation to inform the Tax Department about the assessee’s death. If there is no specific intimation from the legal heirs, the validity of the assessment order is uncertain. The High Court in Savita Kapila v. ACIT ruled that a duty cannot be placed on legal representatives to inform the Department of the assessee’s death. If an assessment officer issued a notice invalid after the assessee’s death, the notice should be quashed. This case highlights the importance of legal intimation in determining the validity of assessment orders.
The assessment order cannot be considered valid in the eyes of law due to the absence of a specific statutory provision under Income Tax law that requires legal heirs to inform the Income Tax Department about the deceased assessee’s death. It is also established that no assessment can be framed in the name of a deceased person without bringing their legal heirs on record. The High Court in Pravinchandra A Shah 154 (Gujarat) held that reopening notice issued under section 148 issued upon the deceased assessee was a nullity, and consequential proceedings and orders were to be quashed and set aside.
The order passed under section 263 of the Act is deemed invalid in the eyes of law due to its original assessment order being framed in the name of a deceased person. The order cannot be revised through 263 proceedings, and therefore, it is directed to be set aside.
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