By Sri v. Chandrashekar, Adv

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 16 DAY OF JUNE 20271 PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’/BLE MR. JUSTICE HEMANT CHANDANGOUDARLT.A. NCO.561 OF 2013 BETWEEN: 1.|THE COMMISSIONER OF INCOME TAX CENTRAL CIRCLE C.R. BUILDING, QUEENS ROAD BANGALORE. 2 |THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1(2) CR BUILDING, QUEENS ROAD. BANGALORE. .., APPELLANTS~ (BY SRI. K.V. ARAVIND, ADV.,) AND" SHRI. I. MAHABALESHWARAPPA_BY LEGAL HEIR MANU ITTINAITTINA HOUSE, SARJAPUR ROAD|KAIKONDANAHALLI, CARMELRAMPOST, BANGALORE-560005. .., RESPONDENT (BY SRI. V. CHANDRASHEKAR, ADV.) THIS I.T.A. IS FILED UNDER SEC. J6O0-A OF INCOME TAXACT 1961, ARISING OUT OF ORDER DATED 12.07.2013 PASSEDIN ITA NO.155/BANG/2012 FOR THE ASSESSMENT YEAR 2005-06,PRAYING TQ: | (1) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW,STATED ABOVE. (ii) ALLOW THE APPEAL AND SET ASIDE THE ORDER.PASSED BY THE ITAT, BANGALORE IN ITA NO.155/BANG/2012DATED 12.0/7.20L3 AND CONFIRM THE ORDER OF THE APPELLATECOMMISSIONER CONFIRMING THE ORDER PASSED BY THE.ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(2), BANGALORE. THIS ILT.A. COMING ON FOR’ HEARING, THIS DAY, | ALOK ARADHE J.,DELIVERED THE FOLLOWING: | JUDGMENT This appeal under Section 260A of the Income TaxAct, 1961 (hereinafter referred to as the Act for short)nas been preferred by the revenue. The subject matterof the appeal pertains to the Assessment year 2005-06. The appeal was admitted by a bench of this Court on thefollowing substantial questions of law: “(1) Whether on tne facts and in the.circumstances and in law the Tribunel wasCorrectIn|holdingthattheorderofassessment passed after the death of theassessee in invalid without taking’ intoconsideration the scope of section 159 of theAct and recorded a perverse finding? (ii) Whether on the facts and in the.circumstances and in law the Tribunel wasCOrreclIn|holdingthattheorderofassessment passed on the basis of thereturn filed by the assessee for the relevantprevious year is bad in law on the groundthe order is passed after the death ofassessee?” 2.|Facts leading to filing of this appeal brieflystated are that a search under Section 1327 of the Actwas conducted in case of M/s. Ittina Properties Pvt. Ltd.,Bangalore and in the residential premises of the|assessee viz., Late I.Mahabaleshwarappa viz., who wasthe Managing Director of the said company, a searchwas also conducted on 28.07.7008. A. notice underSection 153A of the Act was issued to the aforesaidassessee on 21.10.7008 for the Assessment Year 7200506 amongst other Assessment Years. The assessee did|not comply with the notice and Miss Mona_ Ittinarequested on behalf of the assessee to postpone thehearing on the ground that the assessee is indisposed. The assessee filed the return of Income on 16.07.7009.Thereafter, a notice under Section 143(2) of the Act wasissued on 31.08.2009. A chartered Accountant appearedon behalf of the assessee and the filed the details on.23.11.2009. On the aforesaid date, the arguments were|heard. In the meanwhile, before passing the order of.assessment, the assessee expired on 18.12.2009. TheAssessing Officer passed an order of assessment on.31.12.2009 by which the income of the assessee was.assessed at Rs.81,08,359/-. 3The legal representatives of the assesseepreferred an appeal before the Commissioner of IncomeTax (Appeals) who by an order dated Q3.11.2011—decided the appeal on merits. The Commissioner of.Income Tax (Appeals) confirmed the addition made bythe Assessing Officer and made an enhancement ofRs.4,/71,23,166/- under Section 2(22)(e) of the Act tothe assessed income. The legal neirs thereupon filed an-appeal before the Income Tax Appellate’ Tribunal 3The legal representatives of the assesseepreferred an appeal before the Commissioner of IncomeTax (Appeals) who by an order dated Q3.11.2011—decided the appeal on merits. The Commissioner of.Income Tax (Appeals) confirmed the addition made bythe Assessing Officer and made an enhancement ofRs.4,/71,23,166/- under Section 2(22)(e) of the Act tothe assessed income. The legal neirs thereupon filed an-appeal before the Income Tax Appellate’ Tribunal (hereinafter referred to as ‘the tribunal for short). Thetribunal by an order dated 12.07.2013 inter alia heldthat since, the order of assessment was passed by theAssessing Officer after the death of the assessee,therefore, the order passed by the Assessing Officeragainst a dead person is a nullity. In the result, orders|of assessment passed by the Assessing Officer inrespect of Assessment Years 2002-03 and 2005-06 wereheld to be null and void and were annulled and the.appeals preferred by the assessee were allowed. In theaforesaid factual background, this appeal Nas been filed. 4Learned counsel for the revenue submittedthat the tribunal ought to have appreciated that thehearing of the case was concluded by the AssessingOfficer on 23.11.2009 and thereafter, the assessee hasexpired. It is also contended that the factum of death ofassessee was not made known to the Assessing Officer.It is also submitted that Section 159 of the Act providesfor an opportunity of hearing to the legal heirs who have. succeeded the estate of the assessee before determiningthe liability. It is further submitted that the tribunalought to have therefore, remitted the matter to theAssessing Officer to pass a fresh order after affording anOpportunity of hearing to the legal heirs of deceasedassessee. It is also urged that Supreme Court has dealtwith the issue of notice on the non existing person andhas held that issuance of notice under Section 143(2) ofthe Act on the non existing company after intimation ofamalgamation to the Assessing Officer is_ illegal.However, in the instant case, no intimation was given to the Assessing Officer. It is also contended that issuance|of notice under Section 148 of the Act in the name of.non existing company is a curable defect under Section.292B of the Act and initiation of proceeding underSection 148 of the Act in the name of non existingcompany has been held to be valid with reference toSection 292B of the Act. In support of aforesaidSubmissions, reliance Nas been placed on decisions in. "PRINCIPAL COMMISSIONER OF INCOME TAX,NEW DELHI VS. MARUTI SUZUKI INDIA LTD.,(2019) 107 TAXMANN.COM 375 (SC), ‘SKY LIGHTHOSPITALITY LLP VS, ASSISTANT COMMISSIONER|OF INCOME TAX, CIRCLE 28(1), NEW DELHI,(2018)9o°TAXMANN.COM413°(DEL),‘COMMISSIONER OF INCOME-TAX VS. SMT. V.RUKMINTI',(2011)172TAXMANN,.COM562(KARNATAKA).5.|On the other hand, learned counsel for theassessee submitted that the order of assessment passedagainst a dead person is null and void. It is alsosubmitted that admittedly, the Assessing Officer had notDrought on record the legal representatives of tnedeceasedaSSeSSe@AeIt IS|furtherSubmittedthat|provisions of Section 159 of the Act are not applicableas the same applies only to regular assessment or re-assessment proceeding and in the instant case theproceeding was initiated under Section 153A of the Act. During the course of hearing, it is asserted that a.Communication dated 18.12.2009 was submitted before.the Assessing Officer intimating him about the death ofthe deceased. It is also submitted that if the Assessing|Officer wanted to continue the assessment proceeding,he ought to have brought the legal representatives on.record. It is also urged that order passed by the tribunaldoes not call for any interference in this case. In supportof aforesaid submissions reliance Nas been placed ondecisions in.SARASWATI INDUSTRIAL SYNDICATE(VS.CIT,(1990)186ITR2/8,'SPICEINFOTAINMENT LTD. VS. CIT’, (2015) 65 DTR 391(DEL), 'VIJAY KUMAR JAIN VS. CIT’, (1975) 99 ITR|349(PUNJABANDHARYANA),"CIT|YS,AMARCHAND N. SHROFF,, (1963) 48 ITR 59 (SC),"R.C.JAIN VS. CIT’, (2005) 273 ITR 384 (DEL.), "PCIT VS. MARUTI SUZUKI INDIA LTD.', (2019)|416 ITR 613 (SC)|andGVK INDUSTRIES LTD. VS.ITO, (2011) 332 ITR 130 (SC). 6.|We have considered the submissions made§ by learned counsel for the parties and have perused the record. The solitary issue, which arises for considerationin this appeal is whether an order passed by theAssessing Officer, after the death of the assessee whodies after conclusion of the arguments and before an)order is passed by the Assessing Officer is ab initio void. |Before proceeding further, it is apposite to take note of.Section 159 of the Act, wnicn reads as under: 159. (1) Where a person dies, his_ legalrepresentative shall be liable to pay any sum whichthe deceased would have been liable to pay if hehad not died, in the like manner and to the sameextent as the deceased. (2) For the purpose of making an assessment.(including.af)assessment,reassessmen sOrrecomputation under section 147) of the income ofthe deceased and for the purpose of levying anysum in the hands of the legal representative inaccordance with the provisions of sub-section (a)allyproceedingtakenagainst thedeceased before his death shall be deemed to havebeen taken against the legal representative andmay be continued against the legal representativefrom the stage at which it stood on the date of thedeath of the deceased; (b) any proceeding which could nave been|taken against the deceased if he had survived,may be taken against the legal representative; and (c) all the provisions of this Act shall applyaccordingly. (3) The legal representative of the deceased|Shall, for the purposes of this Act, be deemed to beah) aAaSSeCSS (4) Every legal representative shall bepersonally liable for any tax payable by him in his-capacity as legal representative if, while his liabilityfor tax remains undischarged, he creates a chargeon or disposes of or parts with any assets4/7 of theestate of the deceased, which are in, or may comeinto, his possession, but such fTIiability shall blimited to the value of the asset so charged,disposed of or parted with. (5)TheDrovisions|ofsub-section|(2)of section 161, section 162, and section 16/7, shall, so far as may be and to the extent to which theyare not inconsistent with the provisions of thissection, apply in relation to a legal representative. (6) The liability of a legal representative under thissection shall, subject to the provisions of sub-section (4)and sub-section (5), be limited to the extent to whichthe estate is capable of meeting the Iiability. 7. Thus, from perusal of Section 159(2) of the Acct,it is evident that the aforesaid provision expresslyprovides that death of the party is of no consequenceand proceeding under the Act can proceed against legalrepresentativesoftheaSS@SSC2Eandproceedingsinitiated against the deceased assessee shall be deemedtO.be|theproceedinginitiatedagainst.legalrepresentatives of the assessee from the Inception wnicn—could be continued from the stage of nis death. Tneconcept of abatement of the proceeding is notcontemplated under the provisions of the Act. Section.159(2)(a)(bD) and Section 159(3) of the Act create alegal fiction. It is well settled rule of statutory. 7. Thus, from perusal of Section 159(2) of the Acct,it is evident that the aforesaid provision expresslyprovides that death of the party is of no consequenceand proceeding under the Act can proceed against legalrepresentativesoftheaSS@SSC2Eandproceedingsinitiated against the deceased assessee shall be deemedtO.be|theproceedinginitiatedagainst.legalrepresentatives of the assessee from the Inception wnicn—could be continued from the stage of nis death. Tneconcept of abatement of the proceeding is notcontemplated under the provisions of the Act. Section.159(2)(a)(bD) and Section 159(3) of the Act create alegal fiction. It is well settled rule of statutory. interpretation that in interpreting a provision creating a|legal fiction, the court is to ascertain for what purposethe fiction is created, and after ascertaining this, the)Court is to assume all those facts and consequences.which are incidental or inevitable corollaries to thegiving effect to the fiction. (State of Trav-Co. v.Shanmugha Vilas Cashewnut Factory, Quilon, AIR 1953|SC 244, East End Dwelling Co. Ltd. V. Finsbury BoroughCouncil, (1951) 2 AII ER 58/7 and Corporation Bank v.Saraswati Abharansala (2009) 1 SCC 540) (SeePrinciples of Statutory Interpretation Justice G.P.Sinch.14th edition page 417). 8. A division Dpencn of tnis court in Smt.V.RUkKmMmSupra while dealing with the question wnether an appealunder Section J60A of the Act abates on account of.death of the assessee during the pendency of theappeal, wnile dealing with scope and ambit of Section159 of the Act nas held that the concept of abatement is. excluded, from the provisions of the Act which is evident.from Section 159(2) of the Act. In the instant case,admittedly, after conclusion of the submissions, before.an order was passed by the Assessing Officer, theassessee expired. Therefore, by virtue of Section 159(2).of the Act, the proceeding could not have held to havebeen abated and could have been continued against the|legal representatives. Section 159(2)(a) of the Act.creates a legal fiction therefore, full effect has to begiven to the same. It is not a case where theproceedings were initiated against the assessee who Nadalready expired. Therefore, the proceeding could have)been held to be ab initio void. For the aforementioned.reasons, the substantial questions of law are answeredin favour of the revenue and against the assessee. 9. In the result, the order passed by the tribunal|dated 12.07.2013 is quashed and the matter is remittedto the Assessing Officer to issue notice to the legal �������������������������������������������������������� ������������������������������������� �������������������������������������� ����������� ��� �����������