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Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :
This captioned appeal is filed by the assessee against the order of Learned Commissioner of Income Tax (Appeals)-NFAC, Delhi dated 29.10.2025 under section 250 of the Act (hereinafter referred as ‘the Act’) arising from the penalty order dated 30.12.2021 by the NFAC, Delhi under section 271AAC(1) of the Act for the Assessment Year 2018-19.
The assessee has raised the following grounds of appeal:
1.That on the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the penalty order dated 30.12.2021 passed under Section 271AAC(1) of the Income-tax Act, 1961, without properly appreciating the material placed on record and the submissions advanced by the Appellant. The impugned order dated 29.10.2025, is therefore unjustified, unsustainable and bad in law.
2.That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that an order passed in the name of a deceased or otherwise non-existent person is a nullity in law, being void, unenforceable and non-est, and thus incapable of being sustained under the Act.
3.That on the facts and in the circumstances of the case and in law, the penalty proceedings and the resultant order are vitiated in law as the same were conducted and concluded without issuing a proper statutory notice to the legal heir, rendering the entire proceedings void, illegal and unsustainable.
4.That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the levy of penalty under Section 271AAC, which is merely consequential to the addition made under Section 68 of the Act, without appreciating that Section 68 itself was wrongly invoked since the assessee was not required under the Act to maintain any books of account. In absence of books, the foundational requirement for invocation of Section 68 itself fails.
5.That on the facts and in the circumstances of the case and in law, the Ld. AO has erred in law and on facts in levying penalty under Section 271AAC(1) without appreciating that such penalty is not automatic and cannot be imposed mechanically without recording proper satisfaction as mandated under the Act.
6.That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in disregarding the fact that the assessee had duly substantiated the source of cash deposits as agricultural income supported by documentary evidence. Rejection of a bona fide claim does not ipso facto justify levy of penalty under Section 271AAC.
7.That on the facts and in the circumstances of the case and in law, the penalty order suffers from complete non-application of mind, being passed in a routine, mechanical and perfunctory manner without any independent consideration or proper analysis of facts, rendering the penalty order invalid and unsustainable in law.
8.That on the facts and in the circumstances of the case and in law, the impugned penalty order is bad in law and liable to be quashed, having been passed in violation of the principles of natural justice and in disregard of the mandatory statutory requirements prescribed under the Act.
9.That each of the above grounds is independent and without prejudice to the others.
10.That the appellant craves leave to add, amend, modify, alter or withdraw any of the foregoing grounds of appeal at any time before or during the hearing of the appeal, in the interest of justice.
The brief facts of the case are that Mr. Avinash Singh Grewal was an individual having source of income from agriculture income and interest income and is now a deceased person. He had filed his return of income on 29.03.2019 declaring total income of Rs.NIL. Thereafter, case was selected for scrutiny assessment for the reasons of Large agricultural income in comparison to total income (Non-business ITR) and Gross receipts shown in Schedule OS of ITR is less than receipts reported in 26AC u/s 193 and 194A. The Ld. AO on 16.03.2021, passed the assessment order u/s 143(3) of the Act and made addition of Rs. 78,67,805/- on account of agriculture income u/s 68 and interest income and separately initiated the penalty proceedings. Along with the Assessment Order a show cause notice under section 271AAC was also issued to the assessee on 16.03.2021. The order under section 271AAC of the Act was passed on 30.12.2021 imposing a penalty of Rs. 2,10,600/- being 10% of the tax calculated under section 115BBE(1)(i) i.e., Rs. 21,60,000/-.
At the outset, the ld AR of the assessee stated that the case pertains to the penalty u/s 271AAC of the Act. The ld AR submitted that the assessee was suffering from serious ailments and was bed ridden since past 4 years. He also got affected with COVID and died on 06.04.2021. Therefore, no notice issued was responded to by the assessee. After the death of the assessee also, notices under section 271AAC(1) of the Act were uploaded on the portal by the Ld. AO on 22.07.2021 and 16.08.2021 which were admittedly not responded to. It is submitted by the learned AR of the assessee that as the assessee is a deceased person and the order passed in the name of deceased or otherwise non-existence person is nullity in law.
Per contra the ld DR relied on the orders of the AO/CIT(A).
We have heard the rival submissions and have perused the materials on record. It is a settled position in law that any order passed in the name of a deceased person is unenforceable and non-est in the eyes of law unless the legal representatives have been properly substituted in the proceedings. Failure to do so renders the entire proceedings void ab initio. In the instant case, we find that the assessee has expired on 06.04.2021 and the penalty order on a deceased person was passed on 30.12.2021. The AO has not undertaken the process of substituting the legal representative u/s 159(1) of the Act. We are therefore of the considered view that in the instant case, the penalty levied on a deceased person, without following the due procedure u/s 159 of the Act, is void and non-est. The penalty is therefore, quashed. Appeal is allowed.
In the result, appeal of the assessee in ITA No. 7783/DEL/2025 is allowed.