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Judgment
PER SUDHIR KUMAR, JUDICIAL MEMBER:
This appeal by the assessee is directed against the order of the National Faceless appeal Centre (NFAC) Delhi [hereinafter referred to as (“Ld. NFAC”] vide order dated 16-10-2025 arising out the penalty order dated 26-08-2021 under section 271(1)(c) of the Income Tax Act 1961 (in short “the Act”) pertaining to A.Y. 2012-13.
The legal heir of the assessee has raised the following grounds in the appeal:
1.That the learned officer of NFAC erred in law as well as on fact to issue penalty notice u/s 271(1)(c) dt.16-03-2021 and 17-05-2021 as well as framing the penalty order dt. 26-08-2021 in the name of assessee while the assessee expired on dt.20-05-2020. Hence all the penalty proceedings conduct vide notice 16-03-2021 and 17-05-2021 and order dt. 26-08-2021 was invalid since assessee passed away on 20-05-2020 and not exists on such date of notice and penalty order.
2.That issue of notice dt. 16-03-2021 and 17-05-2021 in the name of the dead person is bad in law & on this issue the legal heir of the assessee
3.That the first basic penalty notice dt. 18-10-2019 defective because in the notice in appropriate words in the said notice has not been struck off and the notice does not specify as to whether the penalty is being levied for concealing the particular of income or furnishing inaccurate particulars of such income.
4.That the learned officer of NFAC also erred in law for not accepting the assessee Ist reply submitted in response to first notice u/s 271(1)(c ) dt. 18-10-2019 on 18-01-2020 which is illegal and wrong.
5, That the observation made and basis adopted by the officer of NFAC in order to impose penalty is wrong and illegal.
6.That in any case penalty order is illegal and wrong and liable to be cancelled.
7.That the appellant craved to leave to add amend or modify and grounds of appeal if so requirement in the interest of natural justice before hearing the appellant.
The brief facts of the case are that the assessee had filed his original return under section 139 of the Act on 05-04-2014 declaring total income of Rs.5,06,000/-. Thereafter, a notice under section 148 of the Act was issued to the assessee on 26-03-2029. In the response of the notice the assessee filed the return of income on 30-05-2029 declaring total income of Rs.20,31,810/-. The assessment was completed on the total income of Rs. 20,31,810/- after making the addition by the Assessing Officer and notice for penalty under section 271(1)(c) of the Act was also issued. The Assessing Officer levied the penalty of Rs.4,50,000/- against the assessee. According to Assessing Officer the assessee himself admitted in the explanation that he disclosed the additional income in the compliance of the notice under section 148 of the Act. Because the assessee has concealed the particular of his income so, the penalty of Rs.4,50,000/- was imposed against the assessee.
Aggrieved by the order of the Assessing Officer, the assessee preferred the appeal before Ld. CIT(A), who vide order dated 16-10-2025 dismissed the appeal. Being aggrieved the order of the Ld. CIT(A) the assessee is in appeal before the tribunal on the various grounds. The Ld. NFAC found that the assessee had not made the voluntary disclosure so he cannot save from the penalty.
The ld. AR of the assessee submitted that the assessee was expired on 20-05- 2020 and final penalty order was passed on 26-08-2021, in the name of the deceased assessee. The notice dated 16-03-2021 and 17-05-2021 were also issued against the dead person. He further submitted that there is no legal obligation on the legal heirs to inform the tax authority regarding the death of the assessee. Iin the support the legal heir of the assessee place reliance on the Hon’ble Madras High Court Judgement in the case of CIT v S. Gowri [2019]417 ITR 45 held that the legal heirs cannot be held liable to face those proceedings or pay sum determined as penalty payable under section 271(1) (c) of the Act. Reliance is also placed on the following judgements:
Smt. Rekha Agarwal (Legal Heir and wife of Late Grish Chand Agarwal) v. DCIT, Circle 28(1) ITA No. 2199/Del/2024
Mangadu Natarajan Balasundharam v. The Income Tax Officer, Ward-3(1) Chennai, in this the Co-ordinate bench held that if the Assessing Officer completed the assessment based on the return of income filed in the compliance of the notice under section 148 of the Act the penalty cannot be imposed.
Late Jayant Maneklal Wagle L/H Rajlaxmi Dilip Parulkar v The ACIT Circle-2
The Ld. DR of the Revenue submitted that during the penalty proceedings no information of the death was given to the Assessing Officer. The legal representatives are liable to pay the penalty imposed under section 271(1)(c) in the light of Section 159(1) to 6 of the Act.
We have heard both the parties and perused the material available on record. In the instant case the assessee was died during the penalty proceedings. In the case of Mangadu Natarajan Balasundharam v. The Income Tax Officer, Ward-3(1) Chennai the Hon’ble High Court held that assessee’s legal heirs are not liable in penalty proceedings after his/her demise in term of section 159of the Act. In the present case the assessment was completed in the name of the assessee and first penalty notice also issued in the name of the assessee but the penalty levied against the dead person. Respectfully following the above decision, we hold that the legal heirs of the deceased assessee are not liable to pay the penalty, therefore, the ground no. 1 of the appeal raised by the legal heirs of the assessee is allowed.
In the result, the appeal of the legal heirs of the assessee is partly allowed.