Penalty u/s 271D initiated when assessee alive but order invalid if passed after his death

Penalty u/s 271D initiated when assessee was alive but order invalid if passed in the name of assessee after his death

ABCAUS Case Law Citation:
ABCAUS 3733 (2023) (05) ITAT

Important Case Laws relied upon:
ITO v. Bhupendra Bhikhalal Desai [2021] 131 40 (SC)
ITO vs. Durlabhbhai Kanubhai Rajpara [2020] 114 482 (SC)
Krishnaawtar Kabra vs. ITO [2022] 140 423
Sandeep Chopra vs. PCIT [2023] 149 225
Vikram Bhatnagar vs. ACIT [2023] 147 254
K. Suresh vs. ACIT [2021] 129 67
Sanabhai R. Dalwadi v. ITO [1990] 34 ITD 183 (AHD.)
ITO v. Bibhuti Mishra

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the order passed by the Assessing Officer (AO) imposing income tax penalty u/s 271D of the Income Tax Act, 1961 (the Act).

The appellant assessee sold a property and the purchaser deducted TDS at 1% as per the provisions of section 194-IA of the Act.

Out of the total sale consideration, a small part was received in cash. Taking note of this cash transaction in respect of the transfer of the property, the Assessing Officer invoked the provisions of section 269SS of the Act and imposed penalty u/s 271D of the Act.

Before the first appellate authority, the assessee raised issue on merits as regards the imposition of penalty u/s 271D of the Act and also contended that since the assessee had died and the legal representative of the assessee had intimated the AO of the fact of the assessee’s death, the order imposing penalty u/s 271D of the Act subsequently is bad in law and the same is to be quashed.

The CIT(A) rejected the contentions of the assessee on merits as well as on the technical plea that the order imposing penalty had been passed on a dead person.

The Tribunal observed that the CIT(A) upheld the penalty order by holding that the penalty proceedings were initiated when the assessee was alive and the objections to the notice for the penalty initiated was filed by the assessee himself.

The Tribunal opined that as per section 159(2) of the Act, mere initiation of penalty proceeding correctly is not sufficient, but it ought to have been completed also in accordance with the said provisions.

The Tribunal in the light of catena of judgments opined that any proceedings taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of death of the deceased. Therefore, when the penalty order was passed in the name of the assesee, he had already died. Hence, the penalty order is invalid.

Accordingly, the Tribunal quashed the penalty order as invalid,  being having been passed on a dead person.

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