1991-VIL-123-ITAT-
Equivalent Citation: ITD 045, 617,
Income Tax Appellate Tribunal CALCUTTA
Date: 30.12.1991
BHUBAN MOHAN MITTER CHARITABLE TRUST.
Vs
INCOME-TAX OFFICER.
BENCH
Member(s) : N. PACHUAU., ABDUL RAZACK.
JUDGMENT
Per Abdul Razack, JM - These appeals are filed by one of the Trustee of Bhuban Mohan Mitter Charitable Trust in respect of penalties levied on the deceased late Shri J. P. Mitter.
2. The assessment of late Shri J. P. Mitter who died on 5-5-1981 was completed on 16-10-1971 on an income of Rs. 19,705. Subsequently the ITO issued a notice dated 20-3-1978 under section 148 which was received by the deceased on 23-3-1978. The said notice was challenged by way of writ petition on 3-4-1978 wherein the High Court granted interim injunction. The deceased made a will on 15-4-1991 bequeathing his property to the trustees to hold the same for the purposes stated in the said will. The will was probated on 6-7-1984 in Probate Case No. 121 of 1983. The deceased had two wives. The first wife died on 6-8-1983 and the second died on 26-3-1981. The writ was dismissed on 25-9-1985 i.e., after the death of the deceased. No return was filed by the deceased as the writ petition was pending. The trustees also did not file any return of income. The assessment was, therefore, made on the trustees on 27-3-1986 under section 144 and no further appeal was filed against the assessment order. The ITO issued two notices under section 274 dated 27-3-1986 for the defaults committed by the deceased. In the notice dated 27-3-1986 under section 274 it was mentioned as to why penalty under section 18(1)(a) should not be levied. There is no mention whatsoever about section 271(1)(a) in the said notice under section 274. In another notice dated 27-3-1986 under section 274 the ITO has stated that it appeared to him that the assessee has concealed the income or furnished inaccurate particulars of income. The authorised representative of one of the trustees filed a reply dated 22-3-1988 for the alleged defaults alleged to have been committed by the deceased for which notices under section 274 were issued. All the trustees who are considered as legal representatives as per section 159 of the Income-tax Act were not served with hearing notices before levy of penalties though so laid down under section 282 of the Income-tax Act. The ITO levied penalty of Rs. 1240 under section 271(1)(a) and Rs. 18,608 under section 271(1)(c) on the trustees in respect of the defaults committed by the deceased.
3. The appeals filed by one of the trustees against the penalty orders of the ITO before the CIT (Appeals) were unsuccessful. Being aggrieved the present appeals are filed before us and they are taken up together for the sake of convenience.
4. It is submitted by the learned counsel for the assessee that the trustees though legal representatives cannot be penalised for the alleged defaults committed by the deceased. In the notice issued under section 274 dated 27-3-1986 the ITO wanted an explanation from the trustees for the default committed by the deceased under section 18(1)(a). Whereas section 18(1)(a) does not speak of any imposition of any penalty for any default. Since all the trustees are considered as legal representatives by virtue of section 159 of the Income-tax Act they should have been heard under section 274 and therefore, served with hearing notices as is mandatorily laid down under section 282 of the Income-tax Act. Therefore, the learned counsel for the assessee submits that the penalty orders were contrary to the mandatory provision of section 274 of the Income-tax Act ; since no return was filed by the deceased or by the trustees even till today and, therefore, the default has not come to end but it is continuing and making of an assessment under section 144 does not bring an end to the default attracting any penalty under section 271(1)(a). In such an event penalty cannot be worked out at all. Regarding the appeal against the order under section 271(1)(c) it is submitted by the learned counsel that all the trustees were not heard as per section 274 and they were not served with hearing notices as per section 282 of the Act though they as legal representatives are deemed as assessees as per section 159 of the Income-tax Act, 1961. He has drawn our attention to the notice dated 27-3-1986 under section 274 wherein the ITO has put a 'tick' mark stating that there is concealment of income or furnishing of inaccurate particulars of income. The counsel for the assessee submits that this notice is ambivalent and vague and, therefore, it cannot be said that the ITO was satisfied about the precise default alleged to have been committed by the deceased. It is also submitted that the trustees cannot be penalised for the alleged defaults of deceased. Arguing further the assessee's counsel submitted that the deceased might have had reasonable causes and grounds for not filing the return or for the alleged offence made out against deceased under section 271(1)(c). Assessee's counsel submits that it is humanly impossible for the trustees to find out the causes and reasons for the alleged defaults of the deceased. Regarding service of notices on all the trustees as legal representatives of the deceased he relies on the judgment of the Gauhati High Court in the case of Jai Prakash Singh v. CIT [1978] 111 ITR 507. The learned departmental representative, on the other hand, relied on the orders of the lower authorities and states that since they are deemed as assessees under section 159 they should answer the default of the deceased. After hearing both the parties and perusing the case law cited before us we see much force in the argument of the learned counsel for the assessee. It is really true that the trustees who are the legal representatives of the deceased and deemed as assessees under section 159 cannot answer and explain the reasons and causes the deceased might have had and he has taken it along with him and to expect the trustees as legal representatives to answer and explain those causes for the alleged defaults of the deceased is not only preposterous but to us appears highly illogical, unfair and improper. The deceased was Barrister-at-Law and therefore a very eminent person and we feel he would not have deliberately committed any defaults for which the trustees have been penalised. Default, if any, if committed by the deceased might be with reasonable and sufficient causes and it is a different matter that the trustees are not aware of the same and, therefore, unable to give out to the ITO. The ITO cannot expect that the legal representatives (trustees) should defend the action or defaults of the deceased when they are themselves not aware of the causes and reasons of the alleged defaults of the deceased. The ITO cannot take advantage of the helplessness of the legal representatives in not knowing the causes. We have also perused one of the notices dated 27-3-1986 under section 274 and we find that the ITO wanted an explanation from the trustees for the default committed by the deceased under section 18(1)(a) and not under section 271(1)(a). This, according to us, clearly shows the non-application of mind by the ITO. In another notice dated 27-3-1986 which is also under section 274 the ITO demanded an explanation for concealment of income or furnishing of inaccurate particulars of income. An assessee can be penalised under section 271(1)(c) either for concealment of income or for furnishing of inaccurate particulars of income. We agree with the learned counsel for the assessee that the said notices are ambivalent and vague and the ITO has not specifically and precisely brought out the alleged default committed by the deceased for which he intended to penalise the trustees as legal representatives. The provisions of section 271(1)(c) clearly lay down that the ITO should be satisfied during the course of assessment proceedings about the commission of a precise default. From the contents of the notice under section 274 referred to above we find that the ITO was not sure which default was committed by the deceased for which he intended to penalise the trustees. Thus, the basic and essential requirements of section 271(1)(c) is wholly absent in this case. We are satisfied that there has been total non-application of mind on the part of the ITO. It is not that the trustees have committed the default for which they have been penalised. The ITO has penalised the trustees as legal representatives for the alleged defaults of the deceased. Penalties thus are not sustainable on this ground. By now it is well settled law by catena of judgments of various High Courts and of Supreme Court that penalty proceedings under the Income-tax Act are quasi-criminal in nature. In criminal jurisprudence a crime dies with a man and the legal representative of the deceased offender or criminal cannot be penalised for the offences or crimes committed by the deceased. If this cardinal principle of criminal jurisprudence is also applied to the penalty proceedings under the Income-tax Act which as stated above, are considered as quasi-criminal in nature then we are of the view that quasi-crimes also die along with the deceased and, therefore, it will be highly irrational, harsh and inequitable to penalise or punish the legal representatives in respect of quasi-crimes committed by the deceased. No doubt, clauses (b) and (c) of sub-section (2) of section 159 say that any proceeding which could have been taken against the deceased if he had survived may be taken against the legal representative and all the provisions of this Act shall apply accordingly. In our view the Legislature was aware of the cardinal principle of criminal jurisprudence that a crime dies with the man which can also apply to quasi-criminal proceedings that is to say the penalty proceedings under the Income-tax Act, 1961. We are sure the Legislature while enacting the provision of section 159(2) did not intend that the legal representatives of the deceased should be penalised under the provision of the Income-tax Act in respect of offences which are quasi-criminal in nature, if any, committed by a deceased person during his life time. We are, therefore, of the opinion that while section 159(2)(b) authorises continuation of proceedings against the legal representatives which could have been taken against the deceased had he survived do not by any stretch of argument mean that the legal representatives of the deceased should be proceeded for the offences and contraventions if any, committed by the deceased for any provision of the Income-tax Act. If such an argument or interpretation of section 159(2)(b) is taken into consideration or applied to the facts of any given case for penalising the legal representatives for the defaults, violation or offences committed by a deceased assessee then there will be grave injustice and hardship to the legal representatives as the legal representatives will be put to losses, sufferance and punishment for the offences committed by others namely, the deceased. In law the legal representatives only represent the estate of the deceased and not the deceased who is not existent in this world. Thus, in our view the penal proceedings abate on the death of an assessee.
5. We also find much force in the submission of the learned counsel for the assessee that when in law all the trustees are considered as legal representatives, then all of them ought to have been heard by the ITO before the levy of the impugned penalties. There is ample support to this submission by the judgment of the Gauhati High Court in Jai Prakash Singh's case. It is evident from records that all the trustees were not heard before levy of the impugned penalties. The impugned penalty orders, therefore, suffer from the serious non-compliance of the mandatory provisions of section 274 and section 282 of the Income-tax Act, 1961.
6. In view of the foregoing discussion the penalties levied are hereby cancelled and the ITO is directed to refund the penalty amounts, if any, collected in the meantime from the trustees.
7. In the result, the appeals are allowed
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