IN HIGH COURT OF JUDICATURE AT MADRAS DATED :: 21-02-2019 CORAM HON'BLE DR.JUSTICE VINEET KOTHARI AND HON'BLE MR.JUSTICE C.V.KARTHIKEYAN T.C.A.Nos.136 TO 141 of 2019 Commissioner of Income Tax, Central 1, No.108, Mahatma Gandhi Road, Chennai. ... Appellant in all Appeals -vs- Smt.S.Gowri ... Respondent in all Appeals T.C.A.No.136 of 2019 is filed under Section 260A of Income Tax Act,1961, against order of Income Tax Appellate Tribunal, Chennai 'A' Bench, dated 12.12.2013, passed in ITA No.1981/Mds/2012. T.C.A.No.137 of 2019 is filed under Section 260A of Income Tax Act,1961, against order of Income Tax Appellate Tribunal, Chennai 'A' Bench, dated 12.12.2013, passed in ITA No.1982/Mds/2012. T.C.A.No.138 of 2019 is filed under Section 260A of Income Tax Act,1961, against order of Income Tax Appellate 1 / 13 Tribunal, Chennai 'A' Bench, dated 12.12.2013, passed in ITA No.1978/Mds/2012. T.C.A.No.139 of 2019 is filed under Section 260A of Income Tax Act,1961, against order of Income Tax Appellate Tribunal, Chennai 'A' Bench, dated 12.12.2013, passed in ITA No.1979/Mds/2012. T.C.A.No.140 of 2019 is filed under Section 260A of Income Tax Act,1961, against order of Income Tax Appellate Tribunal, Chennai 'A' Bench, dated 12.12.2013, passed in ITA No.1980/Mds/2012. T.C.A.No.141 of 2019 is filed under Section 260A of Income Tax Act,1961, against order of Income Tax Appellate Tribunal, Chennai 'A' Bench, dated 12.12.2013, passed in ITA No.1983/Mds/2012. For Appellant : Mr.T.R.Senthil Kumar, Senior Standing Counsel, assisted by Mrs.K.G.Usha Rani, Junior Standing Counsel. For Respondent : Mr.M.P.Senthil Kumar JUDGMENT (Judgment of Court was delivered by Dr.Vineet Kothari,J.) Revenue has filed these Appeals under Section 260A of 2 / 13 http://www.judis.nic.in Income Tax Act, in short, ''Act'', aggrieved by common order passed by learned Income Tax Appellate Tribunal, for brevity, ''Tribunal'', dated 12.12.2013, setting aside penalty under Section 271 (1) (c) of Act against Assessee, namely, Smt.S.Gowri, wife of late Sri S.Shanmugam, who expired on 23.01.2011. 2. following Substantial Question of Law arises for consideration of this Court : Whether in facts and circumstances of case and in law, Appellate Tribunal is correct in interpreting Section 159 of Income Tax Act to effect that penalty under Section 271 (1) (c) cannot be levied on legal representative, ignoring specific provision contained in Clause (2) (b) of Section 159 of Act ? 3. search was conducted at residence of Sri S.Shanmugam on 13.02.2009 and learned Tribunal, by order impugned, dated 12.12.2013, upheld imposition of penalty against said assessee, with following observations : Even otherwise, assessee had not declared her undisclosed income at first instance (supra). It was only after 'search' and investigation that income of Rs.29,25,48,420/- stood declared. In these 3 / 13 http://www.judis.nic.in circumstances, we refer to case law of jurisdictional High Court as well as that of Hon'ble Karnataka High Court (supra) wherein it has been held that if income is unearthed in course of investigation or enquiry conducted in course of assessment, act of assessee amounts to concealment and furnishing of inaccurate particulars of income. Therefore, corresponding findings in order of CIT(A) go against settled law u/s 271 (1) (c) as well as 271 (1) (c) explanation 5A of Act and not liable to be affirmed. Hence, impugned penalty imposed by Assessing Officer stands revived. 4. However, dealing with penalty proceedings against present assessee Smt.S.Gowri, wife of late Sri Shanmugam, learned Tribunal set aside said penalty under Section 271 (1) (c) of Act, following decision of Gujarat High Court in case of Assistant Commissioner of Income Tax v. Late Shrimant F.B.Gaekwad through L.R. Smt.Mrinalini Puar, (2009) 313 ITR 192. Paragraph 10 of order of Tribunal in this regard is quoted below for ready reference : In I.T.A.Nos.1978 to 1983/Mds/2012, though facts are identical as in other cases, but it is admitted position evidenced from penalty order that assessee Shri S.Shanmugam had expired on 23.1.2011 well before imposition of penalty vide order 4 / 13 http://www.judis.nic.in dated 30.6.2011 (supra). In these circumstances, by quoting case law of Hon'ble Gujarat High Court in case of ACIT vs. Late Shrimant F.P.Gaekwad (2009) 313 ITR 192, we hold that penalty u/s 271 (1) (c) of Act had been wrongly imposed by Assessing Officer on legal heirs of deceased assessee. On this sole ground, we dismiss all these appeals. 5. Gujarat High Court, in case of Late Shrimant F.P.Gaekwad, referred to above, dealt with penalty proceedings under Wealth Tax Act under Section 18 (1) (c), which is akin to proceedings under Section 158B of Income Tax Act, in following manner : Under sub-s.(1) of s.19, executor, administrator or other legal representative is liable to pay wealth-tax assessed as payable by deceased, out of estate of deceased, after his death. executor, administrator or other legal representative is also liable to pay any sum, which would have been payable by deceased person under this Act, if he had not died. Either wealth-tax assessed or any other sum is payable by executor, administrator or other legal representative, out of estate of deceased person. prerequisite of sub-s.(1) of s.19 is that there should be assessment and liability to pay wealth-tax or any other sum should arise 5 / 13 http://www.judis.nic.in during lifetime of deceased. It is admitted position that during lifetime of deceased, returns of wealth for respective assessment years were filed by deceased and wealth-tax assessments were also completed. It is also admitted position that notices for penalty under ss.18(1) (a), 18 (1) (c) and 15B were issued on deceased assessee during his lifetime. However, no penalty order was passed during lifetime of deceased. To make legal representative liable for penalty under s.19(1), it is not enough that penalty proceedings should be initiated during lifetime of deceased. It is also necessary that such penalty proceedings must result into penalty orders during his lifetime. No penalty orders have been passed during lifetime of deceased and hence it cannot be said that any sum of penalty would have been payable by executor, administrator or other legal representative under this Act, on death of deceased, if he had not died. plain reading of sub- s.(3) of s.19 makes it clear that legislature has purposefully not included either s.18 or s.15B. It is also in consonance with mandate of sub-s.(1) of s.19. Under s.19(1), neither penalty can be levied on executor, administrator or other legal representative nor can it be recovered from him. There 6 / 13 http://www.judis.nic.in is no question of incorporating s.18 or s.15B under sub-s.(3) of s.19. Therefore, neither s.19(1) nor s.19(3) casts any obligation on executor, administrator or other legal representative to pay amount of penalty as they are not liable to face any such penalty proceedings for which they have ever committed default. Default, if any, at all were committed, were committed by deceased and deceased assessee was not alive when penalty proceedings were culminated into penalty orders. No question of law, much less any substantial question of law, arises out of order of Tribunal deleting penalty. - Smt. Yawarunnissa Begum vs. WTO (1975) 100 ITR 645 (AP), CWT vs. V. Varadrajan (1980) 122 ITR 1014 (Mad), Rameshwar Prasad vs. CWT (1980) 17 CTR (All) 71; (1980) 124 ITR 77 (All), CWT vs. Abdul Mazid Khan (1983) 35 CTR (MP) 316 : (1984) 147 ITR 53 (MP), CWT vs. Banoo E.Cowasji (1985) 152 ITR 16 (MP), CWT vs. Rani Sajjan Kumari (1985) 48 CTR (Raj) 331 : (1985) 155 ITR 438 (Raj), Ved Prakash Narang vs. CWT (1988) 68 CTR (All) 80; (1988) 172 184 (All) and CWT vs. H.S.Chauhan (2000) 163 CTR (Del) 495 : (2000) 245 ITR 704 (Del) concurred with ; Late Rani H.R.Laxmi (Estate) through B.K.Singh vs. CWT (1997) 228 ITR 372 (Pat) distinguished. 7 / 13 http://www.judis.nic.in 6. Apart from aforesaid decision of Gujarat High Court, Madras High Court itself has taken similar view in case of CIT v. Dr.K.C.G.Verghese, (2018) 92 Taxmann.com 400 (Madras), in search case, and held that penalty under Section 158B of Act could not be initiated and concluded against legal representatives of deceased assessee. Paragraphs 14 and 15 of said judgment are quoted below for ready reference : 14. Penal proceedings have been initiated, only after withdrawal of appeal, filed by deceased assessee, before Income Tax Appellate Tribunal, at instance of legal representative of deceased assessee. If word, "proceedings", includes "penal proceedings", then same should have been taken before death of deceased. assessee expired on 14.02.2006. Appeal came to be dismissed as withdrawn. Only after withdrawal of appeal, proceedings under Section 158BFA(2) have been initiated only on 31.03.2008, in block assessment order. 15. Section 159(1) imposes liability on legal representatives to pay any sum (including interest and penalty) in like manner and to same extent, as deceased, had he not died. Liability to pay "any 8 / 13 http://www.judis.nic.in sum" arises only after order is passed either for assessment or for penalty or for interest. Section 159(2) provides that (1) for making assessment in hands of legal representatives and (2) for levying any sum (including interest and penalty) in hands of legal representatives, proceedings taken against deceased before his death would continue against legal representatives. Clause (b) of Section 159 deals with situation where no proceeding were initiated against deceased, but could have been initiated against him, since he had expired and same can be initiated against legal representatives. In case, where deceased earned income but did not file return and expired, notice to file return can be issued to legal representatives and proceedings can be taken against legal representatives. Clause (a) deals with situation where proceedings have been initiated against deceased, when he was alive, but before finalizing, expired. Clause (a) provides that those proceedings would continue against legal representatives, from stage at which they stood at time of death of deceased. fiction is created whereby proceedings initiated against deceased when he was alive, would continue against legal representatives, as they have stepped into shoes of deceased, without there being any effect on 9 / 13 http://www.judis.nic.in legality of proceedings. Once this legal fiction comes into operation, then Clause (c) will have consequential effect of applying all provisions of Act. In case on hand, no penal proceedings have been initiated against assessee, when he was alive. Assessment has not been done in hands of legal representatives and therefore, Section 159 of Income-Tax Act, cannot be applied to legal representative. 7. Having heard learned counsel for parties, we are of considered opinion that learned Tribunal was perfectly justified in setting aside said penalty against assessee/wife of deceased late Sri S.Shanmugam, by impugned order, as penalty proceedings in question were initiated originally against assessee-husband only and were not concluded against said assessee, prior to his death on 23.01.2011. 8. Since provisions of Section 271 (1) (c) of Act depend upon guilty animus or mens rea on part of assessee concerned, naturally, as legal representative, wife cannot be held liable to defend those penalty proceedings or be held guilty of any mens rea on part of husband. Therefore, unless penalty proceedings are concluded 10 / 13 http://www.judis.nic.in against living assessee, legal heirs cannot be held liable to face those proceedings or pay any sum determined as penalty payable under Section 271 (1) (c) of Act. 9. It is also imperative to mention here that as against decision of Gujarat High Court in case of Late Shrimant F.P.Gaekwad (cited supra), appeal in S.L.P.No.8956 of 2009 has been filed and same got dismissed by Hon'ble Supreme Court on 06.04.2009. 10. As such, respectfully following said judgments of Gujarat High Court and also Madras High Court, we answer aforesaid question in favour of Assessee and against Revenue. 11. Appeals of Revenue are, accordingly, dismissed. No costs. Consequently, connected C.M.P.Nos.3549,3551,3553,3555 and 3556 of 2019 stand closed. Index : Yes (V.K.,J.) (C.V.K.,J.) Internet : Yes 21-02-2019 Speaking Order dixit 11 / 13 http://www.judis.nic.in To Income Tax Appellate Tribunal, Chennai 'A' Bench, Chennai. 12 / 13 http://www.judis.nic.in DR.VINEET KOTHARI, J. and C.V.KARTHIKEYAN, J. dixit T.C.A.Nos.136-141 OF 2019 21-02-2019 13 / 13 http://www.judis.nic.in Commissioner of Income-tax, Central-1, Chennai v. S. Gowri