1. This is a departmental appeal against the order of the AAC cancelling the levy of penalty under Section 271(1)(c) of the Income-tax Act, 1961 ('the Act'), for alleged concealment. The ITO levied the penalty under Section 271(1)(c) on Shri Bibhuti Mishra, who died on 4-4-1981 and the penalty order was passed after the death of late Shri Bibhuti Mishra in October 1981. Thus, the ITO levied the penalty on a dead person. In the penalty order, no reference was made that Shri Bibhuti Mishra had died. Further, no show-cause notice was issued in the name of legal representative before levy of penalty in question. The penalty, thus, levied on a dead person without issuing any show-cause notice to the legal representative was obviously an invalid order.
2. The authorised representative stated that the departmental appeal is liable to be dismissed only on this preliminary ground. In this connection, the authorised representative relied upon the following case laws: In this case, it was held by their Lordships of the Madhya Pradesh High Court that a notice which was issued in the name of a person who was known to be dead, was purposeless and defective and the taxing authority cannot make any living person into whose hands the notice went liable and attribute notice to him.
In this case their Lordships of the Gauhati High Court held as under: Violation of statutory principles of natural justice, more particularly statutory principles of natural justice, takes away the jurisdiction of the authority concerned to continue with the proceedings and pass orders and necessarily invalidates the proceedings and the orders passed therein. If the estate of a deceased assessee is to be assessed to income-tax, the estate must be fully represented by impleading all the legal representatives and serving notices under Section 143(2) on all of them who represent the entire estate. If this were not done, the assessment proceedings and assessment orders passed therein would cease to be valid proceedings and valid orders in the eye of the law. In such a case it is the legal duty of the Appellate Assistant Commissioner and the Appellate Tribunal to annul the assessment. After annulment of the assessment order, if the law permits and there is no bar under the limitation prescribed by law, fresh assessment proceedings may be drawn up in appropriate cases. But the appellate authorities cannot nullify the provisions of limitation for assessment, as laid down in Section 153, by passing an order setting aside the assessments and directing completion of the assessments by issuing notices on the remaining legal representatives. (p. 507) 3. The departmental representative argued in connection with the above legal argument that even though no notice was issued to the legal representative, Section 159(2)(a) of the Act authorises the department to continue the proceeding taken against the deceased against the legal representative after his death and the proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative. It was, thus, argued that even though no show-cause notice was issued to the legal representative and the penalty order was passed on a dead person, the order was valid.
4. We have considered the arguments of both the sides. In our opinion, no penalty can be levied on a dead person. The legal representative could not be liable without issue of any show-cause notice to him.
Respectfully following the decided cases mentioned above, we hold that the penalty order passed was null and void.
5. It was argued by the authorised representative that even on merits, there was no case for levy of penalty under Section 271(1)(c). It was stated that the deceased late Shri Bibhuti Mishra was a very old man of 77 years when he had filed the return for this year and either he forgot or he did not know that the interest income arising to his grandson on account of gifts made by him were includible in his total income and as such he should show the said amount in his return.
Further it was stated that this became taxable in the hands of the assessee only by virtue of an amendment made which was given effect from the assessment year 1977-78 only (only one year before the year under consideration). It was, thus, argued that the late assessee was held liable for concealment of income which was not his but of his grandson. He was expected to show that income by a deemed fiction of law. The assessee was a very old person and he did not know all these legal complications and he was not aware of this amendment. Further, when he became aware, he filed a revised return on his own showing this income. It was, thus, argued that it was not a fit case at all for levy of penalty and the AAC has correctly cancelled the penalty. Reliance was placed in this connection on the decision of their Lordships of the Patna High Court in the case of CIT v. P.A. Patel  127 ITR 390.
The facts in this case were that the assessee did not show the income of his wife in his return in the bona fide belief that it was not his income and he was not obliged to show the same in his return. Their Lordships of the Patna High Court held in that case as under: Where the assessee bona fide believes that he is not required to include the income of his wife in his return of income and if the assessee succeeds in showing that he bona fide believed that he is not required to show that income in his return, he succeeds in proving the absence of fraud. Where it is still controversial whether such income has or has not to be included in his return, he has also succeeded in proving absence of gross or wilful negligence.
The finding that the failure to disclose the entire income or to furnish full particulars of the income was due to a bona fide belief of the assessee, not attributable to any gross or wilful negligence, that the income omitted to be included was not an income which had to be included in his return, precludes a finding that he had deliberately concealed that income or furnished inaccurate particulars of his income as a result of fraud or gross or willful neglect. The imposition of penalty under Section 271(1)(c) of the Act, in such circumstances, would not be valid. (p. 391) It was, thus, argued that in identical facts, their Lordships of the Patna High Court held that the levy of penalty under Section 271(1)(c) was not valid.
6. The departmental representative argued that the assessee did not show this income in the return originally filed. Thereafter a revised return was filed but in this return also the income from interest in the name of his grandson was not shown. When details of bank account were called for, the assessee filed another revised return in which the said interest was declared. It was, thus, argued that the assessee had shown this amount in the second revised return, when bank statements were called for. It was, thus, argued that the assessee purposely did not show the income in the earlier two returns and is correctly liable to the levy of penalty for concealment.
7. We have considered the rival arguments and the facts of the case. We have already held above that the order levying penalty was null and void legally as penalty was levied on a dead person and no show-cause notice was issued to the legal representative. Further we are also of the opinion that even on facts, it was not a fit case for levy of penalty under Section 271(1)(c). The assessee was a very old person.
The income was taxable in his hands only by a fiction of law and it was not his actual income. The fiction of law was applicable by virtue of an amendment made only one year back. It can reasonably be held that the assessee may not have been aware of the said amendment. The decision of their Lordships of the Patna High Court in P.A. Patel's case (supra) is wholly in favour of the assessee. Respectfully, following the said decision, we hold that the levy of penalty was not correct even on facts.
8. As per reasons mentioned above, the appeal of the department is dismissed.