2025 PLP (Trib (PTD)

ZAHID SIKANDAR, MEMBER.

The titled appeal has been preferred on behalf of the late registered person by his mother-in-law against Order No.335-ST/A-VI dated 12-09-2022 passed by Commissioner Inland Revenue (Appeals-VI), Lahore whereby the learned CIR(A) upheld the re-assessment order dated 31.01.2022 framed by the taxation officer in appellant's case.

2. Brief facts of the case are that original assessment order No.U-3/01/2019 in the case of M/s Lasting Knits was finalized vide order dated 23.09.2019 creating sales tax demand of Rs.40,226,481/- along with default surcharge and 100% penalty of the principal amount. The taxpayer appeal against the said order before the CIR(A) who vide order 13.10. 2021annulled the assessment order with the following directions: "Statutory hearing notice under section 45B of the Sales Tax Act, 1990 was issued to both the parties which was responded to by the appellant through advocate Mr. Omer Wahab as the authorized representative. The department opted to remain absent and did not challenge the grounds of appeal adopted by the appellant. This appellate order is thus being finalized without any departmental assistance. I have nevertheless perused the available record, deliberated upon the arguments of the learned AR and given due weight to the contentions of the DCIR embodied in the Impugned order. I have also gone through the relevant case law which shall be discussed at appropriate places in this order. After taking into account all the aforesaid the appeal is decided hereunder. During the hearing, the learned AR of the appellant contended that the appellant was murdered on 18th February 2020, therefore, the compliance of notices could not be made. The learned AR further contended that now all the relevant documents are available with him which will be present before the DCIR at the time of proceedings. The contention of the learned AR needs to be examined and verified through documentary evidence. Keeping in view these facts I deem it appropriate to annul the case with the following directions to the DCIR to pass a speaking and judicious order covering all the legal and factual aspects of the case. The appeal is decided in the manner and to the extent discussed above."

3. In the light of directions, re-assessment proceedings were initiated by way of issuing notices to the appellant whereby in response the learned AR submitted an application apprising the officer about the death of the taxpayer requesting the OIR to withdraw the proceedings. The OIR rejected the request and finalized re-assessment vide order dated 31.01.2022 in the absence of any further reply/appearance from the taxpayer's side. On behalf of the deceased taxpayer, appeal was filed by the AR on his mother's instructions but the same was dismissed ex parte by the CIR(A) vide order dated 12.09.2022 which is impugned before us.

4. At the very outset, the learned AR for the appellant apprised the Bench that the taxpayer had already died on 24.02.2021. The factum of death of the appellant is evidenced from the death certificate that has been placed on record by the learned AR which confirmed that the taxpayer has already died on the said date. The learned AR also informed that wife of the deceased taxpayer has also died and there are only three minor children of the deceased under the care of grandparents and business has been closed. The learned AR has also placed death certificate of deceased taxpayer's wife and family tree to substantiate the stated fact. When confronted by this bench as to whether legal heirs of the deceased taxpayer were impleaded in re-assessment proceedings, the learned AR submitted that the OIR was duly informed about the death of the taxpayer but the learned officer neither impleaded the legal heirs in the proceedings nor determined the estate of the deceased for the purpose of recovery if required and without considering the fulfillment of these necessary requirements of law the CIR(A) confirmed the assessment order. Conversely, DR supported the impugned order.

5. Heard.

6. The only issue is to be considered by us at this juncture is whether the assessment order is valid against a dead person. It is a trite law that any type of proceedings initiated/filed against a dead person are nullity in the eye of law. Neither the proceedings initiated against a dead person are valid nor the order is of any consequence. Unless the heirs and legal representatives of the deceased assessee are pleaded to the jurisdiction of the assessing officer and have participated in the assessment proceedings, notice to the dead assessee and then commencement of the assessment proceedings against dead person are null and void. Assessment proceedings by the OIR against the dead person is not merely a procedural Irregularity but it is stated to have been jurisdictional defect as well because there cannot be an assessment against a dead person and no assessment can be framed or non-existing assessee or a person who has died. From perusal of record, it transpires that original assessment order was framed against which appeal was filed before the CIR(A). During the pendency of the first appeal in the first round of litigation, the taxpayer died however the case was remanded back to the taxation officer, Re-assessment notices were issued to the deceased taxpayer and in response the learned AR apprised the officer about the factum of death to the officer. but he without making any effort to implead the legal heirs/representatives of the deceased passed re-assessment order in the absence of any further reply in the following manner: "I have gone through the available facts of the case record and have considered all the facts of the case and also keeping in mind the sad demise of the Registered Person, I have been left with no alternation to finalize the case on the basis of facts and evidence available on record. As the AR of the Registered Person failed to furnish any documentary evidence in response to the discrepancies pointed out in the original assessment order. In the circumstances narrated above, it is established that M/s lasting Knits having STRN 0300620002755, 16KM Sheikupura Road, Javaid Nagar Near Kot Abdul Malik Lahore involved in misusing the facility of zero rated. It is thus stands established that the Registered person has committed tax fraud within the meaning of section 2(37) of the Sales tax Act, 1990 and contravened sections 2(46), 3, 3(1)A,6,7,22,23, 26 and 73 of the Sales Tax Act, 1990 in terms of sub-serial No. (iv) of Sr. No. 01 of Table-II, of SRO 1125(I)/2011 dated 30.12.11 therefore, I order under section 11(3) of the Sales Tax Act, 1990 to M/s Lasting Knite having STRN No. 0300620002755, 16KM Sheikhupura Road, Javaid Nagar Near Kot Abdul Malik Lahore to deposit sales tax amounting to Rs. 40,226,481/- along with default surcharge (to be calculated at the time of deposit) and a penalty of Rs. 40,226,481/- (100%) under section 33(11) of the act besides initiation of penal action under section 2(37) of the Sales Tax Act, 1990."

7. The above quoted reasoning given by the officer shows how casually and arbitrarily re-assessment was finalized. It is strange to note the observation that since the taxpayer had died therefore the OIR had no option but to finalize the re-assessment. It is further surprising for us that the CIR(A) without considering this very pertinent aspect upheld the assessment order ex parte and statedly so because of the death of the taxpayer.

8. Though the tax liability of deceased Individual does not extinguish because as per Section 53 of the Sales Tax Act, 1990 the tax liability of a deceased registered person shall be the first charge on his estate in the hands of his successor. Both the learned officers could not appreciate that after the death, recovery, if any, can only be affected from the estate of deceased which devolves upon the legal heirs at the very time of death. First and foremost determination is to locate legal heirs and deceased's estate devolved upon them and then only after providing them opportunity of hearing to defend the matter on behalf of the deceased any assessment can be finalized and recovery can be affected from them from the deceased's estate. But in the instant matter, legal representatives were not issued any notice and re-assessment proceedings were concluded against a dead person without any effort on the part of the OIR to ensure appearance of any of the legal representatives. Precisely, the allegation/matter pertains to issuance of fake supplies by the appellant to M/s Mirza Textile which allegedly were declared to evade due payment of sales tax as the same were disposed of in the open market. M/s Lasting Knits/appellant was found involved in tax evasion by misusing the facility/benefit of zero rated regime introduced vide SRO 1125(1)/2011 dated 31.12.2011 through declaration of such supplies of zero sales tax to dummy/non-existent registered person along with evasion of further tax leviable under section 3(1A) of STA, 1990. Sales tax liability of Rs.40,226,481/- was created against the deceased registered person along with default surcharge and 100% penalty.

9. Since the assessing officer has not dealt with re-assessment proceedings in accordance with law and settled principles as stated in the preceding paras, Impugned re-assessment order does not have any legal footing. The CIR(A) grossly erred in law in confirming the same. Impugned order is illegal, unlawful and a nullity in the eye of law, hence, is set aside.

10. The titled appeal is accepted. Order accordingly. MQ/36/Tax (Trib) Appeal allowed.