2018 (12) TMI 697 - HC - Income Tax

Reassessment notice under Section 148 to deceased person quashed as Section 292BB cannot cure fundamental defect

The Delhi HC quashed a reassessment notice issued under Section 148 to a deceased assessee and all consequent proceedings. The court held that Section ... Reopening of assessment - notice issued u/s 148 to the deceased assessee - curable defect u/s 292BB - Requirement of issuing notice under Section 143(2) of the Act for completing reassessment - Held that:- If the original assessee had lived and later participated in the proceedings, then, by reason of Section 292BB, she would have been precluded from saying that no notice was factually served upon her. When the notice was issued in her name-when she was no longer of this world, it is inconceivable that she could have participated in the reassessment proceedings, (nor is that the revenue’s case) to be estopped from contending that she did not receive it. The plain language of Section 292BB, in our opinion precludes its application, contrary to the revenue’s argument. This court is of opinion that the absence of any provision in the Act, to fasten revenue liability upon a deceased individual, in the absence of pending or previously instituted proceeding which is really what the present case is all about, renders fatal the effort of the revenue to impose the tax burden upon a legal representative. After rejection, of the objection, which meant that according to the revenue, such a transaction was indeed recorded in the deceased’s books, the revenue attempted to “correct” the “error” by changing the name of the entity (with whom the suspect transaction occurred). This court is of opinion that such “correction” is neither innocuous nor innocent; it was clearly aimed at improving what was a fatally defective “reasons to believe” and mask the reality, to wit, that the revenue authorities utterly failed to apply their minds to the facts and circumstances of the case. On the last issue, i.e the fatality attached to the completed reassessment in the absence of a notice under Section 143(2), this court notices that the omission renders the assessment (or reassessment as in this case) void a proposition of law enunciated in Asstt. CIT v. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT] The impugned reassessment notice and all consequent proceedings-including the reassessment order-have to be and are, hereby quashed. W.P. allowed. Issues:1. Validity of a notice under Section 148 of the Income Tax Act issued to a deceased assessee for the assessment year 2010-11.2. Legality of conducting reassessment proceedings against a deceased individual.3. Requirement of issuing notice under Section 143(2) of the Act for completing reassessment.Analysis:Issue 1: Validity of Notice under Section 148:- The petitioner sought to quash a notice dated 29.03.2017 issued under Section 148 of the Act to the deceased assessee for the assessment year 2010-11.- The petitioner argued that the Act does not provide for reassessment of a deceased person and that the reassessment notice was not based on valid reasons.- The court referred to Section 159 of the Act, which makes the legal representative liable for the deceased's tax obligations.- Citing the case of Vipin Walia Vs. ITO, the court held that proceedings against a deceased assessee must be initiated against the legal representative.- The court concluded that the reassessment notice to a deceased individual was invalid, and the revenue's argument of curability under Section 292BB was untenable.Issue 2: Legality of Reassessment Proceedings:- The court emphasized that the revenue's attempt to impose tax liability on a deceased individual without pending or previously instituted proceedings was not supported by the Act.- Referring to a Supreme Court judgment, the court held that the absence of provisions in the Act to impose revenue liability on a deceased individual rendered the revenue's effort to burden the legal representative fatal.Issue 3: Requirement of Notice under Section 143(2):- The court noted that the completion of reassessment without issuing a notice under Section 143(2) rendered the reassessment void.- Citing the case of Asstt. CIT v. Hotel Blue Moon, the court established that the absence of a notice under Section 143(2) invalidated the reassessment.Conclusion:- The court quashed the impugned reassessment notice and all consequent proceedings, including the reassessment order, based on the above conclusions.- The writ petition was allowed without any order on costs.This detailed analysis of the judgment highlights the key legal issues involved and the court's reasoning behind quashing the reassessment notice and subsequent proceedings.