2021 (3) TMI 892 - HC - Income Tax

Invalid Tax Notice to Deceased Person: Jurisdictional Defect Renders Proceedings Unsustainable

Late Bhupendra Bhikhalal Desai (Since Decd.) Through Legal Heir Raju Bhupendra Desai Versus The Income Tax Officer Ward 1 (2) (1)

The court held that the notice issued under Section 153C of the Income Tax Act to a deceased person was invalid, rendering subsequent proceedings ... Notice under Section 153C against deceased person - liability of legal heir of late assessee - HELD THAT:- It is not in dispute that the legal heir of late Bhupendrabhai Desai had not participated in the proceedings. All that the legal heir of late Bhupendrabhai Desai did was to inform the Assessing Officer about the death of his father and requested to drop the proceedings. It is true that although the father passed away in the year 2017, yet the legal heir did not inform the department upto October 2019. However, at the same time, we should not overlook the fact that even after coming to know about the demise of late Bhupendrabhai, the department could have issued a valid notice to the legal heir as the period of limitation of 21 months had not expired. We fail to understand what prevented the department from issuing a valid notice to the legal heir within the prescribed time period. We may refer to a recent pronouncement of the Supreme Court in the case of Principal Commissioner of Income Tax, New Delhi vs. Maruti Suzuki India Limited,[2019 (7) TMI 1449 - SUPREME COURT] as held during the pendency of the assessment proceedings if the assessee company gets amalgamated with another company, it would lose its existence and the assessment order passed subsequently in the name of the said non-existing entity would be without jurisdiction and liable to be set-aside. In the facts of the case before the Supreme Court, although the Assessing Officer was informed of the amalgamated company having ceased to exist as a result of the approved scheme of amalgamation, yet the jurisdictional notice was issued only in its name. The Supreme Court took the view that the basis on which the jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. The only proposition of law that is applicable in the present litigation is that a notice, be it under Section 148 of the Act or Section 153C of the Act, issued to a dead person, is unenforceable in law. If such is the legal position, the Revenue cannot contend that as they had no knowledge about the death of the assessee, they are entitled to plead that the notice is not defective. The Supreme Court, in a plethora of judgments, has taken the view that if the person sought to be taxed comes within the letter of the law, he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the State, seeking to recover the tax, cannot bring the citizen within the letter of the law, the citizen is free, however, apparently within the spirit of law the case might otherwise appear to be. We are left with no other option but to allow the present writ-application and hold that the impugned notice being invalid, the further proceedings pursuant thereto are not tenable in law. Issues Involved:1. Validity of notice issued under Section 153C of the Income Tax Act, 1961 to a deceased person.2. Legal implications of issuing tax notices to a dead person.3. Applicability of Section 292B of the Income Tax Act, 1961 to cure defects in notices issued to deceased persons.4. Obligations of legal heirs to inform the tax department about the death of the assessee.5. Jurisdiction of the Assessing Officer in issuing notices to deceased persons.6. Interpretation of the term 'person' under Section 2(31) of the Income Tax Act, 1961.Detailed Analysis:1. Validity of Notice Issued Under Section 153C to a Deceased Person:The court examined whether the proceedings initiated by the Assessing Officer pursuant to the notice issued under Section 153C of the Income Tax Act, 1961 to a deceased person are sustainable in law. The court relied on the principle that a notice issued to a dead person is invalid. The legal heir of the deceased had informed the department about the death and requested to drop the proceedings. The court noted that the department could have issued a valid notice to the legal heir within the prescribed time period but failed to do so.2. Legal Implications of Issuing Tax Notices to a Dead Person:The court referred to previous judgments, including the case of Chandreshbhai Jayantibhai Patel vs. Income Tax Officer, which held that a notice issued to a dead person is not a mere technical defect but a jurisdictional defect, rendering the proceedings null and void. The court emphasized that the want of a valid notice affects the jurisdiction of the Assessing Officer to proceed with the assessment.3. Applicability of Section 292B to Cure Defects in Notices Issued to Deceased Persons:The court discussed the applicability of Section 292B of the Income Tax Act, which states that no notice shall be invalid merely by reason of any mistake, defect, or omission if it is in substance and effect in conformity with the intent and purpose of the Act. However, the court concluded that a notice issued to a dead person is not in conformity with the intent and purpose of the Act, and thus, Section 292B cannot cure such a defect.4. Obligations of Legal Heirs to Inform the Tax Department About the Death of the Assessee:The court addressed the argument that the legal heirs failed to inform the department about the death of the assessee and did not take steps to cancel the PAN registration. The court held that there is no statutory obligation on the part of the legal representatives to immediately intimate the death of the assessee or cancel the PAN registration. The court cited the case of Alamelu Veerappan vs. Income Tax Officer, which supported this view.5. Jurisdiction of the Assessing Officer in Issuing Notices to Deceased Persons:The court examined the jurisdiction of the Assessing Officer in issuing notices to deceased persons. The court concluded that the issuance of a notice to a dead person and the consequent proceedings are without jurisdiction and invalid. The court referred to the case of Principal Commissioner of Income Tax, New Delhi vs. Maruti Suzuki India Limited, where the Supreme Court held that an assessment order passed in the name of a non-existing entity is without jurisdiction and liable to be set aside.6. Interpretation of the Term 'Person' Under Section 2(31) of the Income Tax Act, 1961:The court addressed the argument that the legal heir of the deceased would fall within the ambit of 'body of individuals' under Section 2(31) of the Act. The court observed that the definition of 'person' does not include the legal representatives of deceased persons. The court referred to the Supreme Court's decision in Shabina Abraham, which held that the definition of 'person' under the General Clauses Act does not include legal representatives of deceased persons.Conclusion:The court allowed the writ application, holding that the impugned notice issued under Section 153C to a deceased person is invalid, and the further proceedings pursuant thereto are not tenable in law. The court quashed and set aside the impugned notice and the preliminary order. The connected writ applications were also allowed on the same grounds.