2024 (10) TMI 1206 - HC - Income Tax

Section 148 notice to deceased assessee invalid, cannot continue against legal representatives without prior proceedings

Rajendrakumar Padmshibhai Padshala Versus Income Tax Officer

The Gujarat HC held that a notice under section 148 issued to a deceased assessee is defective and cannot be continued against legal representatives. ... Validity of reopening of assessment against dead assessee - notice issued on a dead person - Responsibility of legal representative - Assessee did not file return of income disclosing cash deposited in the bank account which had remained unexplained - HELD THAT:- Issue with regard to issuance of notice for reassessment u/s 148 of the Act on a dead person is no more res integra in view of the decision of Bhupendra Bhikhalal [2021 (3) TMI 892 - GUJARAT HIGH COURT] wherein notice issued u/s 153C of the Act against a dead person is held to be defective and consequently quashed and set aside. Continuing assessment proceedings after assessee death against legal representatives - Expression 'assessee' includes every person who is deemed to be an assessee under any provision of the Act. Sub-section (3) of section 159 of the Act, postulates that the legal representative of the deceased shall, for the purposes of the Act, be deemed to be an assessee. Sub-section (2) of section 159 of the Act says that for the purpose of making an assessment (including an assessment, reassessment or re-computation under section 147) of the income of the deceased and for the purpose of levying any sum in the hands of the legal representative in accordance with the provisions of sub-section (1). Thus, clause (a) of sub-section (2) of section 159 of the Act provides for the eventuality where a proceeding has already been initiated against the deceased before his death, in which case such proceeding shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased. In the present case, the proceeding under section 147 of the Act had not been initiated against the deceased before his death, and hence, clause (a) would not be applicable in the facts of this case. In the present case, the impugned notice under section 148 of the Act has been issued against the deceased assessee. In the opinion of this court, since this is not a case falling under clause (a) of subsection (2) of section 159 of the Act, the proceeding pursuant to the notice under section 148 of the Act issued to the dead person, cannot be continued against the legal representative. Revenue contended that issuance of the notice to the dead assessee is merely a technical defect which could be corrected u/s 292B - In the opinion of this court, here lies the distinction between those cases and the present case. In the relied upon cases, the legal representative, in response to the impugned notice, filed return of income and participated in the proceeding and then raised an objection to the validity of the proceeding and, therefore, the court held that this was a case of waiver and that a technical defect can be waived; whereas in this case, right from the inception the petitioner has objected to the validity of the notice and thereafter to the continuation of the proceeding and has at no point of time participated in the proceeding by filing the income tax return in response to the notice issued under section 148 of the Act. Had the petitioner responded to the notice by filing return of income, he could have been said to have participated in the proceedings, however, merely because the petitioner has informed the Assessing Officer about the death of the assessee and asked him to drop the proceedings, it cannot, by any stretch of imagination, be construed as the petitioner having participated in the proceedings. Assessee appeal allowed. Issues Involved:1. Validity of notice issued under Section 148 of the Income Tax Act, 1961 to a deceased person.2. Legal implications of continuing assessment proceedings against a deceased person.3. Application of Section 159 and Section 292B of the Income Tax Act in cases involving deceased persons.Issue-wise Detailed Analysis:1. Validity of Notice Issued Under Section 148 to a Deceased Person:The primary issue was whether the notice issued under Section 148 of the Income Tax Act, 1961, to a deceased person is valid. The petitioner argued that the notice was invalid as it was issued in the name of the deceased grandfather, who had passed away prior to the issuance of the notice. The petitioner relied on precedents, including the case of Bhupendra Bhikhalal Desai vs. ITO, where it was held that a notice issued to a deceased person is defective and should be quashed. The court agreed with this position, referencing similar judgments that underscored the necessity of issuing notices to legal representatives rather than deceased individuals. The court concluded that the notice issued in this case was invalid and should be set aside.2. Legal Implications of Continuing Assessment Proceedings Against a Deceased Person:The court examined whether it was lawful to continue assessment proceedings initiated against a deceased person. It was noted that the proceedings under Section 147 of the Act were initiated after the death of the assessee, and no steps were taken to issue a notice to the legal representatives, which is a mandatory requirement. The court highlighted that under Section 159 of the Act, any proceedings against a deceased person must be continued against their legal representative, and failing to do so renders the proceedings invalid. The court cited the case of Chandreshbhai Jayantibhai Patel vs. Income Tax Officer, which emphasized that proceedings cannot be continued without issuing a valid notice to the legal representatives.3. Application of Section 159 and Section 292B of the Income Tax Act:The respondent argued that the petitioner should have challenged the impugned assessment order as a legal representative and that the notice's defect was a mere technicality that could be corrected under Section 292B of the Act. However, the court clarified that Section 159 requires proceedings to be properly initiated against legal representatives, and Section 292B cannot be used to rectify the fundamental defect of issuing a notice to a deceased person. The court distinguished between procedural defects and jurisdictional errors, stating that the latter cannot be cured by Section 292B. The court reiterated that the petitioner had not participated in the proceedings and had consistently objected to the invalid notice, further invalidating the continuation of the proceedings.Conclusion:The court concluded that the notice issued under Section 148 to a deceased person was invalid, and the subsequent assessment order and penalty were also void. The petition was allowed, and the impugned notices and orders were quashed. The court emphasized the necessity of issuing notices to legal representatives in cases involving deceased individuals and clarified the limitations of Section 292B in rectifying jurisdictional errors. The judgment reinforced the principle that legal proceedings must adhere to procedural and jurisdictional mandates to be valid.