Assessment orders against deceased insolvent assessee quashed under section 226(3) - revenue claims must go through Official Assignee

Madras HC quashed assessment orders and notices issued against a deceased assessee who was declared insolvent. The petitioner, legal heir of the deceased, received section 226(3) notices for bank account attachment following assessment orders. The court held that since the original assessee died and was declared insolvent with Official Assignee taking charge of the estate under Presidency Towns Insolvency Act, 1909, revenue authorities cannot proceed against the deceased or legal heirs directly. Any claims must be pursued through the Official Assignee via the Insolvency Court. Writ petitions were allowed.

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Issues:
1. Jurisdiction of invoking Section 263 of the Income Tax Act in the case of a deceased person.
2. Legality of assessment orders passed under Section 147 r/w Section 263 r/w Section 144 of the Income Tax Act in the name of a deceased person.
3. Validity of bank account attachment notices issued under Section 226 (3) of the Income Tax Act to the legal heirs of a deceased person.
4. Applicability of the Presidency Towns Insolvency Act, 1909 in cases involving deceased insolvent individuals.

Detailed Analysis:

Issue 1:
The petitioner, wife of a deceased individual, challenged the invocation of Section 263 of the Income Tax Act against her deceased husband. The High Court noted that the initial notice under Section 148 was issued to the deceased, and subsequent proceedings under Section 263 were initiated without considering the death of the assessee. The Court held that such proceedings against a deceased person lacked jurisdiction, leading to the quashing of the orders passed under Section 263.

Issue 2:
Further, the assessment order passed under Section 147 r/w Section 263 r/w Section 144 adding a substantial amount to the deceased husband's income was also challenged. The Court found that since the invocation of Section 263 itself was without jurisdiction due to the deceased status of the assessee, the assessment order in the deceased husband's name was unsustainable. Consequently, the Court allowed the petition seeking to quash the assessment order dated 30.03.2023.

Issue 3:
The petitioner received bank account attachment notices under Section 226 (3) of the Act for demands raised post the assessment order. The petitioner contended that as the deceased husband was declared insolvent and his assets taken over by the Official Assignee, the notices against her were invalid. The Court agreed, emphasizing that all proceedings should have been initiated against the Official Assignee, not the petitioner as a legal heir. The Court quashed the bank account attachment notices in favor of the petitioner.

Issue 4:
Regarding the applicability of the Presidency Towns Insolvency Act, 1909, the Court highlighted that once an individual is declared insolvent and assets taken over by the Official Assignee, proceedings should be directed towards the Official Assignee, not the legal heirs. The Court emphasized that the respondents should approach the Official Assignee for any claims against the assets and distribution of proceeds in accordance with the law.

In conclusion, the High Court quashed the impugned orders passed against the deceased individual and allowed the writ petitions filed by the petitioner. The Court emphasized the need for proper jurisdiction and legal procedures in cases involving deceased individuals and their assets, directing the respondents to follow the appropriate legal course in such matters.

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