Notice under Section 148 issued to deceased person is unenforceable and invalid in law

The ITAT Hyderabad ruled in favor of the assessee regarding a reassessment notice issued after the assessee's death. The tribunal held that a notice under Section 148 issued to a deceased person is unenforceable and invalid in law. Following precedents from Bombay HC and Delhi HC, the tribunal determined that legal heirs have no statutory obligation to inform the department of the assessee's death, and such notices are not protected by Sections 292B or 292BB. The requirement to issue notice to the correct person is a condition precedent for validity, not merely procedural.

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The core legal questions considered in this judgment are:

1. Whether an assessment framed under section 147 read with section 144 of the Income Tax Act, 1961 (the Act), based on a notice issued under section 148 after the death of the assessee, can be sustained in law.

2. Whether the Assessing Officer (A.O.) erred in proceeding with assessment without impleading or properly identifying the legal heirs of the deceased assessee as mandated under section 159 of the Act.

3. Whether the Commissioner of Income-Tax (Appeals) (CIT(A)) was justified in setting aside the assessment for fresh consideration despite the original assessment being completed on a deceased person, and whether such remand accords with principles of natural justice and procedural law.

4. The procedural and jurisdictional implications of issuing notices to a deceased person and the consequent validity of such notices and assessments.

Issue-wise Detailed Analysis

1. Validity of Assessment Based on Notice Issued After Death of Assessee

Relevant Legal Framework and Precedents: The provisions under sections 147, 148, 144, and 159 of the Income Tax Act govern reassessment proceedings and notices. Section 148 mandates that a notice for reassessment must be issued to the "assessee" to initiate proceedings. Section 159 deals with legal representatives of a deceased assessee. Judicial precedents from various High Courts have consistently held that a notice issued to a deceased person is invalid and unenforceable.

Key precedents include:

• Hon'ble Bombay High Court in Devendra Vs. Addl. CIT: Held that notices issued to a dead person are void and that legal heirs are under no statutory obligation to intimate the department about the death. The issuance of notice to the correct person is a condition precedent for jurisdiction.
• Hon'ble Delhi High Court in Savita Kapila Vs. ACIT: Reiterated that no duty lies on legal representatives to inform the department about death and that notices issued post-death are invalid.
• Hon'ble Madras High Court in Alamelu Veerappan Vs. ITO: Affirmed that notices issued on a dead person are invalid and unenforceable.
• Hon'ble Bombay High Court in Sumit Balkrishna Gupta Vs. ACIT: Emphasized that issuing notice to a correct person is not a mere procedural formality but a foundational jurisdictional requirement. Notices to deceased persons are not protected under sections 292B or 292BB of the Act.
• Hon'ble Delhi High Court in Dhirendra Bhupendra Sanghvi Vs. ACIT: Held that notices and consequential proceedings on a deceased person are null and void.

Court's Interpretation and Reasoning: The Tribunal noted that the notice under section 148 dated 26.03.2021 was issued after the death of the assessee on 29.08.2020. Despite the Assessing Officer being aware of the death, the notice was not issued to the legal heirs or representatives. The Tribunal relied heavily on the aforementioned judicial pronouncements to hold that such a notice is void ab initio and the assessment framed thereon lacks jurisdiction.

Application of Law to Facts: Since the notice was issued to the deceased assessee and no valid notice was served on the legal heirs, the foundational requirement for reopening assessment was not met. This rendered the entire reassessment proceeding and the resultant order under section 147 read with section 144 invalid.

Treatment of Competing Arguments: The Department did not contest the fact of death or the timing of the notice. The Tribunal did not find any justification for bypassing the legal heirs or for issuing the notice to the deceased.

Conclusion: The assessment framed based on the notice issued to the deceased assessee is quashed for want of jurisdiction.

2. Procedural Compliance Regarding Legal Heirs and Impleading in Assessment Proceedings

Relevant Legal Framework: Section 159 of the Income Tax Act mandates that when an assessee is deceased, the legal representatives must be brought on record for assessment proceedings. The Assessing Officer is required to identify and implead the legal heirs to ensure proper service of notices and to safeguard the rights of the deceased's estate.

Key Evidence and Findings: The A.O. issued notices under section 133(6) to HDFC Bank to obtain details of the legal heirs. Upon learning that the widow had approached for nominee changes, the A.O. issued a notice to her to explain why she should not be impleaded as legal heir. However, as she did not respond, the A.O. proceeded to treat her as the legal heir and completed the assessment in the deceased's name.

Court's Reasoning: The Tribunal observed that despite the A.O.'s efforts to identify legal heirs, the assessment was completed without proper service of notice to the legal heirs or their participation. The mere issuance of a notice to the deceased without valid substitution or impleading of legal heirs does not satisfy the procedural requirements.

Application of Law to Facts: The Tribunal found that the A.O. failed to ensure proper service of notice to the legal heirs in compliance with section 159, thereby violating procedural safeguards.

Conclusion: The assessment is invalid for non-compliance with mandatory procedural requirements relating to legal heirs.

3. Legitimacy and Effect of CIT(A)'s Order Setting Aside Assessment for Fresh Consideration

Relevant Legal Framework: Section 251 of the Act empowers the CIT(A) to set aside an assessment order for fresh consideration if procedural irregularities or substantial justice demands it. Principles of natural justice require that the person against whom proceedings are initiated must be given a fair opportunity to be heard.

Court's Interpretation and Reasoning: The CIT(A) acknowledged the procedural lapse that the notices and assessment orders were issued and passed after the death of the assessee. Recognizing that the legal heirs had not been given an opportunity to be heard, the CIT(A) set aside the assessment for fresh consideration to afford a proper hearing to the legal representatives.

Treatment of Competing Arguments: The assessee's representatives argued that the original assessment was a nullity, and the CIT(A) erred in remanding rather than quashing the assessment outright. The Department contended that remand was appropriate to allow the A.O. to rectify procedural defects.

Tribunal's Conclusion: The Tribunal found that the CIT(A)'s approach to remand the matter for fresh adjudication was inconsistent with settled law that notices issued to a deceased person are invalid. The Tribunal held that remanding an invalid assessment does not cure the jurisdictional defect and that the assessment itself must be quashed.

4. Jurisdictional and Procedural Implications of Issuing Notices to a Deceased Person

Legal Framework and Precedents: Jurisdiction to reopen assessment under section 147 is contingent on valid issuance of notice under section 148 to the correct person. Notices to deceased persons violate this requirement and are not curable under sections 292B or 292BB of the Act, which deal with service of notices and deemed service.

Court's Reasoning: The Tribunal emphasized that the requirement to issue notice to the correct person is a "condition precedent" and not a mere procedural formality. The issuance of notice to a deceased person is a fundamental jurisdictional defect that cannot be cured by subsequent procedural steps or deemed service provisions.

Application of Law to Facts: The notice dated 26.03.2021 issued to the deceased assessee was foundationally defective, rendering the reassessment proceedings invalid.

Conclusion: The reassessment proceedings initiated on the basis of such notice are null and void.

Significant Holdings

"The sine qua non for acquiring jurisdiction to reopen an assessment is that such notice should be issued in the name of a correct person. This requirement of issuing notice to a correct person and not to a dead person is not merely a procedural requirement but is a condition precedent to the impugned notice being valid in law."

"A notice which has been issued in the name of the dead person is also not protected either by provisions of section 292B or 292BB of the Act. This is so as the requirement of issuing a notice in the name of correct person is the foundational requirement to acquire jurisdiction to reopen the assessment."

"No duty is cast upon a legal representative to intimate the factum of death of an assessee to the Income-tax department."

"A notice and all consequential proceedings in the name of a dead person or the reopening of assessment of a dead person is null and void in law."

The Tribunal conclusively held that the assessment orders passed under section 147 read with section 144 based on the notice issued under section 148 after the death of the assessee are unsustainable and must be quashed.

Accordingly, the appeals filed by the legal heirs of the deceased assessee for the assessment years 2016-17 and 2017-18 were allowed, and the assessments were quashed.

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