Invalid notice under section 148 issued to deceased assessee renders reassessment proceedings void despite legal heir filing return

ITAT Mumbai dismissed Revenue's appeal challenging validity of reopening assessment under section 147 against deceased assessee. The assessee died on 10.07.2017, and notice under section 148 was subsequently issued in the deceased's name. ITAT held that notice issued against deceased assessee is invalid, as no valid assessment or reassessment can be made in the name of deceased person. Return was filed by legal heir after death, but this did not validate the improper notice procedure.

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1. ISSUES PRESENTED and CONSIDERED

The core legal question considered by the Appellate Tribunal was whether the notice issued under section 148 of the Income Tax Act, 1961 ("the Act") to the deceased assessee was valid and whether the reassessment proceedings initiated pursuant to such notice could be sustained in law, given that the assessee had expired prior to the issuance of the notice. Specifically, the Tribunal examined:

• Whether issuance of a notice under section 148 of the Act to a deceased person, who had expired before the notice was issued, is valid and confers jurisdiction on the Assessing Officer to proceed with reassessment.
• The applicability of section 159 of the Act concerning legal representatives and the continuance or initiation of proceedings against them in place of the deceased assessee.
• The effect of section 292B of the Act, which provides that procedural defects in notices or proceedings shall not invalidate them, on the validity of notices issued to deceased persons.
• Whether the legal heir's knowledge of the proceedings and failure to respond to the notice constitutes submission to jurisdiction or waiver of defects in the notice.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Notice under Section 148 Issued to Deceased Assessee

Relevant Legal Framework and Precedents: Section 148 of the Act empowers the Assessing Officer to issue notice for reassessment if income has escaped assessment. The notice is jurisdictional, and its validity is a condition precedent for reassessment under section 147. Section 159 deals with legal representatives of deceased persons, and section 292B addresses procedural defects in notices or proceedings.

Several judicial pronouncements were considered, notably:

• The Supreme Court decision in Kanubhai Dhirubhai Patel Lr. vs. ITO, which upheld that no valid notice can be issued on a dead person and dismissed SLP against a High Court decision holding the same.
• The Gujarat High Court's decision in Chandreshbhai Jayantibhai Patel vs. Income Tax Officer, which distinguished between continuation of proceedings initiated before death (section 159(2)(a)) and initiation of fresh proceedings after death (section 159(2)(b)).
• Other High Court and Supreme Court decisions emphasizing that a notice under section 148 is jurisdictional and must be validly issued to the correct party.

Court's Interpretation and Reasoning: The Tribunal noted that the notice under section 148 was issued to the deceased assessee after his death. Since the reassessment proceedings had not been initiated before the death, clause (a) of subsection (2) of section 159 did not apply. Clause (b) allows initiation of proceedings against legal representatives only if valid notice is issued to them. Here, no such notice was issued to the legal heirs. Therefore, the notice to the deceased was invalid and did not confer jurisdiction on the Assessing Officer to proceed.

Key Evidence and Findings: The record showed the assessee died on 10.07.2017, and the notice under section 148 was issued subsequently to the deceased. The legal heir filed the return after the death and objected to the validity of the notice. No fresh notice was issued to the legal heirs.

Application of Law to Facts: The Tribunal applied the legal principle that a notice under section 148 is jurisdictional and must be validly issued to the assessee or legal representative. Since the notice was issued to a dead person and not to the legal heirs, the Assessing Officer lacked jurisdiction.

Treatment of Competing Arguments: The Revenue argued that the defect was procedural and curable under section 292B, relying on precedents where courts held that defects in notices do not invalidate proceedings if the party participates. The Tribunal distinguished these cases, noting that in those, legal representatives had participated and submitted returns, thereby waiving objections. Here, the legal heir objected from the outset and did not participate, so no waiver occurred.

Conclusion: The notice under section 148 issued to the deceased was invalid, and the reassessment proceedings based on it could not be sustained.

Issue 2: Applicability of Section 159 Regarding Legal Representatives

Relevant Legal Framework and Precedents: Section 159(2)(a) allows continuation of proceedings initiated against the deceased before death against legal representatives. Section 159(2)(b) permits initiation of proceedings against legal representatives if the deceased had survived. Section 159(3) deems legal representatives as assessee for the purposes of the Act.

Precedents such as Chandreshbhai Jayantibhai Patel and other High Court decisions were relied upon.

Court's Interpretation and Reasoning: Since the reassessment proceedings were not initiated before death, section 159(2)(a) did not apply. For section 159(2)(b) to apply, a fresh notice under section 148 must be issued to the legal representatives. As no such notice was issued, the Assessing Officer could not proceed against the legal heirs on the basis of the notice issued to the deceased.

Key Evidence and Findings: The legal heir objected to the proceedings and no fresh notice was issued to her. The Assessing Officer failed to bring legal representatives on record as required.

Application of Law to Facts: The Tribunal held that procedural correctness requires issuance of fresh notice to legal heirs to initiate proceedings under section 147 after death of the assessee.

Treatment of Competing Arguments: The Revenue contended that legal heirs had knowledge and did not respond, implying submission to jurisdiction. The Tribunal rejected this, emphasizing that mere knowledge without participation or waiver does not cure jurisdictional defects.

Conclusion: Without a valid notice to legal heirs, proceedings under section 147 cannot be initiated posthumously against the deceased's estate.

Issue 3: Effect of Section 292B on Procedural Defects in Notice Issuance

Relevant Legal Framework and Precedents: Section 292B provides that no notice or proceeding shall be invalid merely due to any mistake, defect, or omission if it is in substance and effect according to the intent and purpose of the Act. Cases such as Sky Light Hospitality LLP v. ACIT and others were considered.

Court's Interpretation and Reasoning: The Tribunal observed that section 292B applies to procedural defects but cannot cure jurisdictional defects. Since a valid notice under section 148 is a condition precedent to jurisdiction, issuance of notice to a deceased person is a jurisdictional defect that cannot be cured by section 292B.

Key Evidence and Findings: The legal heir consistently objected to the notice and did not waive the defect. The notice was not in conformity with the Act's intent as it was addressed to a non-existent person.

Application of Law to Facts: The Tribunal concluded that section 292B cannot validate a notice issued to a deceased person where no fresh notice is issued to legal heirs, especially when the legal heirs do not participate or waive objections.

Treatment of Competing Arguments: Revenue's reliance on section 292B was rejected on the ground that the defect was jurisdictional and not merely procedural.

Conclusion: Section 292B does not apply to cure the invalidity of a notice under section 148 issued to a deceased person without notice to legal heirs.

Issue 4: Whether Legal Heir's Knowledge and Non-Response Constitute Submission to Jurisdiction

Relevant Legal Framework and Precedents: Courts have held that participation in proceedings or filing returns in response to notices may amount to submission to jurisdiction and waiver of defects (e.g., Commissioner of Income Tax v. Sumantbhai C. Munshaw).

Court's Interpretation and Reasoning: The Tribunal distinguished cases where legal representatives participated and filed returns, from the present case where the legal heir objected from the outset and did not file return in response to the notice to the deceased.

Key Evidence and Findings: The legal heir filed the return post-death but objected to the notice's validity and did not participate in reassessment proceedings.

Application of Law to Facts: Mere knowledge of proceedings and non-response does not amount to submission to jurisdiction or waiver of the right to object to invalid notice.

Treatment of Competing Arguments: Revenue's argument that legal heir's knowledge without response amounted to submission was rejected.

Conclusion: The legal heir did not waive the defect by failing to respond and did not submit to jurisdiction; hence, the notice and proceedings are invalid.

3. SIGNIFICANT HOLDINGS

"As a dead individual is not a person in the eyes of law, assessment or reassessment proceedings or subsequent proceedings taken in his name will be invalid. The AO must bring all the legal representative(s) on record and continue proceedings against them as required under and in accordance with section 159 of the Act. No assessment or reassessment proceedings or subsequent proceedings can be undertaken against a dead person. Framing assessment or reassessment proceedings on a non-existent person is a jurisdictional defect and cannot be cured under section 292B or under section 292BB."

"A notice under section 148 of the Act is a jurisdictional notice, and existence of a valid notice under section 148 is a condition precedent for exercise of jurisdiction by the Assessing Officer to assess or reassess under section 147 of the Act. The want of a valid notice affects the jurisdiction of the Assessing Officer to proceed with the assessment and thus, affects the validity of the proceedings for assessment or reassessment."

"Where the legal representative does not waive his right to a notice under section 148 of the Act, it cannot be said that the notice issued against the dead person is in conformity with or according to the intent and purpose of the Act which requires issuance of notice to the assessee, whereupon the Assessing Officer assumes jurisdiction under section 147 of the Act and consequently, the provisions of section 292B of the Act would not be attracted."

"Since no fresh notice under section 148 has been issued in the name of the legal heirs, the Assessing Officer has no authority to assume the jurisdiction under section 147 of the Act over the legal heirs and, hence, continuation of the proceeding under section of the Act pursuant to such invalid notice issued in the name of the deceased assessee, is without authority of law and hence the impugned notice as well as the proceedings taken pursuant thereto cannot be sustained."

Core principles established include:

• Proceedings under section 147/148 cannot be initiated or continued against a deceased person; legal representatives must be brought on record and valid notice issued to them.
• Issuance of notice to a deceased person is a jurisdictional defect that cannot be cured by section 292B.
• Legal representatives' participation or filing of returns may amount to waiver of defects, but mere knowledge without participation does not.
• Where legal heirs object to invalid notices and do not participate, proceedings based on such notices are void.

Final determinations:

• The notice under section 148 issued to the deceased assessee was invalid.
• The reassessment proceedings based on such notice were without jurisdiction and therefore void.
• The Assessing Officer must issue fresh notice to legal heirs to initiate reassessment proceedings post death.
• The appeal filed by the Revenue was dismissed, upholding the order quashing the notice and proceedings.

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