2025 (8) TMI 376 - AT - Income Tax

Assessment notices to deceased assessee invalid without involving legal representative under sections 143(2) and 142(1)

The ITAT Ahmedabad held that assessment notices and order issued in the name of a deceased assessee were invalid as the AO failed to implead the legal ... Assessment in the name of a dead-person - Bogus LTCG - denying the exemption claimed u/s 10(38) - HELD THAT:- It is pertinent to note that the death of the assessee was informed by the L/R. of the assessee on 9.4.2019 in response to notice u/s 148 - Department, therefore, was aware in the month of April, 2019 that the assessee expired and the L/R has filed return of income of the dead assessee. But despite that the notices were issued on 11.9.2019 u/s 143(2) of the Act and notice issued u/s 142(1) of the Act on 28.11.2019 were in the name of the dead-person. In fact, the assessment order was also passed in the name of a dead-person without referring to the L/R of the assessee. Thus, the AO has not taken precaution which is a statutory requirement of impleading/addressing the correct legal representatives/legal heirs in the notices which are statutory notices, when the AO was very well aware that the assessee is a dead person. Assessee appeal allowed. ISSUES: Whether an assessment order passed in the name of a deceased assessee without impleading the legal representative is valid.Whether addition of long-term capital gain on sale of shares treated as bogus and non-genuine can be sustained denying exemption under section 10(38) of the Income Tax Act, 1961.Whether interest under sections 234A, 234B, and 234C is leviable when disputed additions are made. RULINGS / HOLDINGS: The assessment order passed in the name of a dead person without addressing or impleading the legal representative is 'bad in law' and cannot be treated as a curable mistake under section 292B of the Income Tax Act; hence, such assessment is liable to be quashed.The addition of Rs. 19,43,000/- on account of long-term capital gain from sale of shares treated as non-genuine and bogus was upheld by the lower authorities, but the present order primarily quashes the assessment on procedural grounds, without adjudicating this substantive issue.The levy of interest under sections 234A, 234B, and 234C was challenged but the court's decision focused on the invalidity of assessment order due to procedural defects and did not specifically rule on the interest liability. RATIONALE: The legal framework applied includes sections 143(2), 147, 148, 234A, 234B, 234C, and 292B of the Income Tax Act, 1961, and principles regarding issuance of statutory notices to correct parties.Precedents considered include the Hon'ble Gujarat High Court decision in Rasid Lala Vs. ITO, which held that issuance of notice to a deceased person without impleading legal representatives is not a curable defect, and the Hon'ble Madhya Pradesh High Court decision in Smt. Kaushalyabhai Vs. CIT, which was distinguished on facts where the department was unaware of the death.The Tribunal emphasized that knowledge of the assessee's death by the department prior to issuance of notices imposes a statutory duty to issue notices to legal representatives, and failure to do so renders the assessment order invalid.The procedural irregularity of issuing notices and passing assessment orders in the name of the deceased was held to be fatal to the validity of the assessment, overriding any substantive merits of the case at this stage.