2025 (9) TMI 518 - AT - Income Tax

Reassessment under section 148 quashed where notice not served on legal heir of deceased assessee; no representative designated

ITAT Kolkata allowed the appeal, holding the reopening invalid because notice under section 148 was not served on the legal heir of the deceased assessee. ... Reopening of Assessment - notice u/s 148 of the Act has been issued on a deceased assessee - HELD THAT:- A perusal of the facts clearly shows that notice u/s 148 of the Act has not been served on the legal heir. The assessee is deceased. The notice in respect of deceased assessee is to be served on legal heirs first and it is after that the legal heir so specified and brought on record, would represent on behalf of the deceased assessee. Nothing has been done by the AO when the AO passed the assessment order, he was aware that the assessee was deceased. The Assessing Officer has not mentioned how he has treated Smt. Lily Sarkar as the legal heir - Assessee appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a notice issued under section 148 of the Act addressed to a deceased assessee is valid in law when no fresh notice has been issued on the legal heirs or legal representative. 2. Whether an assessment completed pursuant to a section 148 notice addressed to a deceased person is vitiated and liable to be quashed. 3. Whether an appeal filed in the name of a deceased assessee (with verification signed by a person claiming to be a legal heir) is maintainable before the appellate authority where legal heirs/representative have not been formally brought on record. 4. The relevance and application of prior administrative/appellate treatment and judicial decisions addressing notices/assessments issued to deceased persons and the obligation to proceed against legal representatives under section 159 (and analogous principles). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of section 148 notice issued to a deceased assessee Legal framework: Section 148 authorises issuance of a notice for reopening assessment; section 159 establishes that income tax proceedings in respect of a deceased person proceed against the legal representative (legal heir) and that notices, assessments and demands pertaining to a deceased person are to be in respect of the legal representative. Precedent Treatment: The Tribunal considered earlier appellate findings in an identical factual matrix (same family; earlier assessment year) where the appellate authority quashed a section 148 notice issued after death, relying on several High Court decisions applying the principle that notices should not be issued to deceased persons but to legal representatives. Interpretation and reasoning: The Tribunal found on the record that the assessing officer issued the section 148 notice in the name of the deceased, despite having knowledge of the death. No fresh notice was issued to any identified legal heir or legal representative. The obligation under section 159 and settled judicial approach require that proceedings be taken against the legal representative once the taxpayer is dead. Issuance of a notice to a deceased person, without service on a legal representative, is a procedural nullity because the statutory scheme contemplates continuation of proceedings through the legal representative, not against the deceased person. Ratio vs. Obiter: The holding that a section 148 notice issued to a deceased person (without issuing a fresh notice on a legal heir) is invalid is ratio decidendi as applied to the facts; references to specific High Court authorities and the earlier appellate order are treated as supporting precedent rather than mere obiter. Conclusion: The section 148 notice addressed to the deceased was invalid and quashed because no notice was issued to, and proceedings were not continued against, the legal heirs/legal representative as required by the statutory scheme. Issue 2 - Validity of assessment completed pursuant to an invalid notice Legal framework: Consequences of defective/invalid notice under section 148; principle that consequential orders made pursuant to a void notice are themselves void. Precedent Treatment: The Tribunal relied on the earlier appellate finding for the related assessment year which quashed both the notice and the assessment made on the deceased, and on judicial authorities holding that any proceedings completed on a deceased person without following the statutory route through legal representatives are null and void. Interpretation and reasoning: The Tribunal observed that the assessing officer, aware of the assessee's death, neither issued a fresh notice to any legal heir nor recorded proper identification/acceptance of a legal representative. The assessment order indicates that a person was treated as a legal heir without proper explanation, and the Assessing Officer did not explain how that status was determined or how notices were served. Given the invalidity of the foundational notice, the Tribunal concluded the consequential assessment order lacked legal basis. Ratio vs. Obiter: The conclusion that an assessment made pursuant to a void section 148 notice is itself void is ratio and applied to invalidate the assessment under challenge. Conclusion: The assessment order made pursuant to the defective section 148 notice is quashed as consequentially void. Issue 3 - Maintainability of appeal filed in the name of a deceased assessee Legal framework: Procedural requirements for filing appeals (verification, correct party naming, and representation by legal heirs/legal representatives when the assessee is deceased); administrative practice of incorporating legal heirs on records before appellate filing. Precedent Treatment: The appellate order under challenge held that an appeal filed in the name of a deceased assessee, even when verified by a purported legal heir, is not maintainable unless the legal heir is formally brought on record and the appeal is filed in the capacity of the legal representative; the Tribunal examined that finding against the factual record. Interpretation and reasoning: The Tribunal noted that Form 35 identified a specific legal heir (the wife) and was signed by her, while the assessing officer's record and assessment order reflected a different person as legal heir without explanation; one purported legal heir had denied the status and receipt of notices. The Tribunal emphasised that procedural regularity requires service of notice and identification of the legal representative before completing proceedings; where the foundational notice is invalid (see Issue 1), the question of technical maintainability of an appeal filed in the deceased's name is subordinate to the primary defect in issuance/ service. The Tribunal found that the assessing officer had not ensured identification/communication with the correct legal representative and therefore could not sustain the appellate dismissal on maintainability grounds when the underlying notice itself was void. Ratio vs. Obiter: The observation that an appeal should ideally be filed by a legal representative after incorporation is an authoritative statement of procedural law (ratio) but the Tribunal treated the specific dismissal for maintainability as inappropriate in the factual matrix because the underlying notice/assessment were void. Conclusion: Although an appeal filed in the name of a deceased assessee is procedurally defective in principle, where the assessing officer issued a void notice to the deceased and failed to bring proper legal heirs on record, dismissal on maintainability alone is not appropriate; the Tribunal allowed the appeal on the substantive ground that the notice and assessment were void. Issue 4 - Application of prior appellate finding and judicial authorities regarding proceedings against deceased taxpayers Legal framework: Consistency and stare decisis in administrative/appellate decisions dealing with identical factual situations; the statutory mandate to proceed through legal representatives under section 159. Precedent Treatment: The Tribunal reviewed the prior appellate order for a related assessment year which quashed the notice and assessment for issuance after the death and relied on several High Court decisions holding that notices/assessments on deceased persons are null and void if the legal representative is not the recipient/party. Interpretation and reasoning: The Tribunal found the prior appellate conclusion applicable and persuasive on substantially similar facts. The prior order and judicial precedents were followed rather than distinguished because the facts-notice issued after death without service on legal heirs-were squarely similar. The Tribunal noted that where the Assessing Officer has knowledge of death, statutory and judicially approved practice requires issuance of notice to legal representatives; failure to do so invalidates subsequent proceedings. Ratio vs. Obiter: Reliance on prior appellate and High Court authority to quash the notice and assessment is part of the Tribunal's ratio in reaching its decision. Conclusion: The Tribunal followed the reasoning of the earlier appellate order and applicable judicial authorities, applying them to quash the offending notice and consequential assessment. Overall Disposition Because the section 148 notice was issued to a deceased person without issuance to, or proper identification/service on, the legal heirs/legal representative and the Assessing Officer failed to correct the defect despite knowledge of death, the notice and the consequential assessment are quashed; the appeal is allowed.