Reassessment of a deceased assessee and best-judgment assessment: limitation upheld, but fresh opportunity required on merits.

Reassessment of a deceased assessee can continue against the legal representative under Section 159, who is deemed an assessee for that purpose. The limitation challenge failed because the escaped-income threshold attracted the longer period under Section 149 and the time spent in Section 148A(b) proceedings was excluded, making the notice timely. A best-judgment assessment under Section 144, however, may be interfered with where the assessee is not given a fair opportunity to file a reply and supporting material; on that basis, the assessment was set aside and the matter remitted for fresh consideration on merits.

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Issues: (i) Whether reassessment proceedings and the notice issued in the name of the deceased assessee were barred by limitation under the amended limitation scheme; (ii) Whether the assessment order passed under best-judgment procedure required interference and remand for a fresh decision on merits.

Issue (i): Whether reassessment proceedings and the notice issued in the name of the deceased assessee were barred by limitation under the amended limitation scheme.

Analysis: The limitation for issuance of notice under the reassessment regime was examined with reference to the amended time limits under Section 149 of the Income-tax Act, 1961 and the effect of exclusion of time spent in proceedings under Section 148A(b). The deceased assessee could be proceeded against through the legal representative under Section 159(2)(b) of the Income-tax Act, 1961, and the legal representative is deemed to be an assessee under Section 159(3). On the facts, the alleged escaped income exceeded the threshold attracting the longer limitation period, and the notice under Section 148A(b) was found to be within time after applying the statutory exclusion.

Conclusion: The challenge on the ground of limitation failed and the reassessment proceedings were held to be within time.

Issue (ii): Whether the assessment order passed under best-judgment procedure required interference and remand for a fresh decision on merits.

Analysis: The assessment order had been passed under Section 144 of the Income-tax Act, 1961 in the absence of a reply to the show-cause notice. The Court found it appropriate to afford the petitioner an to place a reply and supporting documents before the assessing authority. The order was therefore set aside so that the matter could be reconsidered after due notice and on the basis of the material that may be produced.

Conclusion: The assessment order was quashed and the matter was remitted for fresh consideration on merits.

Final Conclusion: The limitation challenge was rejected, but the assessment order was set aside and the matter was sent back for a fresh adjudication after giving the petitioner an opportunity to respond.

Ratio Decidendi: In reassessment of a deceased assessee, proceedings may continue against the legal representative within the statutory limitation period, and a best-judgment assessment can be remanded where a fresh opportunity to answer the show-cause notice is warranted.

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