2024 (9) TMI 1774 - AT - Income Tax

Validity of reassessment notice issued against the dead person - HELD THAT - In the present case the notice u/s 148 which is a jurisdictional notice has been issued to a dead person. The notice was issued on 29-03-2019 and the assessee was passed away on 11-11-2018 (as per death certificate filed by legal representative of the deceased assessee). The legal representative is not having being waived the requirement of notice u/s.148 of the Act and not having submitted to the jurisdiction of the Assessing officer pursuant to the impugned notice. The legal representative of the assessee has filed an affidavit with this contention that he is not the legal representative of the deceased assessee. The notice issued by the AO was not the valid notice - Assessee appeal allowed.

Summary

ISSUES:

Validity of notice issued under Section 148 of the Income Tax Act, 1961, when issued in the name of a deceased assessee.Jurisdiction of the Assessing Officer to proceed with reassessment under Section 147 of the Act in absence of a valid notice.Whether the legal representative's failure to inform the Income Tax Department of the assessee's death affects the validity of the reassessment proceedings.Application of principles of natural justice and requirement of proper notice and hearing under Section 250(6) of the Act.Validity of assessment order passed against a person not recognized as the legal heir under Section 159 of the Act.Legality of additions made ignoring debit entries and based solely on credit entries in bank statements.Whether the reassessment was initiated solely on the basis of an STR report without independent application of mind.Whether recovery proceedings can be initiated against the appellant under Section 159(6) of the Act.

RULINGS / HOLDINGS:

The notice issued under Section 148 of the Act to a deceased person is "null and void" and "not a mere technical defect," thereby vitiating the jurisdiction of the Assessing Officer to proceed with reassessment.In absence of a valid notice under Section 148, the Assessing Officer has no authority to assume jurisdiction under Section 147, rendering the reassessment and consequent assessment order liable to be quashed.The legal representative's failure to inform the Department of the assessee's death does not cure the defect of issuance of notice to a deceased person, nor does it impose a statutory obligation on legal heirs to intimate such death.An ex-parte order passed under Section 250(6) of the Act without serving proper notice of hearing violates the principle of natural justice and is bad in law.The issuance of assessment order in the name of a person not recognized as the legal heir under Section 159 of the Act is bad in law.Additions made by ignoring debit side entries and considering only credit entries in bank statements are illegal and unsustainable in law.Reassessment initiated solely on the basis of an STR report without independent application of mind is illegal and arbitrary.Recovery proceedings against the appellant are barred under Section 159(6) of the Act.

RATIONALE:

The Court relied on the legal framework established by the Income Tax Act, 1961, particularly Sections 148, 147, 159, and 250(6), and authoritative precedents including the Supreme Court judgment in Income Tax Officer vs. Bhupendra Bhikhalal Desai and various High Court rulings emphasizing that a notice issued to a deceased assessee is invalid and jurisdictionally defective.The Court emphasized that "the issuance of the notice to a dead assessee is not a mere technical defect which can be corrected under section 292 B of the Act" and that "want of a valid notice affects the jurisdiction of the Assessing Officer."It was held that there is "no statutory obligation on the part of the legal representatives of the deceased assessee to immediately intimate the death of the assessee or take steps to cancel the PAN registration," relying on the decision in Savita Kapila v. Assistant Commissioner of Income Tax.The principle that taxing statutes must be interpreted strictly according to their terms without importing provisions to supply assumed deficiencies was reiterated, citing CST v. Modi Sugar Mills Ltd.The Court found that the Assessing Officer's failure to issue a fresh notice to the legal heir within the limitation period, despite knowledge of the assessee's death, rendered the reassessment proceedings invalid.The Court noted the violation of natural justice principles where an ex-parte order was passed without proper notice of hearing under Section 250(6).The reliance on an STR report without independent application of mind was deemed insufficient to sustain reassessment, reflecting the requirement for reasoned and substantiated assessments.The Court followed consistent jurisprudence that recovery cannot be initiated against a person not recognized as a legal heir under Section 159(6).