THERE IS NO STATUTORY REQUIREMENT IMPOSING AN OBLIGATION UPON LEGAL HEIRS TO INTIMATE THE DEATH OF THE ASSESSEE

[Mr. M. GOVINDARAJAN]

Notice to a dead person

A notice cannot be issued on a dead person for the recovery of tax.  In ‘Braham Prakash v. Income Tax Officer’ – 2004 (9) TMI 49 - DELHI HIGH COURT, a notice was issued on Sheesh Ram, when he was no more.  The High Court observed that the notice was issued on a dead person.  It is clear that notice under Section 148 was neither served on the original assessed nor on the deemed assessed.  The High Court held that the subsequent proceedings are bad in law as there is breach of the principles of natural justice as well as the mandatory provisions contained in Section 148.

Legal representative

Section 159 of the Act provides that where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased.   Any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased.  The legal representative of the deceased shall, for the purposes of this Act, be deemed to be an assessee.   Every legal representative shall be personally liable for any tax payable by him in his capacity as legal representative if, while his liability for tax remains undischarged, he creates a charge on or disposes of or parts with any assets of the estate of the deceased, which are in, or may come into, his possession, but such liability shall be limited to the value of the asset so charged, disposed of or parted with.

In ‘SMT. SUDHA PRASAD VERSUS CHIEF COMMISSIONER OF INCOME-TAX AND OTHERS.’ – 2003 (3) TMI 6 - JHARKHAND HIGH COURT the High Court held that the proceedings were not initiated/pending  against the assessee when he was alive and after his death the legal representative did not step into the shoes of the deceased assessee, Section 159 of the Act would not applicable to the present case.

Intimation of death of assessee

In ‘Rajendar Kumar Sehgal v. Income Tax Officer’- 2018 (12) TMI 697 - DELHI HIGH COURT, the High Court held that the High court was of the opinion that the absence of any provision in the Act, to fasten revenue liability upon a deceased individual, in the absence of pending or previously instituted proceeding which is really what the present case is all about, renders fatal the effort of the revenue to impose the tax burden upon a legal representative.  There is no statutory requirement imposing an obligation upon legal heirs to intimate the death of the assessee.

In ‘SAVITA KAPILA, LEGAL HEIR OF LATE SHRI MOHINDER PAUL KAPILA VERSUS ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 43 (1) DELHI [2020 (7) TMI 441 - DELHI HIGH COURT], the income tax Authorities observed that one Shri Mohinder Paul Kapila had cash deposits of ₹ 10 lakhs in his bank account, time deposit of ₹ 11,05,586/- and receipts ₹ 25,414/- as per his Form 26AS for the year 2011-12.  The Authorities further observed that the said assessee did not file any return showing his source of income and concluded that there is an escape of assessment.  His case was selected under section 147/148 of the Act and got the approval of Principal Commissioner of Income Tax. 

A notice was issued under section 148 of the Act for the assessment year 2012-13 on 31.03.2019, i.e., on the last date of limitation, to the last known address of the assessee.  Subsequent notices were issued on 22.08.2019, 27.08.2019 and 18.09.2019.  On 10.10.2019 another notice was issued for the imposition of penalty under section 27(1)(b) of the Act.  Neither notice was served on the assessee.   The Authorities traced a phone number from the KYC of the assessee from the bank and called the phone.  One Kavita answered the phone informing the Authorities that she is the daughter of the assessee and her father was expired on 21.10.2018.  At the directions of the Authorities Kavita uploaded the death certificate of her father on the portal of the Department. 

The Assessing Officer, vide his order dated 21.11.2019, imposed penalty upon the deceased assessee under section 27(1)(b) through his legal heir for non compliance of notice.  A show cause notice was issued on 25.11.2019 to Kavita directing her to file returns and submit the relevant documents on or before 28.11.2019 failing which the Assessing Officer would pass the assessment under section 144 of the Act. 

The proceedings in respect of the deceased assessee were transferred to the PAN number of Kavita, daughter of the deceased assessee on 27.12.2019.  On the same day the assessment order was passed in which an addition of ₹ 21,31,000/- was made and a demand of ₹ 14,19,060/- was raised.

Against this order Kavita (‘petitioner’) filed the present writ petition before the High Court with the prayer to quash the notice issued on 31.03.2019 and subsequent proceedings.  The petitioner submitted the following before the High Court-

• The impugned notice has been issued ignoring the settled position of law.
• The impugned notice was issued subsequent to the death of the assessee and hence the statutory requirement under section 148 has not been fulfilled.
• Notice under Section 148 of the Act, 1961 was not issued to the petitioner or any other legal representative of the deceased assessee and the proceedings were simply transferred to the petitioner’s PAN vide letter dated 27.12.2019 ignoring the fact that there were other legal heirs of the deceased-assessee too.
• The proceedings against the petitioner were barred by limitation by the said date i.e. 27th December, 2019 as per Section 149(1) (b) of the Act, 1961.
• Section 159 of the Act would not apply to the facts of the present case inasmuch as the said provision would be applicable in those situations wherein the proceedings had been initiated/pending against an assessee when he/she was alive and after their death their legal representatives had stepped into their shoes.

The Revenue submitted the following before the High Court-

• The present writ petition ought not to be entertained as it had been preferred after the completion of assessment proceedings and in accordance with the statutory provisions as well as settled law, the petitioner should be directed to agitate the issues raised before the Appellate Commissioner under Section 246A of the Act, 1961.
• Under Section 159 of the Act, 1961 the legal representative is liable for the liabilities of the deceased-assessee and therefore it cannot be said that the present assessment proceedings are null and void merely because impugned notice under Section 148 of the Act dated 31.03.2019 was issued by the assessing officer, completely unbeknownst of the fact that the assessee had died on 21.12.2018.
• The factum of the death of the assessee was communicated to the Revenue for the first time on 15.10.2019 and not before the expiry of limitation period i.e. 31.03.2019 and therefore, there was no way that the Revenue could have known about the death of the assessee.
• It was incumbent upon the legal representatives of the late assessee to intimate about his death to the revenue.
• The Revenue had acted bona fide at the time of issuance of notice under Section 148 of the Act as it had no knowledge of the death of the assessee.
• The proviso to Section 292BB of the Act would be attracted to the present case and the petitioner would be prevented from questioning the validity of the notice since she had ‘cooperated in any inquiry relating to.....reassessment’ by uploading the death certificate of the deceased-assessee.

The petitioner, in her rejoinder to the contentions of the Revenue, submitted the following-

• There was no statutory obligation upon the legal heirs to intimate the death of the assessee to the respondent.
• The assessing officer had no jurisdiction to initiate the re-assessment proceedings and the passing of subsequent orders would not render the jurisdictional challenge infructuous.
• The petitioner had merely uploaded the death certificate of the deceased-assessee online and had in fact neither filed a return on behalf of the deceased-assessee nor submitted to the jurisdiction of the assessing officer and had not even waived the requirement of Section 148 of the Act.
• The provisions of Section 292BB of the Act were not attracted to the present case.

The High Court considered the submissions put forth by the petitioner and the Revenue.  In regard to the jurisdiction of entertaining the writ petition, the High Court relied on the judgment of Supreme Court in ‘WHIRLPOOL CORPORATION VERSUS REGISTRAR OF TRADE MARKS, MUMBAI & ORS.’ – 1998 (10) TMI 510 - SUPREME COURT in which the Supreme Court held that the fact that an assessment order has been passed and it is open to challenge by way of an appeal, does not denude the petitioner of its right to challenge the notice for assessment if it is without jurisdiction. If the assumption of jurisdiction is wrong, the assessment order passed subsequently would have no legs to stand. If the notice goes, so does the order of assessment.

No notice under Section 148 of the Act, 1961 was ever issued to the petitioner during the period of limitation and simply proceedings were transferred to the PAN of the petitioner, who happens to be one of the four legal heirs of the deceased assessee vide letter dated 27.12.2019. Therefore, the assumption of jurisdiction qua the Petitioner for the relevant assessment year is beyond the period prescribed and consequently, the proceedings against the petitioner are barred by limitation in accordance with Section 149(1) (b) of the Act, 1961.

The High Court held that in the absence of a statutory provision it is difficult to cast a duty upon the legal representatives to intimate the factum of death of an assessee to the income tax department.  Consequently, the legal heirs are under no statutory obligation to intimate the death of the assessee to the revenue.   Issuance of notice upon a dead person and non-service of notice does not come under the ambit of mistake, defect or omission. Consequently, Section 292B of the Act, 1961 does not apply to the present case.  One of the legal heirs of the deceased assessee, i.e. the petitioner, had neither cooperated in the assessment proceedings nor filed return or waived the requirement of Section 148 of the Act, 1961 or submitted to jurisdiction of the Assessing Officer. She had merely uploaded the death certificate of the deceased assessee.

The High Court allowed the writ petition and quashed the impugned notice dated 31.03.2019 and all consequential/proceedings passed thereto including order dated 21.11.2019 and 27.12.2019.