2015 (9) TMI 184 - AT - Income Tax

Validity of assessment order passed under section 158BD - notice issued under section 158BD was issued upon a deceased person - Held that - Section 159(2) nowhere authorize the AO to take proceeding against the individual who has already expired, that is why the legal representative under section 2(7) are regarded to be assessee. This aspect can also appreciated by an example, viz. an assessee died leaving behind four legal representatives. The AO issued notice on the deceased. One of the legal representatives participated in the proceedings and the AO passed assessment order. All the four legal representatives had inherited property of the deceased. Can tax liability imposed upon the deceased assessee will be recovered from the rest of the legal representatives, who inherited the property, but did not participate in the proceeding, because they had not received any notice ? Section 292BB will not help the AO in this situation. Therefore, considering from all angles, we find that notice issued by the AO upon the deceased is defective notice and no valid assessment order could be passed. Respectfully following the order of the ITAT in the case of Sikandarlal Jain (2010 (12) TMI 623 - ITAT, Agra ), we allow the first ground of appeal and quash the assessment order. - Decided in favour of assessee.

Summary

Issues:
Validity of assessment order under section 158BD based on a notice issued to a deceased person.

Analysis:
The case involved an appeal against an order passed for a block period starting from 1990-91 to 29.10.1999. The primary issue raised was regarding the sustainability of the assessment order under section 158BD, as the notice for the same was issued to a deceased person. The legal heir of the deceased person had informed the authorities about the demise, but the assessment proceeded regardless. The counsel for the assessee argued that no assessment proceeding can continue based on a notice issued to a deceased person, citing a relevant legal precedent.

The Department argued that as per section 292BB, if an assessee participates in the proceedings, they cannot object to the notice being served upon them. They contended that since the assessee participated in the proceedings, the objection to the notice being issued to a deceased person was not valid. However, the Tribunal analyzed the facts and legal provisions in detail.

The Tribunal noted that the notice under section 158BD was indeed issued to a deceased person, and the question was whether this defect could be rectified under section 292BB. The Tribunal referred to a Third Member decision in a similar case, emphasizing that a notice issued to a deceased person is not valid for initiating proceedings. They delved into the legal definitions of an assessee and individual, concluding that a notice to a deceased individual cannot be considered valid. The Tribunal also discussed the implications of section 159 of the Income Tax Act regarding tax liability on legal representatives of a deceased assessee.

Ultimately, the Tribunal held that the notice issued to the deceased person was defective, and no valid assessment order could be passed based on it. Citing the precedent and legal provisions, the Tribunal allowed the appeal, quashing the assessment order. It was deemed unnecessary to consider other grounds of appeal in light of this decision.

In conclusion, the Tribunal's detailed analysis focused on the legal validity of the notice issued to a deceased person under section 158BD. The judgment highlighted the importance of proper legal procedures and the implications of tax liability on legal representatives in such cases.