2023 (2) TMI 811 - HC - Income Tax

Validity of Reopening of assessment - notice in the name of deceased - HELD THAT - Assessee died during the original assessment proceeding and the department was well aware of this fact that the original assessee had died. Respondent-authority itself passed an order wherein penalty proceeding initiated against the deceased assessee has been dropped by recording inter alia that the assessee has already died on 18.01.2016 and hence, imposing of penalty against the deceased assessee is bad in law. From bare perusal of the penalty order itself, it would be evident that Respondents were duly aware of the fact that the assessee has already died, and have treated the initiation of penalty proceeding against the deceased assessee as bad in law and has dropped the same. On the other hand, Department has proceeded to pass Re-assessment Order u/s 147/148 despite being aware that the assessee has already died on 18.01.2016. Thus, it appears that the very initiation of the re-assessment proceedings against the original-assessee is non est and void ab initio, especially because the said assessee had already died without even substituting and/or transposing legal heirs of the said assessee in accordance with law. - Decided in favour of assessee.

Issues Involved:
1. Validity of reassessment proceedings initiated against a deceased assessee.
2. Legal implications of issuing notices and orders in the name of a deceased person.
3. Applicability of Section 292 BB of the Income Tax Act, 1961.
4. Applicability of Section 159 of the Income Tax Act, 1961.
5. Legal standing of penalty proceedings initiated against a deceased assessee.

Detailed Analysis:

1. Validity of reassessment proceedings initiated against a deceased assessee:
The court examined whether reassessment proceedings under Section 147 of the Income Tax Act, 1961, initiated against the deceased assessee Bhim Sain Chopra, were valid. The petitioner argued that the reassessment proceedings were non est and void ab initio since the assessee had died on 18.01.2016. The court noted that the reassessment order dated 10.09.2021 was passed against the deceased without substituting or transposing the legal heirs, rendering it illegal.

2. Legal implications of issuing notices and orders in the name of a deceased person:
The court scrutinized the issuance of notices under Sections 148 and 142(1) of the Income Tax Act to the deceased assessee. It was highlighted that the department was aware of the death of Bhim Sain Chopra during the original assessment proceedings. Despite this knowledge, notices were issued in the name of the deceased, which the court deemed impermissible. The court emphasized that the condition precedent for acquiring jurisdiction to reopen any assessment is that notice under Section 148 should be issued to a correct and alive person and not to a dead person.

3. Applicability of Section 292 BB of the Income Tax Act, 1961:
The Revenue argued that Section 292 BB, which deems a notice valid if the assessee has participated in the proceedings, should apply. However, the court clarified that Section 292 BB does not save the complete absence of notice. It only cures infirmities in the manner of service of notice but does not validate notices issued to a dead person. The court cited the case of Rajendra Kumar Sehgal vs. I.T.O., where it was held that Section 292 BB is applicable to an assessee and not to a legal representative.

4. Applicability of Section 159 of the Income Tax Act, 1961:
The court examined Section 159, which deals with the liability of legal representatives. It stated that for making any assessment, proceedings taken against the deceased before his death are deemed to have been taken against his legal representatives. However, in this case, the reassessment proceedings were initiated after the issuance of notice against the dead person, which is not permissible. The court reiterated that the moment the revenue became aware of the death of the original assessee, they were legally bound to involve the legal representative for proceeding in the matter.

5. Legal standing of penalty proceedings initiated against a deceased assessee:
The court noted that penalty proceedings under Sections 271(1)(b) and 271(1)(c) were initiated against the deceased assessee. However, these proceedings were later dropped by the respondent-authority, acknowledging that imposing a penalty against a deceased assessee is bad in law. This acknowledgment further supported the petitioner's argument that reassessment proceedings against the deceased were void.

Conclusion:
The court concluded that the reassessment proceedings and the consequent order dated 10.09.2021 were non est and void ab initio, having been initiated against a deceased person without involving the legal representatives. The notice dated 18.03.2020 under Section 148 and all consequential orders were quashed and set aside. The court allowed the application, emphasizing that the legal requirements for issuing notices and conducting reassessment proceedings were not met.

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