2024 (9) TMI 1314 - HC - Income Tax

Validity of notice u/s 148 issued to a deceased assessee - salary income received by the deceased assessee - Responsibility of employer for TDS payments and affect of tax deduction at source on reassessment - HELD THAT - While dealing with an identical question, this Court in the case of Savita Kapila 2020 (7) TMI 441 - DELHI HIGH COURT held that the pre-requisite for issuing a notice in the name of the correct person and not in the name of a dead person is sine qua none for acquiring the jurisdiction and initiating action under Section 148 of the Act. In the present case, the proceedings were not initiated against the assessee when he was alive and after his death, his legal heirs did not step into the shoes of the deceased assessee. The Gujarat High Court in Chandresh Jayantibhai Patel 2019 (1) TMI 353 - GUJARAT HIGH COURT took the view that there is no statutory provision which casts a duty upon the legal representatives to intimate the factum of death of an assessee to the Income Tax Department. The Court also took note that there may be cases where the legal representatives are estranged from the deceased assessee or the deceased assessee may have bequeathed his entire wealth to a charity. Action under Section 147 of the Act cannot be initiated as the impugned notices were issued in the name of a dead person. As per Section 204 (i) of the Act, in the case of payments of income chargeable under the head Salaries , the employer is the person responsible for making payment of tax and Section 205 of the Act provides that where the tax is deductable at the source, assessee shall not be called upon to pay the tax himself to the extent to which the tax has been deducted from that income. Since the tax has already been deducted on the salary income, as is evident from Form-16, the reassessment action leading to demand of tax cannot be initiated against the assessee or even his legal representatives. Even on account of non-deposit of TDS by the employer, we had in the case of Shantanu Awasthi 2014 (5) TMI 1237 - DELHI HIGH COURT while relying upon the Office Memorandum of the Central Board of Direct Taxes concluded that there was no justification for the demand being shown as outstanding against the writ petitioner. The impugned notice u/s 148-A(b), order u/s 148-A(d) and notice u/s 148, both even dated 21.03.2024 cannot be sustained and are set aside. Assessee appeal allowed.

Summary

Issues:
Validity of notice under Section 148 of the Income Tax Act issued to a deceased assessee, Bar of limitation under Section 149(1)(b) of the Act, Applicability of Section 159 of the Act to legal representatives, Jurisdictional requirement for initiating action under Section 148, Reassessment based on TDS information, Responsibility of employer for TDS payments, Consequences of tax deduction at source on reassessment.

Analysis:

The judgment concerns a Writ Petition challenging a notice under Section 148-A(b) of the Income Tax Act, 1961, issued to the legal heir of a deceased assessee for the Assessment Year 2020-21. The deceased assessee's return of income could not be filed, leading to the notice for reassessment. The petitioner contended that the salary income of the deceased had already been subjected to TDS, rendering no income chargeable to tax. Despite this, the Revenue proceeded with the reassessment, prompting the petitioner to challenge the validity of the notices.

The Court referred to precedents, including the case of Savita Kapila v. Assistant Commissioner of Income Tax, emphasizing the importance of issuing notices in the name of the correct person and not a deceased individual for jurisdictional validity under Section 148. It highlighted that a notice against a dead person is invalid, affecting the Assessing Officer's jurisdiction for assessment or reassessment. The judgment also noted the bar of limitation under Section 149(1)(b) and the inapplicability of Section 159 of the Act in cases where legal representatives do not step into the deceased assessee's shoes.

Furthermore, the Court addressed the reassessment based on TDS information, emphasizing the employer's responsibility for TDS payments and the consequences of tax deduction at source on reassessment. It noted that since tax had already been deducted and deposited for the deceased's salary income, reassessment leading to tax demand against the assessee or legal representatives was unwarranted. Citing a previous case, the Court concluded that the impugned notices were unsustainable and set them aside, allowing the petition in favor of the petitioner.