2024 (9) TMI 1569 - HC - Income Tax

Sustainability of order passed against a dead person - Legal heirs' liability to discharge deceased assessee's liabilities - HELD THAT - There is no dispute about the aforesaid provision of law but under the principle of natural justice, legal heirs of the deceased assessee are liable to be heard if they are to discharging the liability of the assessee. There is no document to show that notices were tired to be served on the appellant and returned back unserved with a noting that the assessee is no more, therefore, no efforts were made to implead the legal heirs of the assessee. As decided in Savita Kapila 2020 (7) TMI 441 - DELHI HIGH COURT noted that a notice u/s 148 of the Act is a jurisdictional notice, and existence of a valid notice u/s 148 is a condition precedent for exercise of jurisdiction by the AO to assess or reassess u/s 147 of the Act. The want of valid notice affects the jurisdiction of the AO to proceed with the assessment and thus, affects the validity of the proceedings for assessment or reassessment. A notice issued under Section 148 of the Act against a dead person is invalid, unless the legal representative submits to the jurisdiction of the Assessing Officer without raising any objection. Consequently, in view of the above, a reopening notice under Section 148 of the Act, 1961 issued in the name of a deceased assessee is null and void. The impugned order is set-aside and the matter is remanded back to respondent No.1 with direction to decide the appeal afresh. The petitioner shall appear before the respondent No.1-National Faceless Appeal Centre (NFAC).

Summary

Issues:
1. Challenge to order under Section 250 of the Income Tax Act, 1961 passed against a deceased person.
2. Legal heirs' liability to discharge deceased assessee's liabilities.
3. Violation of principles of natural justice in not hearing legal heirs.
4. Validity of notices served on a deceased assessee.
5. Applicability of alternative statutory remedy in challenging orders.

Detailed Analysis:
The High Court of Madhya Pradesh heard a petition filed by the legal heirs of a deceased individual challenging an order passed under Section 250 of the Income Tax Act, 1961 by the National Faceless Appeal Centre (NFAC). The dispute pertained to the assessment year 2018-19, with the petition contending that the order was unsustainable as it was directed against a deceased person, supported by the submission of the death certificate. The respondents did not dispute this fact but argued that under Section 159 of the Act, legal heirs are obligated to discharge the deceased assessee's liabilities. However, the court emphasized that under the principle of natural justice, legal heirs must be heard if they are to discharge the liabilities. Notably, there was no evidence to show that notices were served on the appellant or returned unserved with a mention of the assessee's demise, indicating a failure to involve the legal heirs in the proceedings.

The court referred to a judgment by the High Court of Delhi in the case of Savita Kapila vs. Assistant Commissioner of Income Tax, highlighting that an alternative statutory remedy does not bar a writ petition in cases involving a violation of natural justice. Additionally, a judgment by the Gujarat High Court emphasized the importance of a valid notice under Section 148 of the Act for jurisdictional purposes, stating that a notice issued against a deceased assessee is invalid unless the legal representative submits to the jurisdiction without objection. Therefore, the court set aside the impugned order and remanded the matter back to the NFAC with directions to decide the appeal afresh, emphasizing the necessity for the petitioner to appear before the NFAC.

In conclusion, the court disposed of the petition in favor of the legal heirs, stressing the importance of adhering to principles of natural justice and ensuring proper involvement of legal representatives in cases involving deceased assessees to maintain the validity and fairness of the proceedings.