2025 (1) TMI 510 - HC - Income Tax

Reopening of assessment against dead person/ assessee - respondent directed the deceased assessee to reassess his income and further deemed financial transactions as his taxable income - applicability of Section 159 of the Income Tax Act concerning proceedings against legal representatives of a deceased assessee - HELD THAT - Issuance of a notice under section 148 of the Act is the foundation for reopening of an assessment. Consequently, the sine qua non for acquiring jurisdiction to reopen an assessment is that such notice should be issued in the name of the correct person. This requirement of issuing notice to a correct person and not to a dead person is not merely a procedural requirement but is a condition precedent to the impugned notice being valid in law. See Sumit Balkrishna Gupta 2019 (2) TMI 1209 - BOMBAY HIGH COURT As no notice was issued to the legal heir of the deceased under Section 159(2)(b) of the Act, despite the respondent being informed of the death. Section 159 of the Act is applicable when proceedings are initiated and pending against an assessee during their lifetime, and the legal representative assumes responsibility after the assessee's death. This was not the factual scenario in the present case; therefore, Section 159 of the Act is not applicable here. We may also refer to decision of this Court in Dharamraj 2022 (1) TMI 844 - DELHI HIGH COURT wherein also the assessee had died much prior to the issuance of the notice under Section 148 of the Act, and the issuance of such a notice was held to be unsustainable in law, inter-alia holding that even section 292B of the Act does not apply in such a situation. This writ petition is allowed, and resultantly, the impugned notice u/s 148A(b) is quashed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The primary legal issue in this case was whether the issuance of a notice under Section 148A(b) of the Income Tax Act, 1961, to a deceased assessee was valid and whether subsequent proceedings based on such a notice were sustainable in law. Additionally, the applicability of Section 159 of the Income Tax Act concerning proceedings against legal representatives of a deceased assessee was also considered.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Notice Issued to a Deceased Assessee

Relevant Legal Framework and Precedents: The legal framework involved Section 148A(b) and Section 148 of the Income Tax Act, which pertain to the issuance of notices for reassessment of income. The court referred to precedents such as Savita Kapila v. Assistant Commissioner of Income Tax and Dharamraj v. Income Tax Officer to establish the principles governing the issuance of notices to deceased individuals.

Court's Interpretation and Reasoning: The court held that the issuance of a notice under Section 148A(b) to a deceased person was inherently flawed. It emphasized that the jurisdictional requirement under Section 148 necessitates that the notice be served to a "correct person" and not to a deceased individual. The court reiterated that such a notice is void ab initio and cannot confer jurisdiction for reassessment.

Key Evidence and Findings: The petitioner, as the legal heir, informed the tax authorities of the assessee's death, providing a death certificate. Despite this, the authorities proceeded with issuing the notice, which was deemed invalid by the court.

Application of Law to Facts: The court applied the principles from the cited precedents, concluding that the notice issued to the deceased was without jurisdiction and, therefore, invalid. The court emphasized that the legal requirement was not merely procedural but a condition precedent for valid jurisdiction.

Treatment of Competing Arguments: The respondent argued that Section 159 of the Act allowed proceedings against the legal representative. However, the court clarified that Section 159 applies when proceedings are initiated during the lifetime of the assessee, which was not the case here.

Conclusions: The court concluded that the notice issued under Section 148A(b) was invalid, and all subsequent proceedings based on it were unsustainable.

Issue 2: Applicability of Section 159 of the Income Tax Act

Relevant Legal Framework and Precedents: Section 159 of the Income Tax Act deals with the liability of legal representatives for the income tax obligations of a deceased person. The court examined whether this section could cure the defect of issuing a notice to a deceased person.

Court's Interpretation and Reasoning: The court interpreted that Section 159 is applicable only when proceedings are initiated against an assessee during their lifetime and continued against the legal representative after their death. Since no such proceedings were initiated against the deceased assessee in this case, Section 159 was deemed inapplicable.

Key Evidence and Findings: The court found no evidence of proceedings initiated against the deceased during his lifetime. The notice was issued posthumously, which did not satisfy the requirements of Section 159.

Application of Law to Facts: The court applied the legal principles and found that the issuance of the notice to the deceased could not be rectified by Section 159, as the section was not applicable to the factual scenario.

Treatment of Competing Arguments: The respondent's reliance on Section 159 was dismissed by the court, which maintained that the section did not apply to notices issued after the death of the assessee.

Conclusions: The court concluded that Section 159 could not be invoked to validate the notice, and the proceedings were quashed.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: The court emphasized, "The sine qua non for acquiring jurisdiction to reopen an assessment is that notice under section 148 should be issued to a correct person and not to a dead person."

Core Principles Established: The court established that notices for reassessment must be issued to the correct person, and any notice issued to a deceased person is void ab initio. Furthermore, Section 159 does not apply to posthumous notices.

Final Determinations on Each Issue: The court quashed the notice under Section 148A(b) and all consequential proceedings. It held that the notice was issued without jurisdiction and could not be sustained in law.

In conclusion, the court allowed the writ petition, quashing the impugned notice and all subsequent proceedings, thereby upholding the legal principles regarding jurisdictional requirements for issuing reassessment notices under the Income Tax Act.