2016 (2) TMI 524 - HC - Income Tax

Reopening of assessment - notice addressed to a dead person - Held that - ITO took the stand that since the intimation of the death of Shri Inder Pal Singh Walia on 14th March 2015 was not received by her office therefore the notice was not issued on a dead person . To say the least this was a strange stand to take since the death certificate of Shri Inder Pal Singh Walia confirming the date of his death as 14th March 2015 is on record. With the Department having not been able to counter this basic fact, the stand taken by it that the notice was not issued to a dead person on 27th March 2015 was plainly untenable. Another stand taken in the letter dated 18th July 2015 is treating the endorsement made by the postal authority ( addressee expired ) as a refusal by the family members of the Assessee to accept the notice. This was again plainly erroneous. The notices were not addressed to the family members. Therefor, there was no occasion for them to refuse such notice. The postal authority had correctly noted that the person to whom the notice was addressed had indeed expired by then. In the present case where the initial notice under Section 147/148 of the Act was issued to a dead person. The Revenue was unable to issue a notice to the LR of the deceased Assessee under Section 147/148 of the Act within the period of limitation. That would be a plain illegality and not a mere irregularity.- Decided in favour of assessee

Issues:
1. Validity of notice under Section 148 of the Income Tax Act, 1961 issued to a deceased person.
2. Interpretation of Section 159 of the Income Tax Act regarding legal representatives' liability.
3. Legality of continuing proceedings under Section 147/148 against the legal representative of a deceased assessee.

Issue 1: Validity of Notice to Deceased Person
The High Court examined a case where a notice under Section 148 of the Income Tax Act, 1961 was issued to a deceased individual. The notice was returned unserved as the addressee had passed away before the notice was sent. Despite this, the Income Tax Officer proceeded with the matter, requesting details from the deceased's legal heirs. The Court found this action legally untenable, as the notice issued to a dead person was invalid. The Court emphasized that the notice should have been directed to the legal representatives of the deceased within the specified time limit.

Issue 2: Interpretation of Section 159 Regarding Legal Representatives' Liability
The Court analyzed Section 159 of the Income Tax Act, which outlines the liability of legal representatives of a deceased assessee. It stipulates that legal representatives are liable to pay any outstanding tax obligations of the deceased. The section also allows for proceedings against the legal representatives as if they were the assessee themselves. The Court clarified that in cases where the assessee has passed away, the department should proceed against the legal representatives as per the provisions of Section 159.

Issue 3: Legality of Continuing Proceedings Against Legal Representative
The Court scrutinized the legality of continuing proceedings under Section 147/148 against the legal representative of a deceased assessee. It noted that the department's insistence on pursuing the case against the legal representative was based on erroneous grounds. The Court referred to previous judgments to distinguish cases where notices were served before or after the demise of the assessee. Ultimately, the Court held that the Revenue's actions were misconceived and quashed the notice and all subsequent proceedings against the legal representative.

In conclusion, the High Court allowed the writ petition, ruling in favor of the petitioner, the legal representative of the deceased assessee. The Court highlighted the importance of adhering to legal procedures, especially concerning notices issued to deceased individuals and the liability of their legal representatives under the Income Tax Act.

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