2016 (10) TMI 691 - AT - Income Tax

Failure to Serve notice under section 143(2)to the legal heir - Held that - As per the order of the Hon ble Supreme Court in the case of CIT & Another vs. M/s Hotel Blue Moon (2010 (2) TMI 1 - SUPREME COURT OF INDIA ) before completion of the assessment under section 143(3) of the Act the assessee has to be served with notice under section 143(2) of the Act, which is mandatory and failure to do so would vitiate the entire assessment proceedings completed under section 143(3) of the Act. We take note that despite the information given by the son of Shri Ramesh Chand Bajpai that his father i.e. Shri Ramesh Chand Bajpai was no more, still the AO issued notice under section 142(3) and 143(2) of the Act in the name of Shri Ramesh Chand Bajpai and not to the legal heir as per section 159 of the Act. The ld. CIT(A) has rightly held that failure of the AO to issue and serve notice under section 143(2) of the Act to the legal heir in accordance with the law could not be cured under section 292B and 292BB of the Act is also correct and therefore we are not inclined to interfere in the order passed by the ld. CIT(A) and we uphold the same.

Summary

Issues:
1. Failure to issue notice under section 143(2) of the Income-tax Act, 1961 to the legal heir of the deceased assessee.
2. Validity of the assessment completed without serving notice under section 143(2) to the legal heir.

Issue 1: Failure to issue notice under section 143(2) to the legal heir

The main grievance of the Revenue in this case was against the order of the ld. CIT(A) annulling the assessment due to the non-issuance of notice 143(2) of the Income-tax Act, 1961 to the legal heir of the deceased assessee. The search operation under section 132 of the Act was conducted at the premises of the deceased assessee, who had passed away before the statutory notices were served. Despite the legal heir informing the Assessing Officer of the demise of the assessee, notices under section 143(2) were repeatedly issued in the name of the deceased, leading to the completion of the assessment in the deceased's name.

Issue 2: Validity of the assessment completed without serving notice under section 143(2) to the legal heir

The ld. CIT(A) upheld the contention of the assessee regarding the non-issuance and service of notice under section 143(2) to the legal heir, leading to the annulment of the assessment. The legislative history was examined, citing the provisions of section 159 of the Act that deal with situations where the assessee dies during assessment proceedings. The legal representative, as per section 159, becomes liable to pay any sum the deceased would have been liable to pay, and the assessment is to be made as if the legal representative were the assessee. The Hon'ble Supreme Court's ruling in CIT & Another vs. M/s Hotel Blue Moon emphasized the mandatory nature of serving notice under section 143(2) before completing assessment under section 143(3). The failure of the Assessing Officer to issue and serve notice to the legal heir, as per section 159, could not be cured under other sections of the Act, leading to the dismissal of the Revenue's appeal.

In conclusion, the Appellate Tribunal upheld the decision of the ld. CIT(A) to annul the assessment due to the failure to issue notice under section 143(2) to the legal heir of the deceased assessee. The Tribunal emphasized the importance of following the statutory provisions, especially in cases where the assessee has passed away during the assessment proceedings, ensuring that the legal representative is duly informed and involved in the assessment process.