2018 (4) TMI 1209 - AT - Income Tax

Reopening of assessee - notice in the name of deceased person - Held that - The assessee is not harping upon any irregularity in the notice, rather he is challenging the very jurisdiction over the assessee, on account of issuance of notice in the name of a deceased person, and further, even after coming to know about status of the assessee as a deceased, passing of an assessment order in the name of deceased person would not be sustainable. Therefore allow this ground of appeal and quash the assessment order. - Decided in favour of assessee.

Issues Involved:
1. Validity of the assessment order passed under section 144 read with section 147 of the Income Tax Act.
2. Service of notice under section 148 on a deceased person.
3. Legal implications of issuing and serving notice on a deceased person.
4. Applicability of section 292B in cases of procedural lapses.
5. Jurisdiction over the assessee in the context of the deceased person's status.

Issue-Wise Detailed Analysis:

1. Validity of the Assessment Order:
The assessee contested the validity of the assessment order passed under section 144 read with section 147, arguing that the notice under section 148 was not served upon the legal heirs of the deceased, Maganbhai Nagjibhai Desai. The assessment order was issued in the name of the deceased person, which the assessee claimed rendered the order unsustainable in the eyes of the law.

2. Service of Notice Under Section 148:
The facts revealed that the Assessing Officer (AO) had information about cash deposits of ?10.45 lakhs in the assessee's bank account during the financial year 2007-08. The AO issued a notice under section 148 on 25.03.2015, allegedly served on 26.03.2015. However, the assessee argued that the notice was served on the deceased person and not on the legal heirs, despite the AO being aware of the death of Maganbhai Nagjibhai Desai on 26.12.2008.

3. Legal Implications of Issuing and Serving Notice on a Deceased Person:
The Tribunal examined whether an assessment order can be sustained if it was passed in the name of a deceased person. Citing previous cases such as Hashmukh K. Barot and Sikander Lal Jain, the Tribunal emphasized that a notice issued to a deceased person is invalid, and any subsequent assessment order based on such a notice is void. The Tribunal highlighted that section 159 of the Income Tax Act provides a mechanism to address the tax liabilities of a deceased person through their legal representatives, but this does not authorize the AO to issue notices to a deceased individual.

4. Applicability of Section 292B in Cases of Procedural Lapses:
The Department's Representative (DR) argued that section 292B could rectify such lapses, referring to the case of Sky Light Hospitality LLP vs. ACIT, where the Delhi High Court held that minor errors in the notice, such as addressing it to a non-existent entity, could be overlooked if the intent was clear. However, the Tribunal distinguished this case, noting that the issue at hand was not a mere procedural lapse but a fundamental jurisdictional error, as the notice was issued to a deceased person.

5. Jurisdiction Over the Assessee in the Context of the Deceased Person's Status:
The Tribunal concluded that issuing a notice to a deceased person and subsequently passing an assessment order in their name is a jurisdictional defect that cannot be cured by section 292B. The Tribunal reiterated that the AO must issue notices to the legal representatives of the deceased, as they are deemed to be the assessee under section 2(7) of the Income Tax Act.

Conclusion:
The Tribunal allowed the appeal, quashing the assessment order on the grounds that it was passed in the name of a deceased person, which is a fundamental jurisdictional defect. Consequently, the Tribunal did not address the other issues on merit. The judgment underscores the importance of proper service of notices and adherence to legal procedures in tax assessments involving deceased individuals.

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