2021 (11) TMI 148 - HC - Income Tax

Reopening of assessment u/s 147 - notice u/s 142(1) came to be issued in the name of deceased person - Whether notice issued to the deceased assessee on 28.03.2018 within the time prescribed could save the reassessment order passed in the name of the legal representatives who are the petitioners herein? - HELD THAT - In the present case while the notice at its inception to Kurkal Gopal Shetty who is dead is invalid insofar as any claim by the department as against the dead assessee should be only by issuance of notice to the legal representatives in terms of Section 159(2)(b) and except this procedure, there can be no other procedure envisaged. This would flow from the premise that any act which is required to be done in a particular manner must be done in that manner or not at all which is a settled legal proposition. In the present case, it also ought to be noted that though notice was issued to the dead assessee, the contention that as there is no abatement, and proceedings must be permitted to be continued against the legal representatives, is an argument that is liable to be rejected as the question of continuation of proceedings of an assessment against the legal representatives is only in the scenario as contemplated under Section 159(2)(a) i.e., where the assessee is alive at the initiation of proceedings and has subsequently died. In the case on hand, the assessee having died on 11.11.2014, claims or proceedings, if any against the deceased assessee ought to be under Section 159(2)(b). As Section 159 does not permit of any ambiguity, any elasticity to the time period fixed under Section 149 and the manner of initiation of proceedings against the deceased assessee as provided under Section 159(2)(b) is impermissible. Assessment proceedings initiated against Kurkal Gopal Shetty under Section 148 is sought to be continued and concluded as against the legal representatives not by way of any fresh notice to the legal representatives under Section 148 but by way of notice to furnish return under Section 142 which again relates to a subsequent stage of reassessment proceedings. The judgment in the case of Alamelu Veerappan 2018 (6) TMI 760 - MADRAS HIGH COURT provides that notice issued to the legal representatives beyond the period of limitation prescribed is without jurisdiction and unenforceable in law. The judgment in the case of Rajendra Kumar Sehgal 2018 (12) TMI 697 - DELHI HIGH COURT is also on the same lines. The other circumstance that is required to be noticed is that the legal representatives in the present case were not issued with any notice regarding proceedings under Section 148 and it is only under Section 142 notice was issued to the legal representatives which fact is also taken note of while refusing to reserve liberty to the authority by remanding the matter to the Assessing Authority to initiate proceedings. It must also be noted that exercise of power under Article 226 is not made out in the present case as granting of any relief would be contrary to the statutory period available to initiate proceedings against the legal representatives in terms of Section 159(2)(b) read with Section 149(1)(b) as discussed above. The position of law regarding invalidity of the notice vitiating the proceedings pursuant thereto being settled as noticed from the judgment in the case of Kurban Hussain 1971 (9) TMI 9 - SUPREME COURT and in light of the discussions made above and in the absence of any notice under Section 148 in terms of Section 149(1)(b) of the Act, the assessment order passed in the names of the petitioners enclosed at Annexure-E for the assessment year 2011-12 passed under Section 144 read with Section 147 of the Act is set aside. - Decided in favour of assessee.

Issues Involved:
1. Validity of notice issued under Section 148 of the Income Tax Act, 1961.
2. Validity of notices issued under Section 142(1) of the Income Tax Act, 1961.
3. Validity of reassessment order passed under Section 144 read with Section 147.
4. Validity of demand and recovery notices issued under Section 156.
5. Validity of show cause notice issued under Section 274 read with Section 271F.
6. Applicability of Section 159 of the Income Tax Act, 1961 regarding legal representatives.
7. Applicability of Section 292B of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of Notice Issued Under Section 148:
The notice under Section 148 was issued on 28.03.2018 for the assessment year 2011-12, stating that the income chargeable to tax had escaped assessment. However, the notice was issued to the deceased Kurkal Gopal Shetty, who had died on 11.11.2014. The court noted that the proceedings under Section 148 should have been initiated against the legal representatives of the deceased as per Section 159(2)(b). Since the notice was issued to a dead person, it was deemed invalid.

2. Validity of Notices Issued Under Section 142(1):
Subsequent notices under Section 142(1) were issued to the deceased and later to the legal representatives. The court found that the initial notice to the deceased was invalid and that the subsequent notices to the legal representatives were not in compliance with Section 159(2)(b), which requires a notice under Section 148 to be issued within the prescribed time frame. As such, these notices were also deemed invalid.

3. Validity of Reassessment Order Passed Under Section 144 Read with Section 147:
The reassessment order was issued based on the invalid notices under Sections 148 and 142(1). The court held that since the initiation of reassessment proceedings was invalid, the reassessment order passed under Section 144 read with Section 147 was also invalid and set it aside.

4. Validity of Demand and Recovery Notices Issued Under Section 156:
The demand and recovery notices issued under Section 156 were consequential to the invalid reassessment order. Since the reassessment order was set aside, these notices were also set aside by the court.

5. Validity of Show Cause Notice Issued Under Section 274 Read with Section 271F:
The show cause notice issued under Section 274 read with Section 271F was also consequential to the invalid reassessment order. Therefore, the court set aside this notice as well.

6. Applicability of Section 159 Regarding Legal Representatives:
Section 159(2)(b) allows proceedings to be initiated against the legal representatives of a deceased person. The court emphasized that any proceedings against a deceased person must be initiated against the legal representatives within the time prescribed under Section 149(1)(b). In this case, the proceedings were not initiated correctly, rendering them invalid.

7. Applicability of Section 292B:
The revenue argued that the defect in the notice should be saved under Section 292B, which allows for the rectification of mistakes in proceedings. However, the court held that Section 292B could not save a notice issued to a dead person, as the proper procedure under Section 159(2)(b) was not followed. Therefore, Section 292B was not applicable in this case.

Conclusion:
The court concluded that the notices issued under Sections 148 and 142(1) were invalid as they were not issued in compliance with Section 159(2)(b) and within the prescribed time frame. Consequently, the reassessment order, demand and recovery notices, and the show cause notice were all set aside. The writ petition was disposed of accordingly.

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