2024 (11) TMI 501 - HC - Income Tax

Revision u/s 263 against dead person - petitioner received two notices u/s 226 (3) attaching two bank accounts of the petitioner with respect to the demands raised consequent to the assessment order - HELD THAT - When the original assessee passed away on 11.07.2013 and after his demise, he was declared as an insolvent by order and in which the petitioner was also one of the legal heirs and that the Official Assignee has taken charge of the entire estate of the original assessee, i.e. the deceased/petitioner s husband under the provisions of the Presidency Towns Insolvency Act, 1909, issuing notices and assessment orders one after another to the petitioner in the name of the dead person, who is the original assessee, by the respondents are not sustainable. If at all there is any other claim against the original assessee, the respondents ought to have proceeded against the Official Assignee as per the relevant provisions since the original assessee was already declared as an Insolvent by this Court (Insolvency Court). As respondents submitted that some portion of the assets have also been transferred or mutated in the name of the petitioner or the other legal heirs and that notices were also issued against the other legal heirs of the deceased. If that is the case of the respondents, the right course available to the respondents is to file a petition before this Court (Insolvency Court) to set aside the same and seek for a direction against the Official Assignee to take over the assets in accordance with law. Once the assets were taken over by the Official Assignee and the assessee was declared as an insolvent, the respondents can very well approach the Official Assignee for seeking their remedy. It is upto the Official Assignee to consider the claims and distribute the proceeds in accordance with law. Accordingly, the impugned orders passed by the respondents are quashed and these writ petitions are allowed.

Summary

Issues:
1. Jurisdiction of invoking Section 263 of the Income Tax Act in the case of a deceased person.
2. Legality of assessment orders passed under Section 147 r/w Section 263 r/w Section 144 of the Income Tax Act in the name of a deceased person.
3. Validity of bank account attachment notices issued under Section 226 (3) of the Income Tax Act to the legal heirs of a deceased person.
4. Applicability of the Presidency Towns Insolvency Act, 1909 in cases involving deceased insolvent individuals.

Detailed Analysis:

Issue 1:
The petitioner, wife of a deceased individual, challenged the invocation of Section 263 of the Income Tax Act against her deceased husband. The High Court noted that the initial notice under Section 148 was issued to the deceased, and subsequent proceedings under Section 263 were initiated without considering the death of the assessee. The Court held that such proceedings against a deceased person lacked jurisdiction, leading to the quashing of the orders passed under Section 263.

Issue 2:
Further, the assessment order passed under Section 147 r/w Section 263 r/w Section 144 adding a substantial amount to the deceased husband's income was also challenged. The Court found that since the invocation of Section 263 itself was without jurisdiction due to the deceased status of the assessee, the assessment order in the deceased husband's name was unsustainable. Consequently, the Court allowed the petition seeking to quash the assessment order dated 30.03.2023.

Issue 3:
The petitioner received bank account attachment notices under Section 226 (3) of the Act for demands raised post the assessment order. The petitioner contended that as the deceased husband was declared insolvent and his assets taken over by the Official Assignee, the notices against her were invalid. The Court agreed, emphasizing that all proceedings should have been initiated against the Official Assignee, not the petitioner as a legal heir. The Court quashed the bank account attachment notices in favor of the petitioner.

Issue 4:
Regarding the applicability of the Presidency Towns Insolvency Act, 1909, the Court highlighted that once an individual is declared insolvent and assets taken over by the Official Assignee, proceedings should be directed towards the Official Assignee, not the legal heirs. The Court emphasized that the respondents should approach the Official Assignee for any claims against the assets and distribution of proceeds in accordance with the law.

In conclusion, the High Court quashed the impugned orders passed against the deceased individual and allowed the writ petitions filed by the petitioner. The Court emphasized the need for proper jurisdiction and legal procedures in cases involving deceased individuals and their assets, directing the respondents to follow the appropriate legal course in such matters.