REASSESSMENT ORDER PASSED IN NAME OF DECEASED ASSESSEE IS INVALID; MATTER REMANDED TO IMPLEAD LEGAL HEIRS

By | December 28, 2025
0 Comment

REASSESSMENT ORDER PASSED IN NAME OF DECEASED ASSESSEE IS INVALID; MATTER REMANDED TO IMPLEAD LEGAL HEIRS

ISSUE

Whether an assessment order passed under Section 147 in the name of a deceased assessee is sustainable in law when the notice under Section 148 was validly issued while the assessee was alive, but he died during the pendency of proceedings and the Assessing Officer (AO) was explicitly informed of the death before passing the final order.

FACTS

  • Assessment Year: 2015-16.

  • The Trigger: The AO initiated reassessment proceedings to tax undisclosed Capital Gains from a Joint Development Agreement (JDA).

  • Timeline of Events:

    • 31-03-2021: Notice under Section 148 was issued. The assessee was alive at this time.

    • 17-05-2021: The assessee passed away.

    • Post-Death: No response was filed to notices under Section 148/142(1).

    • 22-03-2022: A Show Cause Notice with a draft order was issued proposing a Best Judgment Assessment.

    • 25-03-2022: The Legal Heir informed the AO about the death (occurred on 17-05-2021) and made submissions on merits.

    • 28-03-2022: Despite this knowledge, the AO passed the final reassessment order in the name of the deceased assessee.

DECISION

  • Legal Principle (Section 159): The Tribunal reiterated the settled principle that no order can be passed against a dead person. Under Section 159, if an assessee dies during the pendency of proceedings, the proceedings must be continued against the Legal Representatives from the stage at which they stood on the date of death.

  • Fundamental Defect: Since the AO was aware of the death but failed to bring the legal representatives on record and proceeded to pass the order against the deceased, the order suffered from a fundamental defect.

  • Remedy: The proper course is not just to annul the proceedings (since the notice was valid), but to correct the procedural flaw.

  • Verdict: The assessment order was set aside, and the matter was remanded to the AO with a specific direction to frame the assessment afresh after formally impleading the legal heirs on record. [Matter Remanded]

KEY TAKEAWAYS

  • Notice vs. Order:

    • Scenario A: If the Section 148 Notice is issued to a person who is already dead, the entire proceeding is Void Ab Initio (cannot be cured).

    • Scenario B (Current Case): If the Notice is valid (alive), but the order is passed after death without impleading heirs, the order is Invalid/Defective, but the proceedings usually survive and are remanded to fix the defect.

  • Duty of Legal Heir: As a legal heir, your duty is to inform the AO immediately upon death and submit the Death Certificate. Once you do this, the burden shifts to the AO to update the records. If they don’t, the order is liable to be quashed or remanded.

IN THE ITAT VISAKHAPATNAM BENCH
Dasari Sai Annapurna
v.
Assistant Commissioner of Income-tax*
Ravish Sood, Judicial Member
and BALAKRISHNAN S., Accountant Member
IT Appeal No. 583 (Viz) OF 2025
[Assessment year 2015-16]
DECEMBER  5, 2025
M.V. Prasad, CA for the Appellant. Dr. Aparna Villuri, Sr. AR for the Respondent.
ORDER
Ravish Sood, Judicial Member. – The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, dated 08/07/2025, which in turn arises from the order passed by the Assessing Officer (for short, “AO”) under Section 147 r.w.s 144 r.w.s 144B of the Income-tax Act, 1961 (for short, “Act”), dated 28/03/2022, for the Assessment Year 2015-16. The assessee has assailed the impugned order of the CIT(Appeals) on the following grounds of appeal before us:
“1. The order passed by the Learned CIT (Appeals) is against the law as well as on the facts of the case.
2. On the facts and circumstances of the case, the Learned CIT(Appeals) erred in setting aside the assessment back to the file of the Assessing Officer.
3. The Learned CIT(Appeals) is legally incorrect by remitting back to the Assessing Officer without adjudicating the legal and factual grounds even though the submissions were made.
4. On the facts and circumstances of the case, the Learned CIT(A) is not justified in not considering the ground that the notice issued u/s.148 of the Act in the name of the deceased person is invalid and hence erred in completing the assessment on such invalid notice.
5. On the facts and circumstances of the case, the Assessment is void as the Assessment is made on the deceased person even though the Assessing Officer was intimated about the demise of the assessee by the legal heir of such deceased person on 22.03.2022 1.e. before completion of the assessment proceedings. Therefore the AO would have completed the assessment in the hands of the legal heir but not in the hands of the deceased person.
6. Without prejudice to the above grounds, On the facts and circumstances of the case, the Learned CIT(A) is not justified in not considering the ground that the Assessing officer erred in making the assessment without issue of notice u/s 143(2) as the assessee replied to treat the original return of Income as the return filed in response to notice u/s 148.
7. On the facts and circumstances of the case, the Learned CIT(A) is not justified in not considering the ground that The Learned Assessing Officer while disallowing the claim of exemption u/s.54F totally would have considered exemption on one flat u/s.54F of the I.T. Act.
8. The Appellant craves leave to add, amend, alter, vary and/or withdraw any or all the above grounds of appeal.”
2. Succinctly stated, the assessee had filed his return of income for AY 2015-16 on 30/09/2015, declaring an income of Rs. 17,27,510/-. Thereafter, the AO, based on the information shared with him by the ITO, Ward-2(4), Vijayawada, vide letter dated 31/03/2019, wherein he was informed that as per the information that had surfaced during the course of the assessment proceedings in the case of M/s. CSK Construction, the assessee, viz., Sri Dasari Gopikrishna, had entered into a Joint Development Agreement on 30/05/2014 with the said concern, vide Document No.3838/2014 for a consideration of Rs. 1,37,07,000/-. As per the information, the assessee had given the land admeasuring 505.5 sq yards at Kanur Village, Penamaluru Mandal, Krishna District, for development to M/s. CSK Construction, Vijayawada, vide Document No. 3838/2014. As per the information, the assessee would receive 43.33% of total flats (18 flats) – 9 flats admeasuring 6344 Sq. ft, while the developer would receive 56.67% of total flats (18 flats) – 10 flats admeasuring 7435.25 sq ft, after completion of the building.
3. The AO based on the aforesaid information observed that the assessee as per the provisions of section 45 r.w.s 2(47)(v) of the Act was though statutorily obligated to disclose “capital gains” on te aforesaid transaction during the subject year after taking into consideration the cost of acquisition of land vis-a-vis sale value of 8 flats that were to be received by him, but no such income was disclosed by him in his return of income. Accordingly, the AO for bringing to tax the capital gain on the transfer of the subject property that had escaped assessment, initiated proceedings under section 147 of the Act. Notice under section 148 of the Act, dated 31/03/2021, was duly served upon the assessee. As the assessee failed to comply with the said notice and did not file his return of income within the stipulated time period, therefore, the AO issued notices under section 142(1) of the Act, which too were not responded by the assessee. Also, the reference made by the AO to the designated Verification Unit (VU) to serve notices to the assessee in person remained futile.
4. Accordingly, the AO, based on the aforesaid facts, proposed to conclude the assessment to the best of his judgment under section 147 r.w.s 144 r.w.s 144B of the Act. Considering the merits of the case, a draft assessment order was served upon the assessee along with a show cause notice (SCN), dated 22/03/2022.
5. In reply, Smt. Dasari Sai Annapurna, Legal Heir of late Shri Dasari Gopikrishna Reddy, i.e., the assessee, vide her letter dated 25/03/2022 submitted before the AO that the assessee had passed away on 17/05/2021, i.e., after commencement of the assessment proceedings in March, 2021. On merits, it was submitted by her that though the Joint Development Agreement (JDA) was entered into and registered on 30/05/2014, but the construction was delayed and the project could be completed only in the year of 2018. Also, it was submitted by her that no flat in the subject property had been sold so far. It was further submitted by Smt. Dasari Sai Annapurna (supra) that, being a beneficial land owner, the assessee was entitled to raise a claim of exemption of the Long-term capital gain (LTCG) u/s 54F of the Act by treating the entire 8 apartments as one single unit. However, the AO did not find substance in the Ld. AR’s contention and vide his order passed under section 147 r.w.s 144 r.w.s 144B of the Act, dated 28/03/2022, declined the assessee’s claim of exemption under section 54F of the Act and made an addition of long-term capital gain of Rs. 72,25,753/-.
6. Aggrieved, the assessee carried the matter in appeal before the CIT(A) who in exercise of the powers vested with him under the “first proviso” of section 251(1)(a) of the Act, after taking cognizance of the fact that the assessment was framed by the AO under section 147 r.w.s 144 r.w.s 144B of the Act, dated 28/03/2022, wherein certain documents and submissions could not be produced by the assessee in the course of the assessment proceedings, set aside the matter to the file of the AO for making a fresh assessment after considering the documentary evidence as was placed before him and making such further enquiries as may be considered as he may deem fit. For the sake of clarity, the observations of the CIT(A) are culled out as under:
“6. I have considered the AO’s viewpoint contained in the Assessment Order, the grounds of appeal, statement of facts and submissions uploaded by the appellant.
6.1. During the appellant had failed to furnish documentary evidences in support of his claim and did not comply properly with the notices issued during assessment proceedings. However, while filing this appeal the appellant has made certain submissions against the additions so made. Certain documents have also been uploaded. It seems these submissions and documents were either not produced during assessment proceedings or the AO had not considered the same. Assessment was accordingly made u/s 147 r.w.s 144/144B of the Act in this case. In view of this, invoking the provisions of section 251(1)(a) of the Act, the assessment order dated 28/03/2022 passed under section 147 r.w.s. 144/144B of the Income Tax Act by the A.O., is thus set aside. In accordance with circumstances existing in the case, the matter is restored back to the Assessing Officer for making a fresh assessment in the light of the documentary evidences as may be placed before him and after making such inquiries as may be considered expedient by the AO. The appellant shall be given adequate opportunity to adduce evidences and offer explanation as may be considered expedient to defend its claim. Further, the appellant is also directed to cooperate with AO in completion of fresh assessment.
6.2 With these observations, the matter is remitted back to AO for fresh assessment in accordance with law.
7. In the result, the appeal of the assessee is allowed for statistical purposes.”
7. The assessee, being aggrieved with the order of the CIT(A), has carried the matter in appeal before us.
8. We have heard the Learned Authorised Representatives of both parties, perused the orders of the lower authorities and the material available on record.
9. Sri MV Prasad, Chartered Accountant, the Learned Authorised Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal, submitted that as the assessee, viz. Shri Dasari Gopikrishna Reddy had expired on 17/05/2021, therefore, the assessment order passed by the AO under section 147 r.w.s 144 r.w.s 144B of the Act, dated 28/03/2022, in his case, without impleading the legal heirs of the assessee (since deceased), cannot be sustained and is liable to be struck down. The Ld. AR to buttress his contention had drawn support from the judgment of the Hon’ble High Court of Madhya Pradesh in the case of Sitaram Raikwar v. National Faceless Appeal Centre  (Madhya Pradesh), wherein it was observed that where an assessment order was passed against the deceased assessee even when the legal heir of the assessee had filed the “death certificate” of the assessee, and no notices were tried to be served on legal heir, the impugned assessment order framed in the name of the deceased assessee was to be set aside. Also, the Ld. AR had pressed into service the judgment of the Hon’ble High Court of Bombay in the case of Amjad Ahmed Shaikh v. ITO (Bombay), wherein it was held that where the Assessing Officer despite being in knowledge of the demise of assessee had issued reassessment notice in the name of the deceased assessee, then the impugned notices and orders cannot not bind the legal representatives and were to be quashed and set aside. The Ld. AR had further relied upon the order of the ITAT, Mumbai Bench “D” in Motilal Hastimaji Bothra v. ITO (Mumbai – Trib.), wherein it was held that where the assessee had expired much before the passing of reassessment order and issuance of notices, and his legal heir was not brought on record and no notice was issued the name of the legal heir, then the reassessment order passed in the name of the assessee (since deceased) was non-est in law and hence was to be quashed. The Ld. AR by drawing support from the aforesaid judicial pronouncements, submitted that as in the present case, the AO despite being well in knowledge about the fact that the assessee had expired on 17/05/2021 had failed to implead his legal heirs on record and passed the assessment order in his name, viz., Gopikrishna Reddy Dasari, therefore, the order so passed by him under section 147 r.w.s 144 r.w.s 144B of the Act, dated 28/03/2022 cannot be sustained and is liable to be struck down on the said count itself.
10. Per contra, Dr. Aparna Villuri, the Learned Senior Departmental Representative (for short, “Ld. Sr. DR”), relied upon the orders of the lower authorities. The Ld. Sr. DR submitted that as the assessee had expired after the notice under section 148 of the Act, dated 31/03/2021, was issued, therefore no infirmity arises from the validity of the jurisdiction that was framed by the AO for initiating the reassessment proceedings at the relevant point of time, i.e., during the lifetime of the assessee.
11. We have heard the Learned Authorised Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions.
12. At the threshold, we may herein observe that the judgment of the Hon’ble High Court of Madhya Pradesh in the case of Sitaram Raikwar (supra) as had been pressed into service by the Ld. AR, being distinguishable on facts, will not assist his case. Although, in the case before the Hon’ble High Court the assessment order was passed in the name of the deceased assessee, despite the legal heirs of the assessee had filed with the AO a copy of the “death certificate” of the assessee (since deceased) and brought the fact of his death to his knowledge, but notice under section 148 of the Act was issued in the name of the assessee (since deceased). Unlike the facts involved in the aforementioned case, in the case before us, it is a fact discernible from the record that the notice under section 148 of the Act, dated 31/03/2021, was served upon the assessee during his lifetime.
13. Apropos, the judgment of the Hon’ble High Court of Bombay in the case of Amjad Ahmed Shaikh (supra), we find that in the said case as the AO, despite being well aware about the demise of the assessee, had issued the reassessment notice in the name of the deceased assessee, despite being well aware about the demise of the assessee, therefore, it was in the backdrop of the said fact that the Hon’ble High Court had observed that the impugned notices and orders made based on the aforesaid notice in the name of the assessee (since deceased) could not be sustained and was liable to be quashed. Once again, as in the case of the present assessee before us, the notice under section 148 of the Act, dated 31/03/2021, was issued and served upon the assessee during his lifetime, therefore, the same renders the present case distinguishable on facts as in comparison to the aforesaid judicial pronouncement.
14. Coming to the order of the ITAT, Mumbai Bench “D” in the case of Motilal Hastimaji Bothra (supra), as the assessee had expired much before the passing of the reassessment order and issuance of notices, the Tribunal had observed that as no notice was issued in the name of the legal heir, therefore, the re-assessment order passed in the name of the assessee (since deceased) was non-est in law and hence was liable to be quashed.
15. We have given thought consideration to the facts which are involved in the present case, i.e., the assessee was alive at the time when the notice under section 148 of the Act, dated 31/03/2021, was issued, but had, during the pendency of the assessment proceedings expired on 17/05/2021, which fact was brought to the notice of the AO by Smt. Dasari Sai Annapurna, i.e. Legal Heir of the assessee (since deceased) vide her letter dated 25/03/2022.
16. We are of the view that, as per the settled principle of law, no order can be passed against a dead person, and any proceedings regarding the deceased assessee shall be continued against the legal representatives from the stage at which it stood on the date of the death of the deceased. Our aforesaid view is supported by section 159 of the Act, which reads as under:
“159. (1) Where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased.
(2) For the purpose of making an assessment (including an assessment, reassessment or recomputation under section-147) of the income of the deceased and for the purpose of levying any sum in the hands of the legal representative in accordance with the provisions of sub-section (1),—
(a) any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased;
(b) any proceeding which could have been taken against the deceased if he had survived, may be taken against the legal representative; and
(c) all the provisions of this Act shall apply accordingly.
(3) The legal representative of the deceased shall, for the purposes of this Act, be deemed to be an assessee.
(4) Every legal representative shall be personally liable for any tax payable by him in his capacity as legal representative if, while his liability for tax remains undischarged, he creates a charge on or disposes of or parts with any assets of the estate of the deceased, which are in, or may come into, his possession, but such liability shall be limited to the value of the asset so charged, disposed of or parted with.
(5) The provisions of sub-section (2) of section-161, section-162 and section-167, shall, so far as may be and to the extent to which they are not inconsistent with the provisions of this section, apply in relation to a legal representative.
(6) The liability of a legal representative under this section shall, subject to the provisions of sub-section (4) and sub-section (5), be limited to the extent to which the estate is capable of meeting the liability.”
In a case where an assessee dies pending any proceedings before the department, the provisions of Section 159 of the Act gets attracted. Accordingly, it is incumbent on the department to ensure compliance with Section 159 before any order is passed. An analogy can be drawn from the judgment of the Hon’ble High Court of Madhya Pradesh in the case of Commissioner of Income Tax v. Dalumal Shyamumal  ITR 62 (MP). The Hon’ble High Court had observed that, as the A.O. had framed the assessment in the name of the assessee (since deceased), therefore, the assessment so framed was a nullity. However, the Hon’ble High Court was of the view that once the assessment order was held to be a nullity, then the Tribunal should have given a consequential direction as contemplated u/s. 159 of the Act to the A.O. so that a proper assessment order could be passed. For the sake of clarity, the observations of the Hon’ble High Court are culled out as under:
“In our opinion, the Tribunal while deciding the appeal ought to have taken note of section 159 ibid and should have accordingly, remanded the case to assessing officer for ensuring compliance of section 159 for passing appropriate orders of assessment after due notice to legal representative of deceased assessee. Indeed, once the assessment order is held to be a nullity then in such event consequential direction as contemplated under section 159 of the Act should have been given to assessing officer so that proper assessment order could be passed.”
Based on our aforesaid observations and the judgment of the Hon’ble High Court of Madhya Pradesh in the case of Dalumal Shyamumal (supra), we are of the view that as the AO, NFAC, Delhi had passed the assessment order under section 147 r.w.s 144 r.w.s 144B of the Act, dated 28/03/2022 in the name of the deceased assessee (expired on 17/05/2021), therefore, the order so passed by him suffers from a fundamental defect and cannot be sustained. We, thus, hold the order passed by the AO under section 147 r.w.s 144 r.w.s 144B of the Act, dated 28/03/2022, as a nullity and remand the matter to his file with a direction to frame the assessment afresh after impleading the legal heirs of the deceased assessee on record. Needless to say, the AO shall afford a reasonable opportunity of being heard to the legal heirs of the assessee (since deceased) in the course of the de-novo assessment proceedings.
17. In the result, the appeal of the assessee is allowed for statistical purposes in terms of our aforesaid observations.