Reassessment Notice Issued to Deceased Assessee Quashed; Department Allowed to Proceed Against Legal Heir

Issue: Whether a reassessment notice issued under Section 148 of the Income-tax Act, 1961, is valid when it is addressed to a deceased assessee, despite the department being informed about the death.

Facts:

The assessee’s father passed away on April 29, 2021.
The assessee informed the tax department about the death during assessment proceedings under Section 142(1).
However, the department did not take any action to implead the assessee as the legal representative, as required under Section 159(2)(a).
A reassessment notice under Section 148 was issued in the name of the deceased assessee.

Decision:

The court held that the reassessment notice issued in the name of the deceased assessee was not valid.
Section 159(2)(a) mandates that in case of the assessee’s death, the legal representative should be impleaded in the proceedings.
The department’s failure to implead the assessee as the legal representative invalidated the notice.
However, the court allowed the department to proceed against the assessee in accordance with the law, implying that a fresh notice could be issued to the legal heir.

Key Takeaways:

This case highlights the importance of updating records and addressing notices to the correct legal entity, especially in cases of the assessee’s death.
Tax authorities must ensure that legal representatives are properly impleaded in the proceedings as per Section 159(2)(a) to avoid invalidating notices and orders.
This decision protects the interests of both the legal heir and the revenue by allowing the department to proceed with the reassessment after rectifying the procedural error.

HIGH COURT OF MADHYA PRADESH

Rohit Baveja

Principal Commissioner of Income-tax

SUSHRUT ARVIND DHARMADHIKARI and AVANINDRA KUMAR SINGH, JJ.

WRIT PETITION No. 35859 of 2024

JANUARY 15, 2025

Sapan Usrethe, learned counsel for the Petitioner. Siddharth Sharma, learned counsel for the Respondent.

ORDER

Sushrut Arvind Dharmadhikari, J.- With the consent of parties, the matter is heard finally.

2. This petition under Article 226 of the Constitution of India has been filed by the petitioner assailing the legality, validity and propriety of impugned orders dated 24.4.2023, annexure P/1, 20.3.2024, annexure P/2, 21.3.2024, annexure P/3, 23.3.2024, annexure P/4 passed by respondent no.3 and 6.7.2022, annexure P/10 passed by respondent no.2 whereby the respondents have passed the assessment orders against dead person in pursuance to notice issued under section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).

3. Learned counsel for the petitioner submitted that the petitioner had informed with regard to the death of his father during the assessment proceedings in compliance of notice under section 142(1) of the Act. Learned counsel for the petitioner contended that his father died on 29.4.2021, therefore, a fresh notice ought to have been issued in the name of the petitioner (son), since no proceedings under section 142(1) can continue against a dead person. The petitioner had timely informed the Department regarding the death of his father. In spite of the aforesaid, no action was taken to implead him as LRs, as envisaged under section 159(2)(a) of the Act. Learned counsel for the petitioner contended that the effect of section 159 was not considered in the order. It is further contended that similar issue arising out of the issuance of notice under section 142(1) is no more res integra and the same has been dealt with by a Division Bench of this Court at Indore in the case of Meet Lalwani, L/h of late Mrs.Amita Lalwani v. Income Tax Officer, (2024) 337 CTR (MP) 602, wherein it is held that notice issued in the name of dead person is unenforceable in the eyes of law.

4. Per contra, learned counsel for the Revenue opposed the prayer and contended that the judgment in the case of Meet Lalwani (supra) is different and cannot be applied in the facts and circumstances of the present case. The petition deserves to be dismissed on this ground alone.

5. Heard the learned counsel for the parties.

6. Taking into consideration the fact that this Court has already taken a decision in the case of Meet Lalwani (supra) wherein it is held that issuance of notice under Section 148 of the Act in the name of deceased cannot be sustained. The issue of notice under Section 148 of the Act is a foundation for reopening of assessment. The sine qua non for acquiring jurisdiction to reopen an assessment is that such notice should be issued in the name of correct person meaning thereby the same should not have been issued in the name of dead person. Admittedly, the provisions of Section 159 A of the Act of 1961 has not been taken into consideration in the case of Meet Lalwani (supra).

7. In view of the fact that the issue involved in the present petition being covered by the judgment of Meet Lalwani (supra), this Court has no hesitation in quashing the impugned orders dated 24.4.2023, annexure P/1, 20.3.2024, annexure P/2, 21.3.2024, annexure P/3, 23.3.2024, annexure P/4 passed by respondent no.3 and 6.7.2022, annexure P/10 passed by respondent no.2.

8. Accordingly, the impugned notices dated 24.4.2023, annexure P/1, 20.3.2024, annexure P/2, 21.3.2024, annexure P/3, 23.3.2024, annexure P/4 passed by respondent no.3 and 6.7.2022, annexure P/10 passed by respondent no.2 are hereby quashed and set aside. However, looking to the fact that the effect of Section 159 of the Act has not been considered in the case of Meet Lalwani (supra), the respondents/Department would be at liberty to proceed against the petitioner in accordance with law.

9. This petition is allowed to the extent indicated herein above.

10. No order as to cost.