Income tax notice issued in the name of dead person is illegal, Revenue can nor plead ignorance – HC

Income tax notice issued in the name of dead person is illegal. Revenue can nor plead ignorance as there is no provision requiting legal representative to to intimate death or cancel PAN– High Court

The instant Writ Petition was filed by the appellant assessee seeking quashing of the notice issued in the name of  a dead person under section 148 of the Income Tax Act, 1961 (the Act) as illegal and forbear the Assessing Officer (AO) from conducting any proceedings for reassessment.

ABCAUS Case Law Citation:
ABCAUS 2381 (2018) 06 HC

Important Case Laws Cited/relied upon by the parties:
CIT Vs. Amarchand N.Shroff [reported in AIR 1963 SC 1448
Shaikh Abdul Kadar Vs. ITO AIR 1959 M.P. 101
Mrs. Kesar Devi Vs. CIT [2010 (321) ITR 341(Raj.)
Vipin Walia Vs. ITO [reported in (2016) 382 ITR 19]
Rasid Lala Vs. ITO [Special Leave Application No.18987 of 2016 dated 29.11.2016]
Sky Light Hospitality LLP Vs. AC (CT) [reported in (2018) 90 Taxmann.Com 413]
Spice Entertainment Ltd. Vs. CST [reported in (2011) SCC Online Del. 3210]

The petitioner was the wife of the of the assessee who had died. The petitioner received a notice u/s 148 of the Act addressed to her late husband stating that certain income of her late husband had escaped assessment and that the AO proposed to re-assess the income for the relevant assessment year.

The petitioner sent a reply pointing out that her husband had died and enclosed a copy of the death certificate to establish the said fact.  As claimed by the petitioner she was a home maker and was living with the support of her two daughters along with mother in law.

The Petitioner alleged that she received frequent telephone calls from the Income Tax Office calling upon her to appear before the AO in respect of the said notice issued in the name of her late husband under Section 148 of the Act. According to the petitioner, she was repeatedly harassed by the telephone calls in spite of her clarification. Though he had specifically stated that she was not aware of any of her husband’s business activities, she was directed to appear for an enquiry.

On her visit to the office of the AO, the petitioner was asked to submit all the documents pertaining to her husband’s assessment including the details of bank account statements. The petitioner, in turn, informed the officer that she did not have any of the documents, which were sought for.

In this background, the petitioner had filed the instant writ petition challenging the impugned notice.

It was submitted that the impugned notice was void and unenforceable in law, as it had been issued to a dead person. It was claimed that the defect in issuing the notice in the name of a dead person goes to the root of the exercise of jurisdiction under Section 147 of the Act and that the notice under Section 148 of the Act was , therefore, a nullity.

It was pointed out that income tax assessment can not be made in the name of a dead person and that the observations made by the Hon’ble Supreme Court will equally apply to the notices issued under Section 148 of the Act. It was also contended that the wife of the deceased to whom, the notice under Section 148 of the Act was issued, cannot be made liable to participate in the re-assessment proceedings.

The Petitioner, placing reliance on judgments of Hon’ble Supreme Court and various Hon’ble High Courts,  submitted that the impugned notice was liable to be quashed. It was further submitted that the defect was not curable and that the Revenue cannot place reliance on Section 292B of the Act in support of their stand, as the said provision had no applicability to the facts of this case.

On the other hand, the Revenue submitted that the factum of death was not reported by the petitioner to the Department and that the PAN registration in the name of the dead person had not been cancelled. Therefore, the Department was fully justified in issuing the notice in the name of the deceased assessee and that the notice, having been issued before the end of the period of limitation was valid in the eye of law.

It was further submitted that the Department, after having knowledge of the death of the assessee, as intimated by the petitioner, issued notice to the petitioner and directed her to produce the documents and to cooperate in the reopening proceedings. It was also submitted that there was no defect in the issuance of the notice and in any event, even assuming without conceding that the notice was defective, the same was a curable defect, which was cured by the issue of the proceedings in the name of the writ petitioner in her capacity as the legal heir of the deceased. It was submitted that the impugned notice under Section 148 of the Act was issued within the period of limitation and thereafter, on coming to know of the death of the assessee, the impugned proceedings continued in the name of the legal heirs by issuing the notice under Section 142 as contemplated under the Act.

The Revenue also relied upon the decision of the High Court of Delhi which held that the notice issued was a nullity and that errors and mistakes can be corrected.

The Hon’ble High Court observed that the settled legal principle is that a notice issued in the name of the dead person is unenforceable in law. Therefore, the Revenue was not justified in contending that they, having no knowledge about the death of the assessee, were entitled to plead that the notice was not defective.

The Hon’ble High Court observed that the limitation period for issuance of notice for reopening expired one day after the issuance of the impugned notice in the name of the dead person. On being intimated about the death, the Department sent the notice to the petitioner – his spouse to participate in the proceedings. This notice was well beyond the period of limitation, as it had been issued after the expiry of the limitation period.

The Hon’ble High Court opined that merely because the Department was not intimated about the death of the assessee, that cannot, by itself, extend the period of limitation prescribed under the Statute. The Revenue could not show that there is a statutory obligation on the part of the legal representatives of the deceased assessee to immediately intimate the death of the assessee or take steps to cancel the PAN registration.

The Hon’ble High Court also ruled out the applicability of Section 159 of the Act as the proceedings under Section 159 of the Act can be invoked only if the proceedings have already been initiated when the assessee was alive and was permitted for the proceedings to be continued as against the legal heirs.

Further, on the Revenue’s stand that the case was covered under Section 292 of the Act and the defect was a curable defect and on that ground, the impugned notice cannot be declared as invalid, the Hon’ble High Court observed that the language employed in Section 292 of the Act is categorical and clear. The notice has to be, in substance and effect, in conformity with or according to the intent and purpose of the Act. The issue relating to limitation is not a curable defect for the Revenue to invoke Section 292B of the Act.

It was held that the impugned notice was wholly without jurisdiction and could not be enforced against the petitioner.

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