Validity of reassessment notice u/s 148 against deceased assessee

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Validity of reassessment notice u/s 148 against deceased assessee

Short Overview : Notice issued under section 148 against deceased assessee was  invalid as  legal representative had not waived his right to a notice under section 148. Also, legal representative not having submitted to the jurisdiction of AO pursuant to impugned notice, section 292B would not get attracted and hence, notice under section 148 was quashed.

AO initiated reassessment proceedings by issuing notice under section 148 against deceased assessee and not against his legal representative.

 it is held that notice issued under section 148 against  deceased assessee was  invalid as  legal representative had not waived his right to a notice under section 148. Also, legal representative not having submitted to the jurisdiction of AO pursuant to impugned notice, section 292B would not get attracted and hence, notice under section 148 was quashed.

Decision: In assessee’s favour.

Applied: Chandreshbhai Jayantibhai Patel v. ITO (2019) 413 ITR 276 (Guj) : 2019 TaxPub(DT) 496 (Guj-HC).

 

IN THE GUJARAT HIGH COURT

HARSHA DEVANI & A. P. THAKER, JJ.

Hetal Brijesh Ukani v. Asst. CIT

R/Special Civil Application No. 16274 of 2018

29 January, 2019

Petitioner (s) by: Vaibhavi K Parikh (3238)

Respondent (s) by: Kalpanak Raval (1046)

ORAL JUDGMENT

Harsha Devani, J.

Rule. Ms. Kalpana Raval, learned Senior Standing Counsel, waives service of rule on behalf of the respondent.

2. Having regard to the controversy involved in the present case, which lies in a very narrow compass and with the consent of learned advocates for the respective parties, the matter was taken up for final hearing today.

3. By this petition under article 226 of the Constitution of India, the petitioner has challenged the notice dated 29-3-2018 issued by the respondent under section 148 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) whereby, he seeks to reopen the assessment of the assessee Shri Brijeshkumar Parsottambhai Ukani for assessment year 2011-12.

4. The facts stated briefly are that the petitioner herein is an individual. The assessee Shri Brijeshkumar Parsottambhai Ukani, that is, the petitioner’s husband, passed away on 23-1-2011. For assessment year 2010-11, the return of income was filed on 31-3-2011 declaring total income of Rs. 33,51,908, which was signed by the petitioner Smt. Hetal Brijeshkumar Ukani.

5. The assessee’s assessment for assessment year 2008-09 came to be reopened by issuing a notice dated 30-3-2015 to the petitioner Smt. Hetal Brijeshkumar Ukani, under section 148 of the Act, which culminated into an Order, dt. 8-3-2016 under section 143(3) read with section 147 of the Act which was passed in the name of the petitioner, namely, Smt. Hetal Brijeshkumar Ukani, legal heir of Shri Brijeshkumar Parsottambhai Ukani.

6. Subsequently, after a period of more than four years from the end of assessment year 2011-12, the respondent issued the impugned notice dated 29-3-2018 to the assessee Shri Brijeshkumar Parsottambhai Ukani under section 148 of the Act seeking to reopen his assessment for that assessment year. It appears that such notice was not served upon the petitioner. Subsequently, a notice dated 10-9-2018 came to be issued to the petitioner calling upon her to furnish the return of income in response to the notice issued under section 148 of the Act. Upon receipt of the said notice, the petitioner addressed a letter dated 2-10-2018 raising objections against the reopening by contending that the notice under section 148 of the Act had not been received at all. Moreover, the notice under section 148 of the Act had been issued in the name of Shri Brijeshkumar Parsottambhai Ukani, namely, a deceased person and hence, was not valid in the eyes of law.

7. By an Order, dt. 3-10-2018, the respondent disposed of the objections raised by the petitioner and held that the reopening was valid. The order disposing of the objections has been passed in the name of the petitioner, Smt. Hetal Brijeshkumar Ukani, as the legal heir of Shri Brijeshkumar Parsottambhai Ukani. Being aggrieved, the petitioner has filed the present petition challenging the impugned notice under section 148 of the Act and all proceedings pursuant thereto.

8. Ms. Vaibhavi Parikh, learned advocate for the petitioner, assailed the impugned notice dated 29-3-2018 by submitting that the same has been issued in the name of a dead person and hence, is not valid in the eyes of law. Referring to the order disposing of the objections, it was pointed out that the assessing officer has observed that no intimation regarding passing away of the assessee Shri Brijeshkumar Parsottambhai Ukani, had been received by their office till date. It was submitted that the above finding recorded by the assessing officer is contrary to the record of the case, which clearly reveals that the notice under section 148 of the Act for reopening of the assessment for assessment year 2008-09 was issued in the name of the petitioner as legal heir of Shri Brijeshkumar Parsottambhai Ukani. It was submitted that therefore, the factum of death of the assessee was very well known to the Department.

8.1 It was submitted that in terms of clause (b) of sub-section (2) of section 159 of the Act, any proceedings which could have been taken against the deceased if he had survived, could have been taken again the legal representative; however, in the present case, the respondent has initiated reassessment proceedings against the deceased person and not against his legal representative and hence, the initiation of reassessment proceedings itself is not tenable in law. It was submitted that the impugned notice under section 148 of the Act, having been issued to a dead person, is no notice in the eyes of law and hence, the same is required to be quashed and set aside.

8.2 In support of her submissions, learned advocate placed reliance upon an unreported decision dated 10-12-2018 of this court in the case of Chandreshbhai Jayantibhai Patel v. The Income Tax Officer rendered in Special Civil Application No. 15172 of 2018 for the proposition that the notice under section 148 of the Act being a jurisdictional notice, if such notice is issued to a dead person it is invalid.

9. Opposing the petition, Ms. Kalpana Raval, learned Senior Standing Counsel, placed reliance upon the averments made in the affidavit in reply filed on behalf of the respondent. It was submitted that before issuance of the notice under section 148 of the Act, notice under section 133(6) of the Act had been issued on 7-3-2018 after getting the approval of the Principal Commissioner, Surat requesting the assessee to furnish the details mentioned therein. However, there was no response thereto. It was submitted that the petitioner has not complied with the notice issued by the Department under section 133(6) of the Act and has also not filed the return of income in response to the notice under section 148 of the Act. It was submitted that all communications to the petitioner as legal heir of the assessee were sent to the same address, and therefore, it cannot be believed that the notice dated 29-3-2018 under section 148 of the Act was not received by the petitioner.

9.1 Reliance was placed upon the decision of the Delhi High Court in the case of Sky Light Hospitality LLP v. Asstt. CIT, (2018) 405 ITR 296 (Del) : 2018 TaxPub(DT) 762 (Del-HC) wherein, the court has held thus;

“17. In the context of the present writ petition, the aforesaid ratio is a complete answer to the contention raised on validity of the notice under section 147/148 of the Act as it was addressed to the erstwhile company and not to the limited liability partnership. There was no doubt and debate that the notice was meant for the petitioner and no one else. Legal error and mistake was made in addressing the notice. Noticeably, the appellant having received the said notice, had filed without prejudice reply/letter dated 11-4-2017. They had objected to the notice being issued in the name of the company, which had ceased to exist. However, the reading of the said letter indicates that they had understood and were aware, that the notice was for them. It was replied and dealt with by them. The fact that notice was addressed to M/s. Sky Light Hospitality (P) Ltd., a company which had been dissolved, was an error and technical lapse on the part of the respondent. No prejudice was caused.”

9.2 It was submitted that the above decision of the Delhi High Court came to be challenged before the Supreme Court in Sky Light Hospitality LLP v. Asstt. CIT, (2018) 92 taxmann.com 93 (SC) : 2018 TaxPub(DT) 1823 (SC), which dismissed the special leave petition holding that the wrong name given in the notice was merely a clerical error, which could be corrected under section 292B of the Act.

9.3 It was contended that in the light of the above decision, the notice under section 148 of the Act cannot be said to be invalid and that the petition, being devoid of merits, deserves to be dismissed.

10. This court has considered the submissions advanced by the learned advocates for the respective parties. As noted hereinabove, in the facts of the present case, the assessee Shri Brijeshkumar Parsottambhai Ukani, passed away on 23-1-2011 and the Department had due notice about the same inasmuch as a notice under section 148 of the Act for assessment year 2008-09 was issued to the petitioner on 30-3-2015 in her capacity as legal heir of the deceased assessee. Moreover, the petitioner herein had filed the return of income for the assessment year 2010-11 as the legal heir of deceased Shri Brijeshkumar Parsottambhai Ukani. Despite the aforesaid position, for the assessment year under consideration, viz., 2011-12, the assessing officer issued the notice under section 148 of the Act in the name of the deceased assessee. Such notice was issued on 29-3-2018, when the period of limitation of six years was just about to expire.

11. It is the specific case of the petitioner that such notice was not served upon her. Subsequently, a notice dated 10-9-2018 came to be issued in the name of the deceased assessee calling upon him to file the return of income, in response to which, the petitioner raised objections dated 2-10-2018, which came to be disposed of by an Order, dt. 3-10-2018.

12. It has been contended on behalf of the respondent that the petitioner had not informed the Department about the death of the assessee. However, such contention is falsified by the record of the case, which clearly reveals that the Department had due notice about the death of the assessee, inasmuch as other proceedings under the Act had been taken against the petitioner as the legal heir of deceased assessee. Thus, despite the fact that the Department was well aware of the death of the assessee, the impugned notice under section 148 of the Act came to be issued to the deceased assessee and not to the heir and legal representative of the deceased.

13. At this juncture reference may be made to the decision of this court in Chandreshbhai Jayantibhai Patel v. ITO (supra), which was a case wherein the notice under section 148 of the Act had been issued to a dead person. The court held thus :–

“12. In the backdrop of the aforesaid facts, it is an admitted position that the notice under section 148 of the Act was issued to a dead person. The petitioner being the heir and legal representative of the deceased, upon receipt of the notice, immediately raised objection against the validity of the impugned notice and did not submit to the jurisdiction of the assessing officer by filing a return of income, but kept on objecting to the continuation of the assessment proceedings pursuant to the impugned notice. The assessing officer, however, instead of taking corrective steps under section 292B of the Act and issuing notice to the heirs and legal representatives, insisted on continuing with the proceedings pursuant to the impugned notice which was issued in the name of a dead person. Since strong reliance has been placed by the learned counsel for the respondent on the provisions of section 2(7) and 2(29) read with sections 159 and 292B of the Act, reference may be made to the said provisions, which read as under :–

“Section 2(7) “assessee” means a person by whom any tax or any other sum of money is payable under this Act, and includes

(a) every person in respect of whom any proceeding under the Act has been taken for the assessment of his income or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person;

(b) every person who is deemed to be an assessee under any provision of this Act;

(c) every person who is deemed to be an assessee in default under any provision of this Act;

“Section 2(29) “legal representative” has the meaning assigned to it in clause (11) of section 2 of the Code of Civil Procedure, 1908;”

“159. Legal representatives.–(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 undercharged, 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.”

“292B. Return of income, etc., not to be invalid on certain grounds. No return of income, assessment, notice, summons or other proceeding furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.”

13. Thus, the expression “assessee” includes every person who is deemed to be an assessee under any provision of the Act. Subsection (3) of section 159 of the Act, postulates that the legal representative of the deceased shall, for the purposes of the Act, be deemed to be an assessee. Sub-section (2) of section 159 of the Act says that 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 the Act shall apply accordingly.

14. Thus, clause (a) of sub-section (2) of section 159 of the Act provides for the eventuality where a proceeding has already been initiated against the deceased before his death, in which case such proceeding 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. In the present case, the proceeding under section 147 of the Act had not been initiated against the deceased before his death, and hence, clause (a) would not be applicable in the facts of this case.

15. Clause (b) of sub-section (2) of section 159 of the Act provides that any proceeding which could have been taken against the deceased if he had survived may be taken against the legal representative. The present case would, therefore, fall within the ambit of section 159(2)(b) of the Act and, hence, the proceeding can be taken against the legal representative. Now, it cannot be gainsaid that a proceeding under section 147 of the Act of reopening the assessment is initiated by issuance of notice under section 148 of the Act, and as a necessary corollary, therefore, for taking a proceeding under that section against the legal representative, necessary notice under section 148 of the Act would be required to be issued to him. In the present case, the impugned notice under section 148 of the Act has been issued against the deceased assessee. In the opinion of this court, since this is not a case falling under clause (a) of sub-section (2) of section 159 of the Act, the proceeding pursuant to the notice under section 148 of the Act issued to the dead person, cannot be continued against the legal representative.

16. On behalf of the revenue, it has been contended that issuance of the notice to the dead assessee is merely a technical defect which could be corrected under section 292B of the Act. Reliance has been placed on the above referred decisions of the Supreme Court as well as the High Courts for contending that the proceedings would not be null and void merely because the notice has been issued against a dead person as the legal representative had received the notice and has objected to the validity of the notice and further continuation of the proceedings. In the opinion of this court, here lies the distinction between those cases and the present case. In the relied upon cases, the legal representative, in response to the impugned notice, filed return of income and participated in the proceeding and then raised an objection to the validity of the proceeding and, therefore, the court held that this was a case of waiver and that a technical defect can be waived; whereas in this case, right from the inception the petitioner has objected to the validity of the notice and thereafter to the continuation of the proceeding and has at no point of time participated in the proceeding by filing the income tax return in response to the notice issued under section 148 of the Act. Had the petitioner responded to the notice by filing return of income, he could have been said to have participated in the proceedings, however, merely because the petitioner has informed the assessing officer about the death of the assessee and asked him to drop the proceedings, it cannot, by any stretch of imagination, be construed as the petitioner having participated in the proceedings.

17. Insofar as reliance placed upon section 292B of the Act is concerned, the said section, inter alia, provides that no notice issued in pursuance of any of the provisions of the Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such notice if such notice, summons is in substance and effect in conformity with or according to the intent and purpose of the Act.

18. The question that therefore arises for consideration is whether the notice under section 148 of the Act issued against the deceased assessee can be said to be in conformity with or according to the intent and purposes of the Act. In this regard, it may be noted that a notice under section 148 of the Act is a jurisdictional notice, and existence of a valid notice under section 148 is a condition precedent for exercise of jurisdiction by the assessing officer to assess or reassess under section 147 of the Act. The want of a valid notice affects the jurisdiction of the assessing officer to proceed with the assessment and thus, affects the validity of the proceedings for assessment or reassessment. A notice issued under section 148 of the Act against a dead person is invalid, unless the legal representative submits to the jurisdiction of the assessing officer without raising any objection. Therefore, where the legal representative does not waive his right to a notice under section 148 of the Act, it cannot be said that the notice issued against the dead person is in conformity with or according to the intent and purpose of the Act which requires issuance of notice to the assessee, whereupon the assessing officer assumes jurisdiction under section 147 of the Act and consequently, the provisions of section 292B of the Act would not be attracted. In the opinion of this court, the decision of this court in the case of Rasid Lala v. ITO, Ward1(3)(6) (supra) would be squarely applicable to the facts of the present case. Therefore, in view of the provisions of section 159(2)(b) of the Act, it is permissible for the assessing officer to issue a fresh notice under section 148 of the Act against the legal representative, provided that the same is not barred by limitation; he, however, cannot continue the proceedings on the basis of an invalid notice issued under section 148 of the Act to the dead assessee.

19. In the facts of the present case, as noticed hereinabove, the notice under section 148 of the Act, which is a jurisdictional notice, has been issued to a dead person. Upon receipt of such notice, the legal representative has raised an objection to the validity of such notice and has not complied with the same. The legal representative not having waived the requirement of notice under section 148 of the Act and not having submitted to the jurisdiction of the assessing officer pursuant to the impugned notice, the provisions of section 292B of the Act would not be attracted and hence, the notice under section 148 of the Act has to be treated as invalid. In the absence of a valid notice, the assessing officer has no authority to assume the jurisdiction under section 147 of the Act and, hence, continuation of the proceeding under section 147 of the Act pursuant to such invalid notice, is without authority of law. The impugned notice as well as the proceedings taken pursuant thereto, therefore, cannot be sustained.”

14. In the opinion of this court, the above decision would be squarely applicable to the facts of the present case and as such, the impugned notice dated 29-3-2018 under section 148 of the Act which is a jurisdictional notice, having been issued in the name of a deceased person is invalid and lacks jurisdiction and, therefore, cannot be sustained.

15. Insofar as the decision of the Delhi High Court in case of Sky Light Hospitality LLP (supra) on which reliance has been placed on behalf of the respondent is concerned, the said decision has been considered by this court in the above referred decision.

16. For the foregoing reasons, the petition succeeds and is, accordingly, allowed. The impugned notice dated 29-3-2018 issued to the deceased assessee under section 148 of the Act as well as all proceedings taken pursuant thereto are hereby quashed and set aside. Rule is made absolute accordingly, with no order as to costs.

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