LATE S.SURESH LEGAL HEIR BY S.MAHESH ,SECUNDRABAD vs. INCOME TAX OFFICER, WARD-15(1), HYDERABAD

Brief facts of the case are that the assessee, an individual, along with some others, sold land, admeasuring 0.12 guntas, situated in survey No.62/A at Yarpal Village under GHMC Alwal Circle, Malkajgiri Mangal, RR Dist. vide document No.597/2009, dated, 30.03.2009 for a consideration of Rs.18.00 lakhs whereas the market value of the property on which the stamp duty is paid was at Rs.34,50,000/-. Since the assessee did not file his return of income offering the capital gains from this transaction to tax, the AO believed that there was escapement of income and thus issued a notice u/s 148 of the Act, on 8.3.2016 to the assessee. Since there was no response from the assessee, a show cause notice was issued to the assessee on 9.6.2016, in

Aggrieved, the legal heir of the assessee preferred an appeal before the CIT (A) stating that the assessee has passed away on 14.12.2015 and the notice u/s 148 dated 8.3.2016 issued on a dead person, was an invalid notice and therefore, the assessment order is not sustainable. However, The CIT (A) dismissed the assessee’s appeal and the assessee is in second appeal before the Tribunal by raising the following grounds of appeal: “1. The order of the learned CIT (A) is against the law, weight of evidence and probabilities of case. 2. The learned CIT (A) ought to have appreciated that the notice u/s 148 is not served as per the provisions of section 282 of the IT Act, therefore, ought to have held the order as invalid order. 3. The learned CIT (A) ought to have appreciated that the notice dated 8.3.2016 is served in the name of a dead person, therefore, ought to have held that the same is an invalid notice, further erred in not holding the order as an invalid order. 4. The learned CIT (A) ought to have held that the alleged sale deed between Father and son is not a transfer as provided I section 2(14) of the I.T. Act, therefore, erred in holding as same as transfer. 5. The learned CIT (A) ought to have appreciated that the transaction is in the nature of gift between father and son,

The learned Counsel for the assessee submitted that the assessee had expired on 14.12.2015 whereas the notice u/s 148 was issued on 8.3.2016. Therefore, the notice was issued on a dead person and therefore, even after being informed that the Assessee has expired, the AO has not taken any steps to serve the notice u/s 148 on the legal heir but has proceeded to complete the assessment on the legal heir. Therefore, according to the learned Counsel for the assessee, the assessment is not sustainable and in support of this contention, he placed reliance upon the decision of the Coordinate Bench of the Tribunal at Vizag in the case of Sri Aemala Venkateswara Rao in ITA No.227/ Viz/2017 dated 3.4.2019 wherein it was held that the notice issued on a dead person is invalid and accordingly quashed the assessment therein is not sustainable and was quashed.

The learned DR was also heard who supported the orders of the authorities below.

Having regard to the rival contentions and the material on record, I find that the factum of the death of the assessee was brought to the notice of the AO during the re-assessment proceedings pursuant to issuance of notice u/s 148 but the AO has not taken any steps to bring Legal Heir on record and to issue notices u/s 148 of the Act to the L/Rs. In fact, the notice u/s 148

The issue, which falls for consideration, is as to whether the impugned notice under Section 148 of the Act issued in the name of the dead person - the said Mr S. Yeeroppan is enforceable in law and the subsidiary issue being as to whether the petitioner, being the wife of the said Mr S. Veerappan, can be compelled to participate in the proceedings and respond to the impugned notice. The fact that the said Mr S. Veeroppan died on 26.1.2010 is not in dispute. If this fact is not disputed- then the notice issued in the name of the dead person is unenforceable in the eye of law.

The Department seeks to justify their standby contending that they were not intimated about the death of the assessee, that the legal heirs did not take any steps to cancel the PAN registration in the name of the assessee and that therefore, the Department was justified in directing the petitioner to cooperate in the proceedings pursuant to the impugned notice. 16. The settled legal principle being that a notice issued in the name of the dead person is unenforceable in law. If such is the legal position, would the Revenue be justified in contending that they, having no knowledge about the death of the assessee, are entitled to plead that the notice is not defective. In my considered view, the answer to the question should be definitely against the Revenue.

This Court supports such a conclusion with the following reasons:

In such circumstances, the question would be as to whether Sectiou159 of the Act would get attracted. The answer to this question would be in the negative, as the proceedings under Section 1590f the Ace 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. The factual position in the instant case being otherwise, the provisions of Section 159 of the Act have no application.

The Revenue seeks to bring their case under Section 292 of the Act to state that the defect is Cl curable defect and on that ground, the impugned notice cannot be declared as invalid.

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 Undoubtedly, the issue relating to limitation is not a curable defect for the Revenue to invoke Section 292B of the Act.

All the above reasons are fully supported by the decision in the case of Vipin Walia. In that case, the notice dated 27.3.2015 was issued under Section 148 of the Act to the assessee, who died on 14.3.2015. The validity of the said notice was put to challenge. The Income Tax Officer took a stand that since the intimation of death of the assessee on 14.3.2015 was not received by her, the notice was issued on Q dead person. However, the fact regarding the death of the assessee could not be disputed by the Department. The Department continued the proceedings under Section 147/148 of the Act and at that stage, the son of the deceased approached the High Court of Delhi. The High Court of Delhi pointed out that what was sought to be done by the Income Tax Officer was to initiate proceedings under Section 147 of the Act against the deceased assessee for the assessment year 2008- 09, for which, the limitation for issuance of notice under Section 147/148 of the Act was 31.3.2015 and on 02.7.2015 when the notice was issued, the assessee was already dead anti if the Department intended to proceed under Section 142 of the Act, it could have done so prior to 31.3.2015 by issuing the notice to the legal heirs of the deceased and beyond that date, it could not have proceeded in the matter even by issuing notice to the legal representatives of

The decision in the case of Vipin Walia was followed in the decision of the High Court of Gujarat in the case of Rasid Lala, in which, the re-assessment proceedings were initiated against the dead person, that too, after a long delay. The Court pointed out that even if the provisions of Section 159 of the Act are attracted, in that case also, the notice was required to be issued against and in the name of the heirs of the deceased assessee and under the said circumstances, Section 159 of the Act shall not be of any assistance to the Revenue. 23. In the decision of the Delhi High Court in the case of Spice Entertainment Ltd., one of the questions, which fell for consideration, is as to whether such framing of assessment against a non existing entity or a dead person could be brought within the ambit of Section 292B of the Act and after referring to the decisions on the point including the decision of the Allahabad High Court in the case of Sri Nath Suresh Chand Ram Naresh v. CIT [reported in (2006) 280 ITR 396], it has been held that the provisions of Section 292B of the Act are not applicable and that framing of assessment against a non existing entity/person goes to the root of the matter, which is not a procedural irregularity, but a jurisdictional defect, as there cannot be any assessment against a dead person." 7. Hon'ble Mumbai High Court in the case of Sumit Balkrishna Gupta v. Asstt. CIT [2019] 103 taxmann.com 188/262 Taxman 61 (Bom.) held that the notice issued on a dead person is invalid unenforceable in law. We extract the relevant part of the order of Hon'ble Bombay High court in Sumit Balkrishna Guptasupra which reads as under: "7. The issue of a 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 the correct person. This requirement of issuing notice to a correct person and not to a dead person is not a merely a procedural requirement but is a condition precedent to the impugned notice being valid in law. Thus, a notice which has been issued in the name of the dead person is also not protected either by provisions of Section 292B or 292BB of the Act. This is so as the requirement of issuing a notice in the name of correct person is the foundational requirement to acquire jurisdiction to reopen the assessment. This is evident from Section 148 of the Act, which requires that before a proceeding can be taken up for reassessment, a notice must be served upon the assessee. The assessee on whom the notice must be sent must be a living person i.e legal heir of the deceased assessee, for the same to be responded. This in fact is the intent and purpose of the Act. Therefore, Section 292B of the Act cannot be invoked to correct a foundational / substantial error as it is meant so as to meet the jurisdictional requirement. Therefore, both the impugned notice dated 29.3.2018 and the impugned order dated 13.11.2018 are quashed and set aside. It is made clear that this order will not prohibit the Revenue from issuing a fresh notice for reassessment, if requirement of Sections 147/148 of the Act are satisfied, including the limitation period therein."

In the result, appeal of the assessee is allowed.