DCIT CIRCLE-52(1), INCOME TAX vs. PRANAV GUPTA, LEGAL HEIR OF LATE SH. VIJAY KUMAR GUPTA, NEW DELHI

In fact, it appears from the reasons recorded, inter alia, that a search and seizure action dated 17.09.2013 was carried out at the premises of Shri Naresh Gupta, a deed writer wherefrom a hard disk of his computer containing deeds pertaining to various properties transactions indicating cash billing in respect of the same was retrieved; the print out of such deeds from his computer was confronted to Shri Naresh Gupta on 08.11.2013 which was replied to have been based on clients instructions. Two agreements in respect of the sale of the premises at C169 Greater Kailash-1 New Delhi mentioning some amount which is different premises were found.

The Ld. AO adopted an amount of Rs.9.90 crores in respect of one of the draft agreements found from the computer of Shri Naresh Gupta as the actual sale consideration and computed the amount of LTCG at Rs.8,71,156,675/-. The assessee filed an appeal before the First Appellate Authority who in turn deleted the entire addition. Hence, the instant appeal before us.

At the very threshold of the matter before the First Appellate Authority the assessee challenged the validity of the notice under Section 148 of the Act issued to the dead person. It is a trite law that in order to undertake proceeding in respect of deceased person the legal heir needs to be identified and notice are required to be served upon such legal heir being deemed assessee. Such notices, however, are also required to be served within the time limit. Notice to assume jurisdiction under Section 148 of the Act issued to a dead person and/or non-existent entity is a case of substantive illegality when it is not the legal obligation on the part of the legal heir to suo moto inform the department on the date of the demise of the original assessee, the father, as in the case in hand; no notice under Section 148 was validly served when he was alive or on the deemed assessee i.e. the appellant of the Ld. CIT(A) particularly relying upon the judgement passed by the Hon’ble Supreme Court in the case of Mahagun Realtors Pvt. Ltd. reported in (2022) 443 ITR 194 (SC). He therefore, held the assumption of jurisdiction to be invalid and allowed the appeal preferred by the assessee with the following observations:

At the time of hearing of the appeal the Ld. DR vehemently argued in support of the order passed by the Ld. AO.

On the other hand the Ld. Counsel appearing for the assessee submitted before us that admittedly the notice under Section 148 of the Act was issued in the name of the father of the appellant who was no longer alive as on the date of issuance of the notice by the Department. Having regard to this particular aspect of the matter, the Ld. Counsel Mr. S. Krishnan referred the provision of law envisaged in Sections 159(2), 159(2)(a), 159(2)(b) and 159(3) of the Act.

It was further contended by the Ld. Counsel that by virtue of section 159(3) of the Act the legal heir of the deceased shall be deemed to be an assessee and in that view of the matter in the event of death of a person, his legal heirs need to be identified and notice under Section 148 of the Act is required to be served on such legal heirs within the limitation period in the absence of which there would be no proper assumption of jurisdiction and the subsequent proceedings would be bad in law as was his ultimate submission before us. In this regard he has relied upon very many judgments including the judgments passed by the jurisdictional High Court Kapila vs. ACIT reported in (2020) 426 ITR 502; Vipin Walia vs. ITO (2016) 382 ITR 19; judgment passed by the Hon’ble Madras High Court in the case of Alamelu Virappan vs. ITO, reported in 2018 (6) TMI 760. He has further relied upon the judgment passed by the Hon’ble Apex Court in the matter of PCIT vs. Maruti Suzuki India Ltd, reported in 416 ITR 613 and in the case of Mahagun Realtors Private Limited, reported in(2022) 443 ITR 194(SC). In the absence of notice under Section 148 of the Act validly served either on the original assessee Shri Vijay Kumar Gupta when he was alive or on the deemed assessee being the legal heir of the assessee, the appellant before us renders the assumption of jurisdiction as invalid and therefore, liable to be quashed as prayed by the ld AR before us.

We have heard the rival submissions made by the respective parties. We have also perused the relevant materials available on record including the orders passed by the authorities below and the judgments relied upon. Under the present facts and circumstances of the matter it is evident that admittedly the original assessee passed away on 02.10.2015, therefore, no notice could have been served upon him in April 2016 and moreso the dead person could not file the return of income as required by notice under Section 148 of the Act. Admittedly the notice limitation prescribed under the law and it was incapable of being served upon him and in that view of the matter the entire proceedings become nonest in the eyes of law.

Having regard to the jurisdictional condition envisaged under Section 148 of the Act not met we have further considered the judgment relied upon by the Ld. AR in the case of Braham Prakash vs ITO (supra), wherein on the identical facts and circumstances of the matter when the notice was not even found to have been served upon the deemed assessee, the subsequent proceedings were found to be bad in law as there was breach of the principle of natural justice as well as the mandatory provisions contained in Section 148 of the Act.

In the case of Savita Kapila versus ACIT (supra), the Hon’ble Delhi High Court has been pleased to observe categorically that 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 merely a procedural requirement but is a condition precedent to the impugned notice being valid in law. Reliance was placed on the judgment passed by the Hon’ble Bombay High Court in the case of Sumit Balkrishna Gupta vs. ACIT, reported in(2019) 2 TMI one 209.

The Hon’ble jurisdictional High Court in the case of Vipin Walia, supra has been pleased to hold that “what was sought to be done by the ITO was to initiate proceedings under Section 147 of the Act against the deceased assessee for Assessment Year 2008-09. The limitation for issuance of the notice under section 147/148 of the Act was 31 March 2015. On 27 March, 2015 when the notice was issued, the assessee was already dead. If the department intended to proceed under Section 147 of the Act, it could have been done so prior to 31 March, 2015 by issuing notice to the legal heirs of the deceased. Beyond that date it could not have proceeded in the matter even by issuing notice to the legal heirs of the assessee”.

We find that in the case of PCIT versus Maruti Suzuki India Ltd.(supra), it is held that participation in proceedings by the appellant cannot operate in estoppel under section 148 of the Act, when issued in respect of a dead person/non-existent entity is a case of substantive illegality and not a procedural violation of the nature adverted to in Section 292BB of the Act. In the case in hand the legal heir of the assessee before us duly objected to the notice being issued in the name of the deceased. However, it has been time and again decided as already narrated hereinabove that it is neither the obligation on the part of the legal heir of the assessee to bring it to the notice of the fact of demise of the original assessee to the Department suo moto, the father of the assessee in the case in hand before us.

Section 159(2) of the Act makes a specific reference to the reassessment proceeding under Section 147 of the Act. While Section 159(2) (a) of the Act speaks of a proceeding already taken against an assessee ‘before his death’, Section 159(2)(b) of the Act envisages any proceeding which could have been taken against the deceased if he had survived. It further permits such a proceeding to be taken against the legal heirs of the deceased assessee even if it had not been taken while the assessee was alive. Section 159(2)(b) of the Act is, therefore, applicable to the case in hand. Taking into consideration this particular provision of law it was the duty incumbent upon the AO to initiate proceeding under Section 148 of the Act against the deceased assessee for Assessment Year 2009-10. The limitation for on that particular day when the notice was issued the assessee was already dead. In that view of the matter if the Ld. AO intended to proceed under Section 147 of the Act he could have done so prior to 31 March 2016 by issuing notice to the legal heir of the deceased. Beyond that date he could not have proceeded in the matter even by issuing notice to the legal heirs of the assessee.

We note that the notice issued in the name of a dead person is, thus, not a valid notice. In order to undertake the proceeding in respect of a deceased person the legal heirs need to be identified and notices are required to be served upon such legal heirs being deemed assessees, in the names and in that capacity as legal heirs of the deceased and that particular notices are required to be served within the statutory time limit prescribed, which is absent in the case in hand. As admittedly, no notice under Section 148 of the Act was served upon the original assessee when was alive or on the deemed assessee, the appellant before us having regard to the provision of law as narrated hereinabove, the entire proceeding is vitiated; the same is void ab initio and therefore, liable to be quashed which has been rightly taken care of by the Ld. CITA in the order impugned in deleting the addition made against the assessee; the same is found to be just and proper so as not to warrant any interference. in favour of the assessee the grounds raised by the Revenue in its appeal have become of academic interest only and need not to be adjudicated upon.

The appeal preferred by the revenue is, thus, found to be devoid of any merit and thus, dismissed.