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Facts
The assessee's legal heir filed an appeal against the Principal CIT's order under Section 263. The assessee had passed away prior to the order being passed by the Principal CIT. The legal heir had also informed the authorities about the death and filed returns accordingly.
Held
The Tribunal held that an order passed against a deceased person, without bringing the legal heir on record, is invalid. Citing various judicial precedents, it was established that proceedings must be continued against the legal representative. Therefore, the impugned order passed by the Principal CIT was quashed.
Key Issues
Whether an order passed by the Principal CIT under Section 263 in the name of a deceased assessee, without impleading the legal heir, is valid.
Sections Cited
263, 143(3), 144B, 10(38), 112A, 159, 161, 162, 167, 148, 153C, 131(1A), 292B
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Income Tax Appellate Tribunal, PUNE BENCHES “A”, PUNE
Before: DR.MANISH BORAD & MS. ASTHA CHANDRA
आदेश / ORDER
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
1. This appeal at the instance of Legal Heir of Assessee is against the order dated 21.03.2024 of the Principal Commissioner of Income tax, Nashik – 1 passed u/s.263 of the Income Tax Act, 1961 for A.Y.2018-19 emanating from Assessment Order dated 28.04.2021 passed u/s.143(3) r.w.s.144B of the Act.
Assessee has raised following grounds of appeal :
“1. On the basis of the facts and circumstances of the case, the order passed u/s. 263 by the Principal Commissioner of Income-tax, Nashik may please be quashed.
2. On the basis of the facts and circumstances of the case and as per law, the Principal Commissioner of Income-tax is not justified in initiating the proceedings u/s. 263 of the Act under the premise that the appellant has earned income from Short term Capital gain and claimed exempt income u/s 10(38) of the Act, particularly when the appellant has claimed exemption w.r.t. long term capital gain on sale of shares.
On the basis of the facts and circumstances of the case and as per law, the Principal Commissioner of Income-tax is not justified in initiating the proceedings u/s 263 of the Act under the premise that the exemption u/s. 10(38) was withdrawn and the transaction of long term capital gain was to be taxed u/s. 112A of the Act, particularly when the exemption u/s. 10(38) was withdrawn from the next assessment year and the provisions of section 112A were inserted from next assessment year.
4. On the basis of the facts, in the circumstances of the case and as per law, the order passed by the Principal Commissioner of Income-tax u/s. 263 of the Act may please be quashed as the same is passed in respect of issues not arising out of the notice issued u/s. 263 of the Act.
5. On the basis of the facts and circumstances of the case, the Principal Commissioner of Income-tax is not justified in initiating revisionary proceedings u/s 263 of the Act on 05/06/2023 in the name of appellant who is deceased, especially when the legal heir was registered on the Income Tax portal on 22/10/2018. The Pr. CIT is further not justified in holding that the demise of the assessee has not brought to the notice of AO or in any other previous proceedings, particularly when the request for registration of legal heir was filed on Income-tax portal on 16/10/2018, which was approved by the competent authority on 22/10/2018 and more particularly when the appellant has furnished the compliances during the course of assessment proceedings as legal representative.
6. On the basis of the facts and circumstances of the case, the Principal Commissioner of Income-tax has erred in holding that the investment in shares of 'Indiabulls Whole Services Limited' does not form a part of investment of appellant as at 31.03.2017 whilst the appellant has clearly shown the said investment in his audited books of accounts. Therefore, the order passed u/s. 263 may please be cancelled.
7. On the basis of the facts and circumstances of the case, the Principal Commissioner of Income-tax has erred in holding that the appellant has not submitted contract notes or evidence in respect of shares of Indiabulls Whole Services Limited' being traded on recognised stock exchange, particularly when the appellant vide his submission dated 20/04/2021 during the course of assessment proceedings has submitted contract notes of purchase and sale of shares of the said company which clearly reflect that the said shares were traded on a recognised stock exchange.
8. The appellant craves for the addition to, deletion, alteration, modification of the above grounds of appeal.”
3. We will first take up the legal issue raised by the assessee vide Grounds of appeal No. 4 and 5.
At the outset, ld.AR for the Assessee filed a brief note along with relying on certain judicial precedents and submitted that the assessee “MR.ANIL BANSILAL LODHA” died on “18.12.2017”. Post death of assessee, legal heir of assessee Ms. Manjusha Anil Lodha filed the return of the deceased in the capacity of legal heir on 30.10.2018 and the ITR-V acknowledgement is placed on record. Ld. AR submitted that ld.PCIT has passed order in the name of the deceased assessee “ANIL BANSILAL LODHA” on 21.03.2024, when the assessee has already passed away and it was well within in the knowledge of the Ld. PCIT. Ld.PCIT has not brought on record the legal heir of the deceased assessee. Therefore, the order of ld.PCIT is invalid and deserves to be quashed. Ld. AR for the assessee has relied on the following decisions :
CIT Vs. M. Hemanathan 68 taxmann.com 22 (Mad) 2. Hiraben Babubahi Patel Vs. Pr.CIT – 3. Mohammad Sharif Siddiqui through legal heir vs. ITO –
4. Sheela Devi Vs. PCIT – ITA No.1853/Del/2021
Ld.DR for the Revenue relied on the order of ld.PCIT.
We have heard the rival contentions and perused the records. In the instant case, it is a fact emerging from the record that assessee “MR. ANIL BANSILAL LODHA” has already passed away on 18.12.2017. Albeit, in para 5 of the impugned order, ld.PCIT has recorded this fact, however, ld. PCIT without bringing the legal heir on record, issuing notices on the legal heir has passed the order dated 21.03.2024 in the name of deceased assessee.
7. As per settled principles of law, no order can be passed against a dead person and any proceedings regarding the deceased assessee shall be continued against the legal representative from the stage at which it stood on the date of the death of the deceased. Provisions of section 159 are relevant in the instant case which reads as under:
“159. (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 undischarged, 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 section167, 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.”
In a case where an assessee dies pending any proceedings before the Department, the provisions of Section 159 of the Act get attracted. Accordingly, it is incumbent on the Department to ensure compliance of Section 159 before any order is passed.
We find Coordinate Bench, Ahmedabad in the case of Hiraben Babubhai Patel Vs. PCIT in order dated 16.06.2023 has dealt with similar issue and quashed the order passed by ld. PCIT in the name of deceased assessee by observing as under :
“6. We have heard the rival contentions and perused the material on record. Before going into the merits of the order passed under section 263 of the Act, we shall first deal with the assessee’s challenge to jurisdiction of the order passed under section 263 of the Act. It is a well-settled principle of law that no order can be passed in the name of a deceased person, and various Courts, including the Hon'ble Supreme Court and jurisdictional Gujarat High Court, have consistently taken a view that such order passed in the name of the deceased person, is not valid in the eyes of law.
6.1 In the case of ITO v. Bhupendra Bhikhalal Desai [2021] 131 taxmann.com 40 (SC), the original assessee, namely 'B', passed away on 23-4-2017.The Assessing Officer issued a notice under section 153C in name of 'B' on 29-3-2019. After receiving said notice legal heir informed Assessing Officer that his father, B had passed away and requested to drop proceedings as notice was issued to a dead person. The Assessing Officer rejected objections raised by legal heir on ground that no information was provided about demise of B and even after his death income tax returns were filed in name of B for relevant assessment years. The High Court by impugned order held that impugned notice under section 153C issued against dead person, is unenforceable in law and revenue could not contend that as they had no knowledge about death of assessee, they were entitled to plead that notice was not defective and, therefore, impugned notice as well as order were to be quashed and set aside.
The Hon'ble Supreme Court held that Special Leave petition filed against impugned order by the Revenue, was to be dismissed.
6.2 In the case of ITO v. Durlabhbhai Kanubhai Rajpara [2020] 114 taxmann.com 482 (SC), pursuant to summons issued in name of assessee's father under section 131(1A), assessee brought to notice of Revenue Authorities that his father had already died. Despite knowing said fact, Assessing Officer issued notice in name of assessee's father under section 148 seeking to reopen assessment. The assessee thus filed petition before High Court contending that impugned notice was without any jurisdiction, which was issued against a dead person. The High Court held that no valid notice could be issued against a dead person and, thus impugned notice was required to be quashed and set aside In light of the above facts, the Hon'ble Supreme Court held that SLP filed by the Revenue against order of High Court was to be dismissed.
6.3 In the case of Chandreshbhai Jayantibhai Patel v. ITO 101 taxmann.com 362 (Gujarat), the Gujarat High Court held that where original assessee died and thereafter Assessing Officer issued notice under section 148 in his name to reopen assessment and petitioner being heir and legal representative of deceased raised an objection that assessee had already expired and, therefore, notice in his name was not valid, merely because petitioner had informed Assessing Officer about death of assessee and asked him to drop proceedings, it could not be construed that petitioner had participated in proceedings and, therefore, provisions of section 292B would not be attracted and notice under section 148 was to be treated as invalid.
6.4 In the case of Urmilaben Anirudhhasinhji Jadejav. ITO117 taxmann.com 504 (Gujarat), the Gujarat High Court held that reopening notice under section 148 issued against a dead person would be a nullity and; proceedings pursuant to a reopening notice issued to a dead person could not be continued against legal representatives.
6.5 In the case of Smt. Madhuben Kantilal Patel v. UOI [2023] 148 taxmann.com 202 (Gujarat), the Hon'ble Gujarat High Court held that here petitioner-legal heir of assessee-deceased had supplied death certificate of assessee to concerned officer within a short period after her demise, impugned reopening notice issued subsequently under section 148 in name of deceased was illegal and thus liable to be set aside.
6.6 In the case of Inox Wind Energy Ltd. [2023] 148 taxmann.com 289 (Gujarat), the Hon'ble Gujarat High Court held that where amalgamated company brought facts of amalgamation to notice of Assessing Officer, show cause notice cum draft assessment order issued in name of non-existing company would be void and same could not be said to be a procedural irregularity which could be cured under section 292B.
6.7 In the case of Krishnaawtar Kabra v. ITO [2022] 140 taxmann.com 423 (Gujarat), the Hon'ble Gujarat High Court held that reopening notice under section 148 issued upon deceased assessee was void ab initio and therefore, consequential proceedings and orders passed thereon were without any jurisdiction and were to be quashed and set aside.
6.8 In the case of Kanubhai Dhirubhai Patel v. ITO [2022] 139 taxmann.com 580 (Gujarat), the Hon'ble Gujarat High Court held that where Assessing Officer issued notice under section 148 to assessee to file return on 31-3-2021 and writ applicant, legal representative of assessee, had informed about death of assessee on 22-11-2020, since writ applicant had not surrendered to jurisdiction of Assessing Officer by submitting return in response to impugned notice and Assessing Officer had not issued notice to him as legal representative representing estate of deceased assessee, impugned notice issued by Assessing Officer was invalid and should be quashed.
6.9 In the case of Bharti Harendra Modi v. ITO 109 taxmann.com 389 (Gujarat), the original assessee, namely, BHM died on 26-5-2017. The Assessing Officer issued a reopening notice under section 148 in name of BHM on ground that on basis of information in Annual Information Return (AIR), it was found that said deceased assessee had sold one immovable property amounting to Rs. 82.89 lakhs but did not file any income tax return, thus, income to said extent had escaped assessment due to failure of BHM to submit her return of income. The Petitioner being heir and legal representative of BHM contended that BHM had already expired and, therefore, impugned notice in name of BHM was not valid. The Hon'ble High Gujarat Court held that a notice issued under section 148 in name of a dead person would not be a valid notice and therefore, the impugned notice issued under section 148 against BHM was to be quashed and set aside.
6.10 Now coming to the facts of the instant case, we observe that at the time when the notice under section 263 of the Act dated 15-02- 2019 was issued by the Principal CIT, the assessee had already expired (on 23-02-2018). Further, during the course of 263 proceedings, this fact was brought to the notice of the Principal CIT, and a specific request was made to drop the 263 proceedings, since the assessee had expired. However, the Principal CIT did not deal with this aspect in the order passed u/s 263 of the Act, by him. It is a well settled proposition that a notice issued /order passed in name of a dead person is not a valid notice/order. Accordingly, keeping in view the facts of the instant case and the decisions rendered by Hon'ble Supreme Court and Hon'ble High Court Gujarat High Court on this issue, we are of the considered view that the order passed under section 263 of the Act is not valid in the eyes of law, having been passed on a deceased person. In the result, it is directed that the order passed under section 263 be set aside.
In the result, the appeal of the assessee is allowed.”
In light of above facts and judicial precedent, since the impugned order is passed in the name of deceased assessee, we quash the order of the ld.PCIT allowing the legal issue raised vide Grounds of appeal No. 4 and 5.
11. Dealing with the remaining grounds would be merely academic in nature and thus held to be infructuous.
In the result, appeal of the assessee is partly allowed.
Order pronounced on this 10th day of October, 2025.