INCOME-TAX OFFICER, WARD-4(2)(1), AHMEDABAD , AHMEDABAD vs. LATE KHODAJI RANCHHODJI THAKOR LEGAL HEIR NARENDAKUMAR KHODAJI THAKOR, AHMEDABAD

3. The brief facts of the case are that the assessee, Shri Khodaji Ranchhodji Thakor, an individual residing at Ahmedabad, had not filed any return of income for Assessment Year 2017–18. Based on data analysis conducted by the Income Tax Department under “Operation Clean Money,” it was found that the assessee had deposited substantial cash in various bank accounts maintained with Punjab National Bank during the demonetization period from 9th November 2016 to 30th December 2016. The total cash deposit during this period amounted to Rs. 15,05,500/-, in addition to total credits of Rs. 1,41,84,687/- appearing in multiple savings and current accounts held by the assessee. Since the assessee had not filed any income tax return for the relevant year, the source of these cash deposits remained unexplained. Accordingly, the Assessing Officer (AO) issued a notice under section 142(1) of the Act, on 21.02.2018 requiring the assessee to file a return of income and explain the source of deposits. Despite several notices and reminders issued ITO vs. Late Khodaji Ranchhodji Thakor Legal Heir Narendrakumar Khodaji Thakor Asst. Year : 2017-18 3 thereafter, including show-cause notices dated 23.08.2019 and 20.09.2019, the assessee failed to respond or furnish any details or explanation regarding the source of the cash deposits or the nature of his income. As a result, the AO proceeded to complete the assessment under section 144 of the Act — a best judgment assessment — based on the material available on record. During the course of proceedings, the AO obtained information from Punjab National Bank under section 133(6) of the Act. The bank confirmed that substantial cash deposits were made in old currency notes during the demonetization period and that large credit entries had also been recorded throughout the year. The AO also verified information through the Annual Information Report (AIR) and the AIMS database, which revealed a mismatch between the total cash deposits reported by the bank (Rs. 6.34 lakh) and that reflected in departmental data (Rs. 15.05 lakh). The assessee was further found to have made an investment in immovable property valued at Rs. 95,10,000/-, with his individual share being Rs. 31,70,000/-, for which no satisfactory explanation regarding the source of funds was furnished. After considering the material evidence, the AO concluded that the assessee had deposited cash and received other credit entries aggregating to Rs. 1,41,84,687/- in his bank accounts, which were not recorded in any books of account nor supported by any credible explanation. Accordingly, the AO held that the conditions prescribed under section 69A of the Act were satisfied — namely, that the assessee was the owner of the money, that such money was not recorded in any books of account, and that the nature and source thereof remained unexplained. Relying upon the judgments of the Hon’ble Supreme Court in Chuharmal v. CIT [(1988) 172 ITR 250 (SC)] and Smt. Srilekha Banerjee v. CIT [1964 AIR 697 (SC)], the AO observed that where the source of money is not satisfactorily proved, such money can be treated as income from undisclosed sources. Accordingly, the AO made an addition ITO vs. Late Khodaji Ranchhodji Thakor Legal Heir Narendrakumar Khodaji Thakor Asst. Year : 2017-18 4 of Rs. 1,41,84,687/- as unexplained money under section 69A of the Act and taxed the same under section 115BBE at the rate of 60%. Further, the AO made an addition of Rs. 31,70,000/- representing the assessee’s investment in immovable property, which was treated as unexplained investment under section 69 of the Act. The total income of the assessee was thus assessed at Rs. 1,73,54,690/-. The assessment was therefore finalized under section 144 of the Act, assessing to total income at Rs. 1,73,54,690/-.

4. Aggrieved by the assessment order, an appeal was filed before the Ld. CIT(A), Delhi, on 03.10.2023 by the legal heir of the deceased assessee, Shri Narendra Khodaji Thakor. The appeal was delayed, and an application for condonation of delay was filed, explaining that the assessee had expired on 21.03.2017 due to liver failure, much before the initiation of the reassessment proceedings. It was submitted that the deceased’s wife was illiterate, and his son lived separately; hence, none of the statutory notices or orders served via the assessee’s registered email were known to the family. The family only came to know of the assessment order when a recovery notice was received in late 2022, after which the legal heir consulted a tax professional and filed the appeal. Considering the reasons and in the interest of substantial justice, the CIT(A) condoned the delay in filing the appeal and admitted it for adjudication. In the appeal, the legal heir submitted that the assessment order passed under section 144 was invalid since the notices under sections 142(1) and 148 of the Act were issued after the death of the assessee and in his name, rendering the proceedings void. It was further submitted that the cash deposits and investments were sourced from the sale of ancestral agricultural land amounting to Rs. 4,35,00,000/-, out of which the deceased’s share was Rs. 54,54,800/-. Various supporting documents such as the sale deed, bank statements, cash book, and details of commission and ITO vs. Late Khodaji Ranchhodji Thakor Legal Heir Narendrakumar Khodaji Thakor Asst. Year : 2017-18 5 interest income were filed, stating that the total taxable income was below the basic exemption limit and that the additions made by the AO were contrary to law and natural justice. The CIT(A), after carefully considering the submissions, the assessment order, and the documents placed on record, observed that the assessee had expired on 21.03.2017, whereas the notice under section 148 was issued on 31.03.2021 — nearly four years after his death. The Commissioner noted that the Assessing Officer appeared unaware of the death and had proceeded to issue notices and frame the assessment in the name of a deceased person. The CIT(Appeals) held that a notice under section 148 can only be issued to a living person, and any assessment made pursuant to a notice issued in the name of a dead person is null and void in law. The CIT(A) referred to the legal principle that jurisdictional requirements under section 148 are mandatory, and non-compliance renders the entire reassessment proceedings invalid. It was also noted that section 292BB, which cures defects in the service of notice, applies only to a living assessee and cannot validate a notice issued in the name of a deceased person. Further, the CIT(A) relied on the judgment of the Hon’ble Delhi High Court in Mrs. Sripathi Subbaraya Manohara (Legal Heir of Late Sripathi Subbaraya Gupta) v. PCIT, Delhi (W.P. (C) No. 2678/2020, CM 9286/2020), wherein it was held that a notice issued in the name of a dead person is invalid and the proceedings based thereon are non est in the eyes of law. In light of these facts and judicial precedents, the CIT(A) held that the notice issued under section 148 and the assessment framed under section 144 in the name of the deceased assessee were void ab initio and without jurisdiction. Consequently, the entire assessment proceedings were declared invalid and annulled. Accordingly, the CIT(A) held that the reassessment proceedings initiated against the deceased person were bad in law and annulled the ITO vs. Late Khodaji Ranchhodji Thakor Legal Heir Narendrakumar Khodaji Thakor Asst. Year : 2017-18 6 assessment order passed by the Assessing Officer. The appeal of the assessee was, therefore, allowed.