LATE ASHVINBHAI UMEDBHAI PATEL (DECEASED) BY LEGAL HEIR SMIT ASHVINBHAI PATEL,KHEDA vs. THE ITO, WARD-1, NADIAD

At the outset, we note that there is a delay of 536 days in filing of the present appeal. The assessee has filed an application for condonation of delay supported by an affidavit explaining the reasons for the delay. It has been explained that the assessee, Shri Ashwinbhai Umedbhai Patel, had expired on 03.08.2013, much before initiation of the present proceedings, and therefore the notices issued by the Department could not be attended. It is further explained that the notices were sent to the email ID of the assessee’s erstwhile Chartered Accountant, Shri Amrish G. Shah, who himself had also expired, and therefore the legal heir of the deceased assessee was not aware of the proceedings. The legal heir came to know of the matter only when he visited India and found that the bank accounts and fixed deposits had been attached, whereafter he consulted a tax practitioner and subsequently a senior chartered accountant in Ahmedabad who advised him to file the present appeal. Thus, the delay has been explained as being on account of circumstances beyond the control of the legal heir and not due to any deliberate or negligent conduct.

On careful consideration of the explanation furnished and the Affidavit placed on record, we are satisfied that sufficient cause has been shown for the delay in filing the appeal. The Hon’ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji [1987] 167 ITR 471 (SC) has laid down that while considering applications for condonation of delay, a liberal approach has to be adopted in order to advance substantial justice. In the facts of the present case, we find that the delay was occasioned due to the death of the assessee, subsequent non-service of notices to the legal heir, and the further death of the erstwhile Chartered Accountant, which prevented timely knowledge and compliance. These reasons, in our considered view, constitute sufficient cause for the delay in filing the appeal. Accordingly, in the interest of justice, the delay of 536 days in filing the appeal is hereby condoned and the appeal is admitted for adjudication on merits.

The brief facts of the case are that the assessee, Shri Ashwinbhai Umedbhai Patel, an individual resident of Nadiad, did not file his return of income for Assessment Year 2011-12. On the basis of information available with the department regarding deposits in his bank account, the case was reopened under section 147 of the Income-tax Act (the “Act”) by issuing notice under section 148 on 28.03.2018. Despite repeated notices issued under section 142(1) of the Act along with questionnaires, the assessee did not comply. In the absence of any explanation, the Assessing Officer proceeded ex parte under section 144 read with section 147 of the Act and completed the assessment on 11.12.2018. On the perusal of the Indian Bank account of the assessee, the Assessing Officer noted cash deposits of Rs.10,60,000 along with clearing entries and interest income, aggregating to Rs.11,15,889. Further, certain fixed deposit receipts were found to be jointly held with family members, and the AO considered the total of FDRs and related interest aggregating to Rs.5,03,511 as income of the assessee. Accordingly, the AO made additions of Rs.10,60,000 on account of unexplained cash deposits and Rs.5,03,511 on account of FDRs and interest, thereby determining the total income at Rs.15,63,511. Penalty proceedings under section 271(1)(b) were also initiated for failure to comply with notices, and penalty of Rs.10,000 was imposed.

Aggrieved, the assessee preferred an appeal before the CIT(Appeals), and contended that the cash deposits were out of agricultural income, past savings, and withdrawals from the bank, and that the FDRs and related interest belonged to family members and not to him. It was also contended that the assessment order was bad in law as the assessee had expired in 2013 and no return was filed thereafter. During the appellate proceedings, notices were issued on several dates between 2021 and 2023, but the assessee did not file any submissions or seek adjournments. In the absence of any compliance, the CIT(A) proceeded ex parte. The CIT(A) observed that filing of an appeal entails not only formal submission but also effective prosecution, and since the assessee failed to pursue the matter despite several opportunities, the appeal had to be adjudicated on the basis of material on record. On merits, the CIT(A) found no reason to interfere with the additions made by the Assessing Officer, as the assessee had not provided any supporting evidence to substantiate his claims either at the assessment stage or at the appellate stage. Accordingly, the CIT(A) upheld the additions made under section 144 read with section 147 and dismissed the appeal of the assessee.

The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.

Before us, the Counsel for the assessee submitted that both the reassessment order and the penalty order are wholly without jurisdiction and bad in law as they were passed in the name of a deceased person. It was pointed out that Shri Ashvinbhai Umedbhai Patel had expired on 03.08.2013, whereas the notice under section 148 was issued much later on 28.03.2018. Since the assessee was already deceased at the time of issue of notice, the entire reassessment proceedings are void ab initio and a nullity in the eyes of law. The Counsel emphasized that there is no legal obligation on the part of the legal heir to intimate the department about the death of the assessee, and the settled position of law is that a notice issued on a dead person is unenforceable. Reliance was placed on the decision of the ITAT Rajkot in the case of Late Smt. Bhavnaben K. Punjani v. PCIT, where following the Delhi High Court judgment in Savita Kapila v. ACIT [2020] 118 taxmann.com 46 (Delhi) and the Gujarat High Court decision in Pravinchandra A. Shah v. ITO [2023] 154 taxmann.com 616 (Guj), it was held that proceedings initiated against a deceased person are invalid. Reliance was also placed on the decision of the ITAT Allahabad in Late Anand Jeewan Verma v. ITO, order dated 30.09.2024, which followed the same principle. The Counsel further submitted that apart from the legal ground, the merits of the case were never considered by the CIT(A) since the appeal was dismissed ex parte for non- compliance. It was argued that the assessee had valid reasons for non-compliance, including the death of the assessee himself and also the death of the chartered accountant handling the matter. The Counsel for the assessee submitted that the addition of Rs.15,63,510 under section 69A was unjustified. Out of this, Rs.10,60,000 represented cash deposits in the bank account which were explained as arising from agricultural income, past savings, and withdrawals, while the balance pertained to FDRs jointly held with family members along with accrued interest. It was contended that the FDRs were investments of family members and could not be added in the hands of the deceased assessee. The Counsel argued that the assessee was primarily a farmer with no independent taxable income and therefore invoking section 69A merely on the basis of bank deposits and FDRs was contrary to law. The Counsel also submitted that the reassessment proceedings were without jurisdiction as deposit in a bank account by itself does not constitute “reason to believe” that income has escaped assessment, relying on binding judicial precedents. The Counsel therefore prayed that the assessment and penalty orders being void and unenforceable deserve to be quashed. In the alternative, vide submission dated 28-07-2025, the Counsel for the assessee submitted that the matter may be restored to the file of the CIT(A) for fresh consideration of the legal grounds and merits with proper opportunity of hearing to the legal heir.

In response, the Ld. DR placed reliance on the observations made by the Assessing Officer and Ld. CIT(Appeals) in their respective orders.

We have heard the rival contentions and perused the material on record. On going through the case records, we observe that at the time of issuance of notice by the Assessing Officer, the assessee had since expired. These facts are not in dispute. But also, it is an admitted fact that the legal heirs of the assessee neither surrendered the PAN nor did they participate in assessment proceedings. The Counsel for the assessee placed reliance on the case of Late Smt. Bhavnaben K. Punjani v. PCIT, where following the Delhi High Court judgment in Savita Kapila v. ACIT [2020] 118 taxmann.com 46 (Delhi) that legal heirs are not under any obligation to inform the Department regarding the demise of the assessee. Accordingly, since at the time of issuance of notice, the assessee had expired and the Act does not cast any obligation on the legal heirs to inform the Department regarding demise of the assessee, the assessment order is void ab initio.

We shall first deal with the above issue. In the case of Late Smt. Bhavnaben K. Punjani v. PCIT, the decision was passed with respect to 263 proceedings, in which ITAT held an assessment order passed in the name of deceased person cannot be a subject matter of revision in 263 proceedings. But, here we are dealing with re-assessment proceedings and it is a well settled law that ratio of another decision cannot be applied to another case unless parity of facts is established. Accordingly, we are of the considered view that reliance cannot be placed on the above decision with respect to the facts of the present case. Therefore, it is not a sacrosanct law that even when evidently and apparently, the facts show that the legal heirs were aware about the on-going assessment proceedings, that they can choose to conveniently remain non-participative, they are precluded from later relying on judicial precedents which have held that assessment proceedings on a deceased person are void. We further take note that in most of the decisions in which this principle has been upheld, were on the fact that despite prior intimation by legal heir of the deceased assessee, the Assessing Officer proceeded to pass assessment order in the name of a deceased person, without bringing the legal heir of the assessee on record. We also have to take cognizance of the fact that in all cases, the Revenue Authorities cannot have knowledge about whether the assessee is surviving or not. As per sub-section (1) of section 159 of the Act, 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. Further, as per sub-section (3) of the said section, the legal representative of the deceased shall be deemed to be an assessee. Hence, the legal representative of the deceased person is required to file the income tax return on his/her behalf for the income earned as representative assesses of the deceased person. Accordingly, it cannot be stated that there is no legal obligation on part of legal heir of the assessee, under any circumstance whatsoever, to give any intimation regarding the death of the assessee to the Income Tax Department. If, however, the Assessing Officer despite having prior intimation about death of the assessee, still proceeds to pass an assessment order in the name of deceased assessee, without bringing the legal heirs of the assessee on record, then that assessment order is liable to be set aside. But, if the Assessing Officer has no knowledge about the death of the assessee, then it cannot be held that in all such cases, the Assessing Officer cannot proceed to pass an assessment order. If the facts reveal that legal heir of the assessee were aware about on- going assessment proceedings, and chose not to participate knowingly and neither did they inform the Assessing Officer, then the assessment proceedings cannot be set aside as being non-est.

Now coming to the facts of the present case, we observe that the assessee had since expired in 2013 and re-assessment proceedings were initiated in 2018. However, legal heir of the assessee did not inform the concerned Assessing Officer regarding the death of the assessee nor was the PAN of the assessee surrendered. Accordingly, in so far as the Assessing Officer is concerned, there is nothing on record to show that he was aware of the death of the assessee at the time of initiation of re-assessment proceedings. On the other hand, legal heir of the assessee submitted it was only when the bank accounts and Fixed Deposits of the assessee were attached that they came to know about passing of assessment order. There is nothing on record to show the legal heir of the assessee had knowledge about on-going re- assessment proceedings. Accordingly, here we have a situation where on one hand the Assessing Officer was not was aware of the death of the assessee at the time of initiation of re-assessment proceedings or at the time of passing of assessment order and legal heir of the assessee had no knowledge about on-going re- assessment proceedings. In such a situation, we are of the considered view that it would not be correct to hold that assessment order should be set aside as being non-est, in view of the specific language of section 159(1) and (3) of the Act. Such a situation, in our view would arise, when the Assessing Officer despite having prior intimation does not bring the legal heir of the assessee on record. Accordingly, in light of view of the specific language of section 159(1) and (3) of the Act, and the alternate contention of the Counsel for the assessee, we deem it proper to set aside the matter to the file of the Assessing Officer for purpose of bringing the legal heirs of the assessee on record and pass appropriate orders after giving due opportunity of hearing and to place on record materials/ evidences in support of the case.

In the result, the appeal of the assessee is allowed for statistical purposes.

We note that ITA 1106/Ahd/2015 in the assessee’s appeal with respect to levy of penalty on the aforesaid transactions.

Since, we have restored the quantum proceedings to the file of the Assessing Officer in terms of above directions, the penalty is also restored to the file of the Assessing Officer.

In the result, both the appeals of the assessee are allowed for statistical purposes.