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Facts
The assessee, Shri Nileshwar Damodar Prabhu, filed a return of income which was processed. The case was later reopened as the sale consideration of an immovable property was below stamp duty value. The assessee passed away during the assessment proceedings, and the Assessing Officer (AO) passed an order in the name of the deceased.
Held
The Tribunal held that the assessment order passed in the name of a deceased assessee, when the AO was aware of the death, is void-ab-initio. The AO has a statutory duty to include the legal heirs in such cases.
Key Issues
Whether an assessment order passed in the name of a deceased assessee is valid in the eyes of law.
Sections Cited
147, 148, 143(1), 143(2), 142(1), 50C, 43CA, 57, 250, 151, 148A, 144B(8)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI, VICE – & SHRI SOUNDARARAJAN K.
ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER
This is an appeal filed by the assessee challenging the order of NFAC, Delhi dated 13/06/2025 in respect of the A.Y. 2017-18 and raised the following grounds: 1. The order of the learned Commissioner of Income Tax [Appeals], NFAC, Delhi passed under Section 250 of the Act dated 13/06/2025 in so far as it is against the Appellant, is opposed to law, equity, Page 2 of weight of evidence, probabilities and the facts and circumstances in the Appellant's case.
2. The Appellant denies himself liable to be taxed over and above his returned total income of Rs. 94,97,220/- on the facts and circumstances of the case.
3. The learned Commissioner of Income Tax [Appeals] erred in confirming the disallowance of brought forward Long Term Capital Loss made by the learned assessing officer amounting to Rs. 46,23,647/- on the facts and circumstances of the case.
The learned Commissioner of Income Tax [Appeals] failed to appreciate that the said Long Term Capital Loss was carried forward to future assessment years from A.Y. 2015-16 and further was not justified in giving an erroneous finding that the Appellant had incurred the said long term capital loss of Rs. 46,23,647/- in A.Y. 2011-12 on the facts and circumstances of the case.
5. The learned Commissioner of Income Tax [Appeals] failed to appreciate that the Appellant is eligible for set-off of brought forward Long Term Capital Loss of Rs. 46,23,647/- against the Long Term Capital Gain income earned during the year of Rs. 66,38,872/- on the facts and circumstances of the case.
6. The findings of the learned Commissioner of Income Tax [Appeals] against the Appellant in the order passed u/s. 250 of the Act is perverse, contrary to the facts, without factual foundation and the findings are not correct on the facts and circumstances of the case.
7. The Appellant craves leave of this Hon'ble Income Tax Appellate Tribunal to add, alter, delete or substitute any or all of the above grounds as may be necessary at the time of hearing of the appeal.
For the above and other grounds that may be urged at the time of the hearing of the appeal, the Appellant prays that the appeal may be allowed in the interest of justice.”
The brief facts of the case are that the assessee Shri Nileshwar Damodar Prabhu filed his return of income on 27/07/2017. The said return was processed u/s. 143(1). Subsequently, based on the information that the assessee had sold an immovable property for a consideration which Page 3 of is below the stamp duty value of the property, the case was reopened u/s. 147 of the Act and notice u/s. 148 was issued. The assessee also filed his return of income on 24/08/2022. Thereafter the case was transferred to faceless assessment unit and a notice u/s. 143(2) was issued on 10/01/2023. To the said notice, the wife of Shri Nileshwar Damodar Prabhu filed her objection that her husband Shri Nileshwar Damodar Prabhu had passed away on 06/12/2022 and also enclosed the death certificate and other relevant details. Thereafter the case has been again transferred to the jurisdictional assessing officer to bring the legal heir on record and notices u/s. 142(1) were issued on 02/05/2023 and 15/05/2023. The legal heir of the deceased assessee submitted certain details but the AO had invoked section 50C/43CA of the Act on the ground that the sale consideration shown by the assessee is below the stamp duty value of the property. The legal heir of the deceased assessee filed her reply and submitted that the difference amount of Rs. 25,51,000/- was already shown in the return of income filed pursuant to the notices issued u/s. 148 of the Act. The AO accepted the said objections and dropped the further proceedings in respect of the said long term capital gains. The AO had also proposed to disallow the interest expenses since no supporting documents were filed by the deceased assessee. The AO had not accepted the objections and confirmed the interest disallowance of Rs. 9,00,000/- and Rs. 2,50,000/- claimed u/s. 57 of the Act. Similarly, the AO had disallowed the set off of long term capital loss against the long term capital gains. As against the said order, the legal heir of the deceased assessee filed an appeal before the NFAC, Delhi. The Ld.CIT(A) had allowed the disallowance of interest expenses whereas confirmed the disallowance of the set off of the long term capital loss as against the long term capital gains. The Ld.CIT(A) thereby confirmed the order of the AO which was made in the name of the deceased assessee. The assessee challenged the said order before this Tribunal and also raised an additional ground which goes into the root of the matter. In the additional ground, the assessee claimed that the assessment order made on the deceased person is an illegal one. The assessee also raised several additional grounds raising the plea that the Page 4 of notice issued u/s. 148 is bad in law since the proper sanction was not granted by the specified authority as per section 151 of the Act. Similarly, the assessee had disputed the 148 notice since the order u/s. 148A(d) was not served on the assessee.
At the time of hearing, the Ld.AR submitted that the assessment order dated 26/05/2023 stood in the name of the deceased assessee who died on 06/12/2022 and therefore the order is not a valid order in the eye of law. The Ld.AR also argued the case on merits and prayed to consider the legal plea that no assessment could be made on the deceased person as the first ground and thereafter if necessary to consider the issue on merits.
4. The Ld.DR supported the orders of the lower authorities and prayed to dismiss the appeal.
We have heard the arguments of both sides and perused the materials available on record.
We have perused the assessment order dated 26/05/2023 and in paragraph no. 3, it was specifically mentioned that the assessee has passed away on 06/12/2022 and the L/R has also produced the death certificate of the assessee to the faceless assessment unit and based on the said details furnished by the legal heir of the deceased assessee, the case of the assessee has been transferred from the faceless assessment unit to the jurisdictional assessing officer as per section 144B(8) of the Act. From the said facts, it is clear that the death of the assessee was known to the AO before passing the assessment order. When the assessee was deceased, then it is the duty of the AO to include the legal heirs and thereafter proceed to finalise the assessment in accordance with law. Having failed to carry out the statutory duty, the assessment order made on the deceased assessee could not be termed as a valid one and therefore we do not find any difficulty in terming the said assessment order as void-ab-initio and therefore we are setting aside the order of the AO dated 26/05/2023 which was made in the name of Page 5 of the deceased assessee. Since we are allowing the appeal based on the legal plea that the assessment could not be made on the deceased person, we are not adjudicating the other grounds as well as the additional grounds raised by the assessee.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 08th January, 2026.