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Income Tax Appellate Tribunal, DELHI ‘H’ BENCH,
Before: SHRI N.K. BILLAIYA, & SHRI CHALLA NAGENDRA PRASAD
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-
This appeal by the assessee is preferred against the order dated 20.02.2019 framed u/s 263 of the Income-tax Act, 1961 [the Act, for short] by the PCIT, Delhi - 5 pertaining to A.Y 2014-15.
The assessee has raised the following grounds of appeal:
The Ld. PCIT has erred on facts and in law in passing an order u/s 263 of the Act in the case of deceased person without issuing any notice u/s 263 to the legal heir of the deceased.
2. The Ld. PCIT has erred on facts and in law in passing the order in the case of deceased person without giving any opportunity of being heard to the legal heir of the deceased.
3. The Ld. PCIT has erred on facts and in law in passing an order u/s 263 of the Act ignoring the specific provision of section 159 of the Act which prohibit any action u/s 263 in the case of a deceased.
4. The Ld. PCIT has erred on facts and in law in passing an order u/s 263 of the Act wholly on assumptions and presumptions holding that the AO did not carry out any enquiry with regard to the claim of exempt LTCG u/s 10(38) of the Act.
5. The appellant craves for liberty to add fresh ground(s) of appeal and also to amend, alter, modify any of the ground(s) of appeal.”
The peculiar facts of the case are that the assessee filed his return of income on 25.03.2015 declaring total income of Rs. 2,88,750/-. The returned income was assessed as such vide order dated 20.07.2016 framed u/s 143(3) of the Act.
The assessee passed away on 04.10.2016, as per the death certificate on record. The legal heir, Shri Vishwanath Aggarwal registered himself as representative assessee in the Income-tax portal on 28.10.2018, as is evident from the screen-shot brought on record.
The return for A.Y 2016-17 was filed by the L/H on 29.03.2017.
With these undisputed facts on record, we find that the PCIT issued notice u/s 263 of the Act on 14.12.2018 in the name of the dead person.
The order u/s 263 of the Act, pursuant to the proceedings, was also framed in the name of a dead person.
The Hon'ble Gujarat High Court in the case of Late Bhupendra Bhikalal Desai, through his L/H Shri Raju Bhupendra Desai, in Special Civil Application No. 22441 of 2019 with Ors order dated 08.03.2021, had an occasion to consider a similar grievance and held as under:
“27. A lot has been argued by Mr.M.R.Bhatt, the learned senior counsel appearing for the Revenue, by submitting that the department was not intimated about the death of the assessee and the legal heirs failed to take any steps to cancel the PAN registration in the name of the assessee and, therefore, no fault could be found with the department.
In the aforesaid context, we may refer to a decision of the Madras High Court in the case of Alamelu Veerappan vs. Income Tax Officer, Non-corporate Ward-2(2), Chennai, wherein the Madras High Court held as under :
"14. The issue, which falls for consideration, is as to whether the impugned notice under Section 148 of the Act issued in the name of the dead person - the said Mr.S.Veerappan is enforceable in law and the subsidiary issue being as to whether the petitioner, being the wife of the said Mr.S.Veerappan, can be compelled to participate in the proceedings and respond to the impugned notice. The fact that the said Mr.S.Veerappan died on 26.1.2010 is not in dispute. If this fact is not disputed, then the notice issued in the name of the dead person is unenforceable in the eye of law.
The Department seeks to justify their stand by contending that they were not intimated about the death of C/SCA/22441/2019 JUDGMENT the assessee, that the legal heirs did not take any steps to cancel the PAN registration in the name of the assessee and that therefore, the Department was justified in directing the petitioner to cooperate in the proceedings pursuant to the impugned notice.
The settled legal principle being that a notice issued in the name of the dead person is unenforceable in law. If such is the legal position, would the Revenue be justified in contending that they, having no knowledge about the death of the assessee, are entitled to plead that the notice is not defective. In my considered view, the answer to the question should be definitely against the Revenue.
This Court supports such a conclusion with the following reasons: Admittedly, the limitation period for issuance of notice for reopening expired on 31.3.2017. The impugned notice was issued on 30.3.2017 in the name of the dead person. On being intimated about the death, the Department sent the notice to the petitioner - his spouse to participate in the proceedings. This notice was well beyond the period of limitation, as it has been issued after 31.3.2017. If we approach the problem sans
complicated facts, a notice issued beyond the period of limitation i.e. 31.3.2017 is a nullity, unenforceable in law and without jurisdiction. Thus, merely because the Department was not intimated about the death of the assessee, that cannot, by itself, extend the period of limitation prescribed under the Statute. Nothing has been placed before this Court by the Revenue to show that there is a statutory obligation on the C/SCA/22441/2019 JUDGMENT part of the legal representatives of the deceased assessee to immediately intimate the death of the assessee or take steps to cancel the PAN registration.
In such circumstances, the question would be as to whether Section 159 of the Act would get attracted. The answer to this question would be in the negative, as the proceedings under Section 159 of the Act can be invoked only if the proceedings have already been initiated when the assessee was alive and was permitted for the proceedings to be continued as against the legal heirs. The factual position in the instant case being otherwise, the provisions of Section 159 of the Act have no application.
The Revenue seeks to bring their case under Section 292 of the Act to state that the defect is a curable defect and on that ground, the impugned notice cannot be declared as invalid.
The language employed in Section 292 of the Act is categorical and clear. The notice has to be, in substance and effect, in conformity with or according to the intent and purpose of the Act. Undoubtedly, the issue relating to limitation is not a curable defect for the Revenue to invoke Section 292B of the Act.”
The SLP filed by the Revenue before the Hon'ble Supreme Court was dismissed by the Hon'ble Supreme Court vide order dated 03.09.2021 in Special Leave to Appeal (C) No. 13061/2021.
In light of the aforesaid judgment of the Hon'ble High Court of Gujarat, it would be pertinent to consider the provisions of section 159(1) and 159(2) of the Act, which reads as under:
“(1) Where a person dies, his legal representatives 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 subsection (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.”
A perusal of the afore-mentioned relevant provisions shows that no power has been vested on the PCIT u/s 263 of the Act for passing order in the hands of the L/R after the death of the person [assessee] as there is no reference to section 263 in the afore-mentioned provisions of the Act.
Thus, in light of the decision of the Hon'ble Gujarat High Court [supra], it can be said that the action of the PCIT by passing order u/s 263 of the Act in the hands of the deceased is outside the scope of law provided u/s 159 of the Act.
The Hon'ble Jurisdictional High Court in the case of Savita Kapila 118 taxmann.com 46, considering a similar situation has, inter alia, held as under:
“32. This Court is of the view that in the absence of a statutory provision it is difficult to cast a duty upon the legal representatives to intimate the factum of death of an assessee to the income tax department. After all, there may be cases where the legal representatives are estranged from the deceased assessee or the deceased assessee may have bequeathed his entire wealth to a charity. Consequently, whether PAN record was updated or not or whether the Department was made aware by the legal representatives or not is irrelevant. In Alamelu Veerappan (supra) it has been held "nothing has been placed before this Court by the Revenue to show that there is a statutory obligation on the part of the legal representatives of the deceased assessee to immediately intimate the death of the assessee or take steps to cancel the PAN registration."
The judgment in Pr. Commissioner of Income Tax v. Maruti Suzuki India Limited (supra) offers no assistance to the respondents. In Pr. Commissioner of Income Tax v. Maruti Suzuki India Limited (supra) the Supreme Court was dealing with Section 170 of the Act, 1961 (succession to business otherwise than on death) wherein notice under Section 143(2) of the Act, 1961 was issued to non-existing company. In that case, Department by very nature of transaction was aware about the amalgamation. However, the said judgment nowhere states that there is an obligation upon the legal representative to inform the Income Tax Department about the death of the assessee or to surrender the PAN of the deceased assessee. The relevant portion of the said judgment is reproduced hereinbelow:-
"35. In this case, the notice under Section 143(2) under which jurisdiction was assumed by the assessing officer was issued to a non-existent company. The assessment order was issued against the amalgamating company. This is a substantive illegality and not a procedural violation of the nature adverted to in Section 292B. xxxx xxxx xxxx xxxx
In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a co-ordinate Bench of two learned judges which dismissed the appeal of the Revenue in Spice Enfotainment on 2 November 2017. The decision in Spice Enfotainment has been followed in the case of the respondent while dismissing the Special Leave Petition for AY 2011-2012. In doing so, this Court has relied on the decision in Spice Enfotainment.
Consequently, the legal heirs are under no statutory obligation to intimate the death of the assessee to the revenue.”
Considering the facts of the case in hand in totality in light of the judicial decisions discussed hereinabove, we set aside the order dated 20.02.2019 framed u/s 263 of the Act by the PCIT in the name of a deceased person as bad in law.
Since the order has been quashed, assessment order dated 20.07.2016 framed u/s 143(3) of the Act by the Assessing Officer is restored.
In the result, the appeal of the assessee in is allowed.
The order is pronounced in the open court on 23.06.2023.