Tax notice to dead person ruled invalid - all subsequent proceedings void

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Case Name

Sripathi Subbaraya Manohara Vs. Principal Commissioner of Income Tax & Anr., (High Court of Delhi)

W.P.(C) 2678/2020 & CM 9286/2020

Date: 14th July 2021

Key Takeaways

1. Jurisdictional Requirement: A notice under Section 148 must be issued to the correct living person - this isn’t just a procedural formality but a fundamental requirement for the tax department to have jurisdiction
2. No Obligation to Inform: Legal heirs have no statutory duty to inform the tax department about an assessee’s death
3. Section 292B Doesn’t Apply: The court clarified that Section 292B (which deals with procedural defects) doesn’t cover situations where notices are issued to dead persons
4. Writ Petition Maintainable: Even when appeal remedies exist, a writ petition can be filed to challenge jurisdictional issues

Issue

The central legal question was: Can a notice under Section 148 of the Income Tax Act issued in the name of a deceased person be considered valid, and can subsequent assessment proceedings based on such notice be sustained?

Facts

• June 17, 2014: Late Shri Sripathi Subbaraya Gupta passed away
• March 22, 2019: The tax department issued a notice under Section 148 to reopen assessment for AY 2012-13 - but they sent it to the deceased person
• November 14, 2019: When no response came, the department passed an assessment order and issued penalty notices
• November 21, 2019: The petitioner (widow) first became aware of these proceedings when she received the assessment order and penalty notices

The tax department had information that the deceased had deposited Rs. 11,55,000 in a bank account but hadn’t filed his tax return, so they wanted to reopen the assessment.

Arguments

Petitioner’s Arguments:

• The notice dated March 22, 2019 was issued to a dead person (who died in 2014), making it invalid
• All subsequent proceedings were therefore void
• Relied on the precedent set in Savita Kapila vs. Assistant Commissioner of Income-Tax (WP© 3258/2020)

Tax Department’s Arguments:

• Raised a preliminary objection that the petitioner should have filed an appeal instead of a writ petition
• Claimed they weren’t aware of the assessee’s death
• Argued that the petitioner should have informed them about the death
• The department had received information about undisclosed deposits and followed proper procedure for reopening

Key Legal Precedents

The court relied heavily on its earlier decision in Savita Kapila vs. Assistant Commissioner of Income-Tax (WP© 3258/2020), which established several key principles:

1. Sumit Balkrishna Gupta v. Asst. Commissioner of Income Tax, Circle 16(2), Mumbai & Ors., (2019) 2 TMI 1209- Bombay High Court - established that issuing notice to correct person is a condition precedent
2. Alamelu Veerappan [2018 (6) TMI 760 – Madras High Court] - held there’s no statutory obligation on legal representatives to inform about death
3. Rajender Kumar Sehgal [2018 (12) TMI 697 (DELHI)] - established that Section 292B doesn’t apply to notices issued to dead persons
4. Chandreshbhai Jayantibhai Patel [2019 (1) TMI 353 – Gujarat High Court] - similar ruling on Section 292B

The court also clarified that Section 159 of the Income Tax Act (which deals with legal representatives) doesn’t apply when proceedings weren’t initiated while the assessee was alive.

Judgement

The Delhi High Court ruled completely in favor of the petitioner. Here’s their reasoning:

Legal Reasoning:

• The court held that issuing a notice under Section 148 is the “foundation for reopening of an assessment”
• The requirement to issue notice to the correct person “is not merely a procedural requirement but is a condition precedent to the impugned notice being valid in law”
• Since the notice was issued to a dead person, it was “null and void”

Orders Made:

1. The notice dated March 22, 2019 under Section 148 was set aside
2. The assessment order dated November 14, 2019 was set aside
3. The penalty notices dated November 14, 2019 were set aside
4. No costs were awarded

FAQs

Q1: What happens if the tax department accidentally sends a notice to someone who has died?

A: The notice becomes completely invalid and void. All subsequent proceedings based on that notice are also invalid and must be set aside.

Q2: Do family members have to inform the tax department when someone dies?

A: No, there’s no legal obligation for legal heirs to inform the income tax department about an assessee’s death.

Q3: Can the tax department use Section 292B to cure this defect?

A: No, the court clearly held that Section 292B (which deals with procedural defects) doesn’t apply when notices are issued to dead persons.

Q4: Should the petitioner have filed an appeal instead of a writ petition?

A: The court held that when there’s a jurisdictional issue (like issuing notice to a dead person), a writ petition is maintainable even if appeal remedies exist.

Q5: What if the tax department wasn’t aware of the death?

A: The court held that the department’s knowledge or lack thereof is irrelevant. The legal requirement is that the notice must be issued to the correct living person.

Q6: Can the tax department start fresh proceedings now?

A: The judgment doesn’t prevent the department from initiating fresh proceedings, but they would need to follow proper procedures and issue notices to the correct legal representatives if they want to pursue the matter.

1. This petition has been filed by the petitioner challenging the Notice

dated 22.03.2019 issued under Section 148 of the Income Tax Act, 1961

(hereinafter referred to as the ‘Act’); Assessment Order dated 14.11.2019

under Section(s) 144/147 of the Act; as also the Penalty Notice(s) dated

14.11.2019 under Section 274 read with Section 271(1)(c) and Section

274 read with Section 271F of the Act.

2. The above-mentioned Impugned Notices and the Assessment

Order have been issued / passed by the respondents in the name of Late

Shri Sripathi Subbaraya Gupta – the Assessee and relate to the

Assessment Year 2012-13.

3. It is the case of the petitioner, that Late Shri Gupta had, however,

expired on 17.06.2014 and in support of this submission, the petitioner

has placed on record the Death Certificate of Late Shri Gupta issued by

the Department of Public Health, Corporation of Chennai.

4. It is the case of the petitioner that she was not aware of the above

proceedings emanating from the Impugned Show Cause Notice dated

22.03.2019, until 21.11.2019, when the petitioner received the Impugned

Assessment Order and the Penalty Notices. Thereafter on enquiry,

representation and follow-up, the petitioner became aware of the

Impugned Notice under Section 148 of the Act, leading to filing of the

present petition.

5. The learned counsel for the petitioner submits that the Impugned

Notice dated 22.03.2019 having been issued in favour of a dead person,

was invalid and all proceedings thereafter, were non-est. In support of

this contention, the petitioner places reliance on the judgment of this

Court in Savita Kapila vs. Assistant Commissioner of Income-Tax,

(WP(C) 3258/2020).

6. On the other hand, while the learned counsel for the respondents

does not deny the factum of the death of the assessee- Late Shri Gupta, he

raises a preliminary objection on the maintainability of the present

petition on the ground of availability of an alternate efficacious remedy in

form of an appeal, being open to the petitioner.

7. On facts, he further submits that information was received by the

Department that the assessee had deposited a cash amount of

Rs.11,55,000/- (Rupees Eleven Lakhs Fifty-five Thousand) in a savings

bank account maintained with the Indian Bank. As the assessee had not

filed his return of income, the Assessing Officer, having reason to believe

that the said amount had escaped assessment for the Assessment Year

2012-13, re-opened the same under Section 147 of the Act and Impugned

Notice under Section 148 of the Act was issued to the assessee, after

getting the prior approval of the Principal Commissioner of Income Tax.

As the assessee failed to file the return of income, further Notices were

issued to the assessee and as no explanation was received from the

assessee, the Impugned Assessment Order dated 14.12.2019 was passed.

He submits that the Assessing Officer was not aware and had no

knowledge about the demise of the assessee as in spite of issuance of

various Notices to the petitioner, the same was not informed to the

Assessing Officer by the petitioner.

8. We have considered the submissions made by the learned counsels

for the parties.

9. The objections raised by the learned counsel for the respondents on

the maintainability of the present petition, as also on merit, are no longer

res integra, having been elaborately discussed and rejected by this Court

in its judgment in Savita Kapila (supra) authored by one of us (Hon’ble

Mr. Justice Manmohan). Therefore, instead of re-visiting the issues

raised, we would merely reproduce the findings given by this Court in its

referred judgment:

“ AN ALTERNATIVE STATUTORY REMEDY

DOES NOT OPERATE AS A BAR TO

MAINTAINABILITY OF A WRIT PETITIN

WHERE THE ORDER OR NOTICE OR

PROCEEDINGS ARE WHOLLY WITHOUT

JURISDICTION TO INITIATE ASSESSMENT

PROCEEDINGS. THE MERE FACT THAT

SUBSEQUENT ORDERS HAVE BEEN PASSED

WOULD NOT RENDER THE CHALLENGE TO

JURISDICTION INFRUCTUOUS.

24. Further, the fact that an assessment order

has been passed and it is open to challenge by

way of an appeal, does not denude the petitioner

of its right to challenge the notice for assessment

if it is without jurisdiction. If the assumption of

jurisdiction is wrong, the assessment order passed

subsequent would have no legs to stand. If the

notice goes, so does the order of assessment. It is

trite law that if the Assessing Officer had no

jurisdiction to initiate assessment proceeding, the

mere fact that subsequent orders have been

passed would not render the challenge to

jurisdiction infructuous.

THE SINE QUA NON FOR ACQUIRING

JURISDICTION TO REOPEN AN ASSESSMENT

IS THAT NOTICE UNDER SECTION 148

SHOULD BE ISSUED TO A CORRECT PERSON

AND NOT TO A DEAD PERSON.

CONSEQUENTLY, THE JURISDICTIONAL

REQUIREMENT UNDER SECTION 148 OF THE

ACT, 1961 OF SERVICE OF NOTICE WAS NOT

FULFILLED IN THE PRESENT INSTANCE.

26. In the opinion of this Court the issuance of

a notice under Section 148 of the Act is the

foundation for reopening of an assessment.

Consequently, the sine qua non for acquiring

jurisdiction to reopen an assessment is that such

notice should be issued in the name of the correct

person. This requirement of issuing notice to a

correct person and not to a dead person is not

merely a procedural requirement but is a

condition precedent to the impugned notice being

valid in law. [See Sumit Balkrishna Gupta v.

Asst. Commissioner of Income Tax, Circle 16(2),

Mumbai & Ors., (2019) 2 TMI 1209- Bombay

High Court].

27. xxxxx Consequently, in view of the above, a

reopening notice under Section 148 of the Act,

1961 issued in the name of a deceased assessee is

null and void.

AS IN THE PRESENT CASE PROCEEDINGS

WERE NOT INITIATED/PENDING AGAINST

THE ASSESSEE WHEN HE WAS ALIVE AND

AFTER HIS DEATH THE LEGAL

REPRESENTATIVE DID NOT STEP INTO THE

SHOES OF THE DECEASED ASSESSEE,

SECTION 159 OF THE ACT, 1961 DOES NOT

APPLY TO THE PRESENT CASE.

30. Section 159 of the Act, 1961 applies to a

situation where proceedings are initiated/pending

against the assessee when he is alive and after his

death the legal representative steps into the shoes

of the deceased assessee. Since that is not the

present factual scenario, Section 159 of the Act,

1961 does not apply to the present case.

31. THERE IS NO STATUTORY REQUIREMENT

IMPOSING AN OBLIGATION UPON LEGAL

HEIRS TO INTIMATE THE DEATH OF THE

ASSESSEE.

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) [2018

(6) TMI 760 – Madras High Court] 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.”

34. Consequently, the legal heirs are under no

statutory obligation to intimate the death of the

assessee to the Revenue.

SECTION 292B OF THE ACT, 1961 HAS BEEN

HELD TO BE INAPPLICABLE, VIS-À-VIS,

NOTICE ISSUED TO A DEAD PERSON IN

RAJENDER KUMAR SEHGAL [2018 (12) TMI

697 (DELHI)], CHANDRESHBHAI

JAYANTIBHAI PATEL [2019 (1) TMI 353 –

GUJARAT HIGH COURT] AND ALAMELU

VEERAPPAN [2018 (6) TMI 760 – MADRAS

HIGH COURT].

35. This Court is of the opinion that issuance of

notice upon a dead person and non-service of

notice does not come under the ambit of mistake,

defect or omission. Consequently, Section 292B of

the Act, 1961 does not apply to the present case.

IN RAJINDER KUMAR SEHGAL (SUPRA) A

COORDINATE BENCH OF THIS COURT HAS

HELD THAT SECTION 292BB OF THE ACT,

1961 IS APPLICABLE TO AN ASSESSEE AND

NOT TO A LEGAL REPRESENTATIVE.

38. This Court is also of the view that Section

292BB of the Act, 1961 is applicable to an

assessee and not to a legal representative.

Further, in the present case one of the legal heirs

of the deceased assessee, i.e. the petitioner, had

neither cooperated in the assessment proceedings

nor filed return or waived the requirement of

Section 148 of the Act, 1961 or submitted to

jurisdiction of the Assessing Officer. She had

merely uploaded the death certificate of the

deceased assessee.

40. Consequently, the applicability of Section

292BB of the Act, 1961 has been held to be

attracted to an assessee and not to legal

representatives.”

10. We have enquired from the learned counsel for the respondents as

to whether the above judgment has been challenged. The learned counsel

for the respondents fairly submits that the same has not been challenged

so far. He submits that this may be because the period of limitation has

been extended by the Supreme Court in the orders passed in Re:

Cognizance for Extension of Limitation, in Suo Motu Writ Petition

(Civil) No. 3 of 2020. However, in our view, the judgment having been

pronounced on 16.07.2020, we are bound by the same and, even

otherwise, see no reason to differ from the law laid down therein.

11. In the present case as well, the Impugned Notice dated 22.03.2019

under Section 148 of the Act, having been issued in the name of a dead

person, is null and void, and all consequent proceedings/orders, including

the Assessment Order and Notices dated 14.11.2019, being equally

tainted, are liable to be set aside.

12. Consequently, the Impugned Notice(s) dated 22.03.2019 and

14.11.2019 are set aside. The Impugned Assessment Order dated

14.11.2019 is also set aside.

13. The petition is accordingly allowed. There shall be no order as to

costs.

NAVIN CHAWLA, J

MANMOHAN, J

JULY 14, 2021