Notice under Section 148 of the Income Tax Act cannot be issued to a dead person – Delhi HC

Section 147 of the Income Tax Act deals with provisions of “income escaping assessment”. The grounds or reasons which led to formation of the belief that income chargeable to tax has escaped assessment must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. However can notice under Section 148 pertaining to “income escaping assessment” be issued to a dead person? A similar issue was raised before the Delhi High Court in the case of Savita Kapila vs ACIT.

Writ petition had been filed seeking a direction to the respondent to quash the notice issued to the deceased-assessee (father of the petitioner) under Section 148 of the Income Tax Act, 1961 and all the consequential proceedings emanating passed by the respondent.

Facts of the Case:-

• Information was received by the Assessing Officer (AO) that in Financial Year 2011-12, the assessee-Shri Mohinder Paul Kapila had cash deposits of Rs. 10,00,000 in his bank account, time deposits of Rs. 11,05,586 and receipts of Rs. 25,414 as per Form 26AS.
• It was noticed that no return had been filed and the source of the aforesaid deposits and receipts remained unexplained and had escaped assessment.
• Accordingly, the case of Mr. Mohinder Paul Kapila was selected under Section 147 & 148 of the Act 1961, after recording of reasons and approval of PCIT-15, Delhi.
• However, late Shri Mohinder Paul Kapila (deceased-assessee) had already expired on 21st December, 2018. The deceased assessee is survived by two sons and two daughters.
• Notice under Section 148 of the Act 1961 for A.Y. 2012-2013 was issued, i.e. on the last date of limitation, in the name of deceased assessee Shri Mohinder Paul Kapila and sent at his last known address known to the Income Tax Department.
• The impugned notice could not and was never served upon Late Shri Mohinder Paul Kapila.
• Thereafter ACIT, Delhi (AO) issued notices to the deceased assessee. The said notices were also neither served upon the assessee nor upon any of his legal heirs.
• A show-cause notice was issued to the deceased Assessee to explain why penalty under Section 271(1)(b) should not be imposed for failure to comply with notice issued under Section 142(1).
• Pursuant to another notice issued under Section 133(6), to the banks of the deceased assessee, it was revealed to the Income Tax Department that the same address of Dwarka was mentioned in the KYC and further from the documents made available by the banks a telephone number was traced and the phone call was made to the present Petitioner i.e., Savita Kapila who for the first time informed that she is the daughter of the Assessee and that the Assessee had passed away on 21st December, 2018.
• The death certificate confirming the above was the uploaded by the Petitioner on the E-Portal of the Income Tax Department.
• AO passed an order, whereby penalty u/s. 271(1)(b) of the Act, 1961 was imposed upon deceased-assessee through legal heir for non-compliance of notices issued to the deceased assessee.
• A final show-cause notice was issued to the Assessee, through legal heir, directing to file the return and produce relevant documents by 28th November, 2019, failing which the AO shall pass the assessment order under Section 144 of the Act.
• Proceedings were transferred to one of the legal heir of the deceased assessee-Ms. Savita Kapila [Petitioner] and on the same date the impugned assessment order was passed in her name and PAN, whereby an addition of Rs. 21,31,000 was made and demand of Rs. 14,19,060 was raised.

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Observations of the Court

An alternative statutory remedy does not operate as a bar to maintainability of a writ petition where the order/notice/proceedings are wholly without jurisdiction.

• If AO had no jurisdiction to initiate assessment proceeding, the mere fact that subsequent orders have been passed would not render the challenge to jurisdiction, pointless.
• An alternative statutory remedy does not operate as a bar to the maintainability of a writ petition in at least three contingencies:-
• where the writ petition has been filed for the enforcement of any of the Fundamental Rights
• where there has been a violation of the principles of natural justice
• where the order or notice or proceedings are wholly without jurisdiction
• The fact that an assessment order has been passed and it is open to challenge by way of an appeal, does not deprive 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 subsequently would have no legs to stand.

The essential condition 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

• In the opinion of this Court the issuance of a notice under Section 148 is the foundation for reopening of an assessment.
• Consequently, the essential condition for acquiring jurisdiction to reopen an assessment is that such notice should be issued in the name of the correct person.
• In the present case the notice under Section 148 was issued to the deceased assessee after the date of his death and thus inevitably the said notice could never have been served upon him.
• Consequently, the jurisdictional requirement under Section 148 of service of notice was not fulfilled in the present instance.
• 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.
• Consequently, in view of the above, a reopening notice under Section 148 issued in the name of a deceased assessee is null and void.

No notice under section 148 was issued to the petitioner during the period of limitation.

• No notice under Section 148 was ever issued to the petitioner during the period of limitation and simply proceedings were transferred to the PAN of the petitioner, who happened to be one of the four legal heirs of the deceased assessee.
• Consequently, the proceedings against the petitioner are barred by limitation in accordance with Section 149(1)(b).

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 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 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.

There is no statutory requirement imposing an obligation upon legal heirs to intimate the death of the assessee.

• Court was 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 death of an assessee to the income tax department.
• 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.
• Consequently, the legal heirs are under no statutory obligation to intimate the death of the assessee to the revenue.

Section 292B has been held to be inapplicable viz-a-viz notice issued to a dead person

• Court was 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.
• According to Section 292B, no return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.
• Consequently, Section 292B of the Act, 1961 does not apply to the present case.

Section 292BB is applicable to an assessee and not to a legal representative

• According to Section 292BB, where an assessee has appeared in any proceeding or co-operated in any inquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was:
• not served upon him; or
• not served upon him in time; or
• served upon him in an improper manner
• Court was 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.
• The primary condition for the invocation of Section 292BB is absent in the case on hand.
• Section 292BB is in place to take care of contingencies where an assessee is put on notice of the initiation of proceedings, but who takes advantage of defective notices or defective service of notice on him.
• Purpose of issue of notice is to make the noticee aware of the nature of the proceedings. Once the nature of the proceedings is made known and understood by the assessee, he should not be allowed to take advantage of certain procedural defects.
• That was the purpose behind the enactment of Section 292BB. It cannot be invoked in cases where the very initiation of proceedings is against a dead person.
• Consequently, the applicability of Section 292BB has been held to be attracted to an assessee and not to legal representatives.

The Delhi High Court thus held that a notice issued to a dead person under Section 148 of the Income Tax Ac to re-open income tax assessment is not valid in law. Therefore, the present writ petition is allowed and all consequential orders/proceedings passed/initiated thereto were quashed.

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