Delhi High Court Quashes Income Tax Notice Issued to Deceased Assessee; Holds Failure to Notify Legal Heirs as Jurisdictional Defect Under Section 148A(b) of the Income Tax Act

Court’s Decision:

The Delhi High Court quashed the notice issued to a deceased assessee under Section 148A(b) of the Income Tax Act, 1961, and all consequential proceedings arising from it. The court held that such a notice is invalid as it does not fulfill the jurisdictional requirement that notices be issued to the legal heirs or representatives of the deceased. This is a mandatory procedural safeguard to ensure fair and lawful reassessment proceedings.

Facts of the Case:

1. Deceased Assessee: The original assessee passed away on July 30, 2021, prior to the issuance of the notice.
2. Notice Issued: On March 30, 2023, the Income Tax Department issued a notice under Section 148A(b), claiming that the assessee had unreported financial transactions amounting to ₹14,55,000 for the Assessment Year 2019-2020.
3. Response by Legal Heir:
   • The deceased’s son and legal heir responded promptly, submitting a death certificate and asserting that the notice was void as it was issued to a deceased individual.
   • Despite this, the department issued further notices under Section 148A(d) and Section 148, treating the financial transactions as taxable income.

Issues Raised:

1. Validity of Notice: Can a notice under Section 148A(b) be issued to a deceased person?
2. Obligation to Notify Legal Heir: Does failing to issue a notice to the legal heir render the proceedings invalid?
3. Applicability of Section 159: Can the department cure the defect by invoking Section 159, which deals with the liability of legal representatives?
4. Applicability of Section 292B: Is the defect curable as a procedural mistake under Section 292B?

Petitioner’s Arguments:

1. Invalidity of the Notice:
   • The notice was issued to a deceased individual, violating the foundational jurisdictional requirement under Section 148 of the Income Tax Act.
   • The defect was substantial, not procedural, and could not be rectified under Section 292B.
2. Failure to Notify Legal Heir:
   • Section 159 requires that notices be issued to legal representatives of the deceased. This was not done, rendering the entire process invalid.
3. Jurisdictional Bar:
   • Since the notice was void ab initio, all subsequent proceedings lacked jurisdiction and must be quashed.

Respondent’s Arguments:

1. Section 159: The department argued that proceedings could continue against legal representatives under Section 159 of the Act, even if the initial notice was flawed.
2. Defect Curable Under Section 292B: They contended that the defect in the notice was procedural and could be cured under Section 292B, which protects against invalidation due to technical errors.

Analysis of the Law:

1. Jurisdictional Requirement:

• The court clarified that the issuance of a valid notice under Section 148 is the cornerstone of reassessment proceedings. Notices must be issued to a living person or their legal representative after death. Issuing a notice to a deceased person is a jurisdictional defect, not a procedural one.

2. Section 159:

• Section 159 allows proceedings to continue against the legal representatives of a deceased person, provided the original proceedings were initiated during the person’s lifetime.
• In this case, the proceedings were initiated after the assessee’s death, and no notice was issued to the legal heir. Therefore, Section 159 was inapplicable.

3. Section 292B:

• Section 292B prevents invalidation of proceedings due to technical errors if the intent and purpose of the law are met.
• However, the court ruled that issuing a notice to a deceased person is a jurisdictional defect that cannot be cured by Section 292B.

Precedent Analysis:

1. Savita Kapila v. Assistant Commissioner of Income Tax (2020):
   • In similar circumstances, the court held that notices issued to deceased persons are invalid and cannot be rectified, even if alternative remedies like appeals exist.
2. Dharamraj v. Income Tax Officer (2022):
   • Reiterated that issuing notices to deceased persons violates jurisdictional prerequisites and renders reassessment proceedings void.

Court’s Reasoning:

• The court emphasized that the issuance of a valid notice is a “sine qua non” (essential precondition) for reassessment proceedings.
• It quoted from previous judgments:“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.”
• The court concluded that:
  • Since no notice was issued to the legal heir under Section 159, the jurisdictional requirement was unmet.
  • The defect was substantive, rendering the notice and subsequent proceedings void.

Conclusion:

• The court allowed the writ petition, quashing the notice issued under Section 148A(b) and all consequential proceedings.
• It emphasized that notices must be issued to the correct person, ensuring procedural fairness and adherence to jurisdictional requirements.

Implications:

1. For Tax Authorities:
   • Tax departments must exercise due diligence in verifying the status of assessees before issuing notices.
   • Any reassessment notices issued to deceased persons without notifying legal heirs are void and unenforceable.
2. For Legal Representatives:
   • Legal heirs can challenge reassessment proceedings initiated against deceased individuals, ensuring they are not burdened with improper tax liabilities.

Also Read – Delhi High Court Rejects Plea Challenging Adverse APAR Grading of BSF Commandant: “Officers Must Set Examples of Discipline and Accountability in Paramilitary Forces”