Notice not issued to heirs of deceased assessee, Re assement Quashed by High Court

JUDGMENT

M.R. Shah, J. – Rule returnable forthwith. Learned advocate Shri Sudhir M. Mehta appears and waives service of notice of rule for and on behalf of the respondent-Revenue.

2. By way of this petition under Article 226 of the Constitution of India, the petitioner-heir and legal representative of the original assessee has prayed for issuance of appropriate writ/order to quash and set-aside the impugned notice under Section 148 of the Income-tax Act, 1961 [“the IT Act” for short] reopening the assessment for Assessment Year 2009-2010. That, the original assessee-Badrunben Rashid Lala died on 2nd December 2009. That, after a period of approximately six years, notice has been issued under Section 148 of the Act against the original assessee-Badrunben Rashid Lala to reopen the assessment for A.Y 2009-2010. Immediately thereafter, the petitioner informed the Assessing Officer that the original assessee – Badrunben Rashid Lala had already expired on 2nd December 2009, and therefore, the notice in the name of the deceased assessee is not valid. And therefore, it was requested to take a note of the same and drop the proceedings. Despite the above, by communication dated 25th May 2016, the petitioner is informed to file the return of income for Assessment Year 2009-2010. Hence, the petitioner has preferred the present petition challenging the impugned notice under Section 148 of the I.T Act, which has been issued against the original assessee who had already passed away as far back as on 2nd December 2009.

3. Mr. Manish J. Shah, learned advocate appearing on behalf of the petitioner has vehemently submitted that as the impugned notice under Section 148 of the Act has been issued against the dead person, the same cannot be sustained. He has submitted that despite the fact that it has been brought to the notice of the Assessing Officer that the original assessee-Badrunben Rashid Lala has died on 2nd December 2009, and therefore, the re- assessment proceedings against a dead person cannot be sustained and the same is required to be dropped, the Assessing Officer has continued with the said re- assessment proceeding against the dead person. Relying upon a decision of Delhi High Court in the case of Vipin Walia v. ITO [2016] 382 ITR 19 it is requested to allow the present petition.

4. In response to the notice issued by this Court, Shri Sudhir M. Mehta has appeared on behalf of the respondent. He has tried to oppose the present petition, relying upon Section 159 of the I.T Act. He has also relied upon a decision of Delhi High Court in the case of Shahid Atiq v. CIT [2006] 152 Taxman 71 and that of Madhya Pradesh High Court in case of Smt. Kaushalyabai v. CIT [1999] 238 ITR 1008 in support of his submission to dismiss the present petition.

5. Heard learned advocates for the respective parties at length.

6. It is an admitted position that the assessee died on 2nd December 2009. It is also an admitted fact that the notice under Section 148 of the Income-tax Act, 1961 to re-open the assessment for Assessment Year 2009-2010 has been issued against the dead person ie., the deceased assessee. Thus, the re-assessment proceedings have been initiated after the death of the assessee. Though it was pointed out by the heir of the deceased assessee that the assessee has expired long back, and therefore, the notice issued in her name and/or against a dead person is not valid, instead of taking corrective measures as provided under Section 292 [b] of the Income-tax Act, 1961 and to issue fresh notice against the legal heirs of the deceased, the Assessing Officer has continued with the re- assessment proceedings against the dead person. Section 159 of the Income-tax Act which has been relied upon by the learned counsel for the Revenue shall not be applicable to the facts of the case on hand.

7. In the present case, admittedly, the reassessment proceedings have been initiated against the dead person and that too after a long delay, therefore, even if Section 159 of the Act is attracted, in that case also, the notice was required to be issued against and in the name of the heirs of deceased assessee. Under the circumstances, in the facts and circumstances of the case, Section 159 of the Act shall not be of any assistance to the Revenue.

8. Now so far as reliance placed upon a decision of Delhi High Court in the case of Shahid Atiq (supra) by the Revenue is concerned, on facts, the same shall not be applicable to the facts of the case on hand. In the case before the Delhi High Court, a notice was issued to one of the legal representatives of the deceased- assessee and he participated in the reassessment proceedings, and thereafter, it was contended on behalf of the assessee/heirs of the deceased that non-service of notices upon other legal representatives amounted to a clear violation of the principles of natural justice qua the said legal representatives, inasmuch as no assessment order could be validly made without first serving a notice upon the other legal representatives who are themselves assesses within the meaning of Section 159 [3] of the IT Act. The aforesaid issue came to be negatived by the High Court, relying upon a decision of the Apex Court in case of CIT v. Jai Prakash Singh [1996] 219 ITR 737

9. Similarly, decision of Madhya Pradesh High Court in the case of Smt. Kaushalyabai (supra) also shall not be applicable to the facts of the case on hand. In the case before the Madhya Pradesh High Court, the High Court did not decide the said question as in view of the fact that heirs of the deceased assessee participated in the reassessment proceedings, and therefore, the Division Bench was of the opinion that the said question has become academic. Under the circumstances, the said decision shall not be applicable to the facts of the case of hand.

10. In view of the above and for the reasons aforestated, the present petition succeeds. The impugned notice dated 29th March 2016 issued under Section 148 of the Income-tax Act, 1961 by the respondent-Income Tax Officer, Ward 1 [3] (6), Surat is hereby quashed and set-aside. Rule nisi made absolute with no separate order as to costs.