Case Law Details
Legal Heirs of Smt. Sneh Lata Bhandari Vs ITO (Rajasthan High Court)
Notice to Deceased Assessee Set Aside Because Mandatory Opportunity Was Not Given to Legal Representatives; Rajasthan High Court Quashes Reassessment Proceedings Because Section 148A Compliance Was Missing; Income Tax Notice Invalid Because Proceedings Were Continued Without Following Section 148A(b); Reassessment Order Quashed Because Legal Representatives Were Not Properly Heard Under Section 148A.
The petition challenged a show cause notice issued under Section 148A(b) of the Income Tax Act, 1961, dated 30.03.2023, along with subsequent proceedings, notices, and the order passed under Section 148A(d). The challenge arose because the notice was issued in the name of an assessee who had passed away on 16.05.2018, nearly five years before the issuance of the notice.
The petitioners, being the legal representatives of the deceased assessee, contended that a show cause notice could not be issued to a deceased person. They further argued that although the legal representatives had been brought on record, the Income Tax Department proceeded under Section 148 and issued subsequent notices and orders without complying with the mandatory requirements of Section 148A of the Act. According to the petitioners, the statutory opportunity contemplated under Section 148A(b) was never provided to the legal representatives before the reassessment proceedings were initiated.
The Revenue defended the proceedings by relying on Section 159 of the Income Tax Act. It argued that legal representatives step into the shoes of the deceased assessee for the purposes of assessment and reassessment and therefore can be proceeded against for liabilities that would have been enforceable against the deceased. The Department maintained that it was entitled to continue or initiate proceedings against the legal heirs in accordance with the statutory framework.
The High Court examined Sections 148A and 159 of the Income Tax Act. It noted that Section 148A prescribes a mandatory procedure before issuance of a notice under Section 148, including conducting inquiry where necessary, providing an opportunity of hearing through a show cause notice, considering the assessee’s reply, and then deciding whether reassessment proceedings should be initiated. The Court also considered Section 159, which provides that legal representatives are liable for the tax liabilities of a deceased assessee and may be subjected to assessment or reassessment proceedings in place of the deceased.
The Court held that proceedings against legal representatives of a deceased assessee can validly be initiated under the Act. However, such proceedings must strictly comply with the mandatory requirements of Section 148A(b). The Court found that, in the present case, the record clearly showed that the mandatory procedure under Section 148A(b) had not been followed against the legal representatives of the deceased assessee.
On this basis, the Court concluded that the impugned notice issued on 21.04.2023 and the order passed on the same date under Section 148A(d) could not be sustained. Consequently, both the notice and the order were quashed and set aside.
At the same time, the Court clarified that the Department was not barred from proceeding further. It granted liberty to the Revenue to reinitiate proceedings against the legal representatives of the deceased assessee, provided that such proceedings are undertaken in strict compliance with Sections 148A(b) and 159 of the Income Tax Act. The Court further directed that the period between the filing of the writ petition and its disposal would be excluded while computing the limitation period for initiating fresh proceedings.
Accordingly, the writ petition was disposed of with the impugned notice and order being quashed, while preserving the Department’s right to commence fresh proceedings in accordance with law and after complying with the mandatory statutory requirements.
FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT
1. The present petition has been preferred with the following prayers:-
“(a) by an appropriate writ, order and/or direction, the show cause Notice under Section 148 dated 30.03.2023 (Annexure-3) issued upon the deceased assessee and consequential proceedings in furtherance thereto including Letter/Order dated 19.04.2023 (Annexure–6), Notice dated 21.04.2023 (Annexure-7) and order dated 21.04.2023 (Annexure-8) passed under Section 148A(d) of the Income Tax Act, 1961 may kindly be quashed and set aside; and
(b) any other appropriate writ, order or direction which this Hon’ble Court consider just and proper in the facts and circumstances of the case may be passed in favour of the petitioners.”
2. Brief facts as noticed by this Court are that the assessee Smt. Sneh Lata Bhandari passed away way back on 16.05.2018, but a show cause notice was issued to her under Section 148A(b) of the Income Tax Act, 1961 (hereinafter referred to as “the Act of 1961”) on 30.03.2023.
3. Mr. Sheetal Kumbhat, learned counsel for the petitioner submits that the show cause notice could not have been issued to a dead person and by the time such order was passed, the legal representatives of the deceased Smt. Sneh Lata Bhandari were brought on record and a decision was taken to proceed under Section 148 of the Act of 1961 and without complying the mandatory provisions of Section 148A of the Act of 1961, a notice (Annexure-7) was issued to her on 21.04.2023.
4. Upon being asked, Mr. Sunil Bhandari, learned counsel for the respondents submitted that the Section 159 of the Act of 1961 creates almost the same liability upon the legal heirs as he step into the shoes of assessee for the purpose of assessment or reassessment upon the legal representatives of the deceased assessee. Thus the Department was entitled to proceed against the legal representatives.
5. This Court has heard the submissions from both the sides.
6. Sections 148A and 159 of the Act of 1961 reads thus:-
148-A. Conducting inquiry, providing opportunity before issue of notice under Section 148.—The Assessing Officer shall, before issuing any notice under Section 148,—
a. conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;
b. provide an opportunity of being heard to the assessee, [* * *], by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under Section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);
c. consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);
d. decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under Section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires:
Provided that the provisions of this section shall not apply in a case where,—
a. a search is initiated under Section 132 or books of account, other documents or any assets are requisitioned under Section 132-A in the case of the assessee on or after the 1st day of April, 2021; or
b. the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under Section 132 or requisitioned under Section 132-A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or
c. the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under Section 132 or requisitioned under Section 132-A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, [relate to, the assessee; or
d. the Assessing Officer has received any information under the scheme notified under Section 135-A pertaining to income chargeable to tax escaping assessment for any assessment year in the case of the assessee.
Explanation.—For the purposes of this section, specified authority means the specified authority referred to in Section 151.
159. Legal representatives.—(1) Where a person dies, his legal representative 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 sub-section (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.
(3) The legal representative of the deceased shall, for the purposes of this Act, be deemed to be an assessee.
(4) Every legal representative shall be personally liable for any tax payable by him in his capacity as legal representative if, while his liability for tax remains undischarged, he creates a charge on or disposes of or parts with any assets of the estate of the deceased, which are in, or may come into, his possession, but such liability shall be limited to the value of the asset so charged, disposed of or parted with.
5. The provisions of sub-section (2) of Section 161, Section 162 and Section 167, shall, so far as may be and to the extent to which they are not inconsistent with the provisions of this section, apply in relation to a legal representative.
6. The liability of a representative under this section shall, subject to the provisions of subsection (4) and sub-section (5), be limited to the extent to which the estate is capable of meeting the liability.”
7. This Court is of the firm opinion that the proceedings under the liability created against the legal representatives of the deceased assessee can be initiated against the petitioner but only after compliance of mandatory provisions under Section 148A (b) of the Act of 1961. It is writ large on the record and the reply that the provision of Section 148A(b) of the Act of 1961 has not been complied against the legal representatives of the deceased Smt. Sneh Lata Bhandari.
8. In limited nature of adjudication, the impugned notice dated 21.04.2023 (Annexure-7) under Section 148A of the Act of 1961 and the order dated 21.04.2023 (Annexure-8) passed under Section 148A(d) of the Act of 1961 are hereby quashed and set aside.
9. However, the respondents shall be free to reinitiate the proceedings against the legal representatives of the deceased Smt. Sheh Lata Bhandari, while strictly complying with the provisions of the Section 148A(b) and 159 of the Act of 1961.
10. Both the parties shall be free to proceed strictly in accordance with law.
11. Since, the liberty has been given to the respondent-Department to reinitiate the proceedings under Section 148A(b) and Section 159 of the Act of 1961, the limitation period between the filing of the writ petition and till its disposal shall be excluded for the purpose of computation of limitation period for initiating such proceedings.
12. The writ petition stands disposed of accordingly.
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