Assessment order not become nullity for mere non-issue of notice upon legal heirs

Late Shri Atulkumar Mansukhlal Shah Vs. ITO (ITAT Ahmedabad)

Facts of the Case and Contention of the Assessee

Brief facts of the case are that the assessee has filed its return of income on 29.5.2009 showing total income at Rs. 1,41,830/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued on 30.8.2010 which was duly served upon the assessee. In order to set assessment proceedings in motion, the ld.AO has issued notice under section 142(1) of the Act. On scrutiny of the details it came to the notice of AO that cash of Rs. 11,79,000/- was deposited in Punjab National Bank, Satellite Branch, Ahmedabad. Similarly, a sum of Rs. 25,95,000/- was deposited with HDFC Bank, Mithakhali Branch, Ahmedabad. The ld.counsel for the assessee while impugning the orders of Revenue authorities took us through section 159 of the Income Tax Act, 1961 and pointed out that as per sub-section (2) of section 159 notice upon legal heirs ought to have been issued by the AO, which the AO has failed to do so, and therefore, the assessment order is a nullity and deserves to be quashed.

Contention of the Revenue

ld.DR pointed out that a perusal of sub-clause (a) of Sub-section (2) and sub-section (3) of Section 159 would contemplates that if any proceedings taken against the assessee, who expired during the pendency of the proceedings, then the proceedings may be continued against legal representatives in the same capacity as if the assessee was alive, and the order could not be declared as nullity. At the most, it can be treated as a procedure illegality which can be cured by issuance of notice to the L/Rs.