Assessment initiated and framed in name of deceased is void

Facts of the case:

Facts of the case in brief are that the AO on the basis of information received from DIT(Investigation), New Delhi that one Sh. Deepak Changia had given an accommodation entry of Rs. 2,01,000/- to the deceased assessee, issued notice dated 31.03.2010 u/s 148 of the Income Tax Act, 1961 in the name of the deceased. In response to the said notice the legal heir namely Smt. Raj Rani Malhotra wife of the deceased assessee vide letter dated 03.05.2010 informed the AO that Sh. Som Nath Malhotra, the assessee had expired on 06.12.2002. She also furnished the death certificate and copy of Income Tax Return filed. The AO however framed the assessment in the name of the deceased at an income of Rs. 22,99,976/- by making the addition of Rs. 19,94,120/-.

Being aggrieved the legal heir of the deceased assessee carried the matter to the ld. CIT(A) and challenged the validity of the notice u/s 148 of the Act on account of the reason that the notice had been issued in the name of dead person and even as per the record of the AO, the same has been served on the dead person. It was also submitted that the notice had been issued in the name of dead person, even though the original return was filed in the name of the legal heir since the assessee had died prior to the date of the accounting period. It was also pointed out that the AO himself had written in the assessment order that the notice was served on the assessee, therefore, the proceeding were invalid. The CIT(A) agreed with the contention of the Assessee and held the assessment as invalid.

Contention of the Assessee

The legal heir submitted that the notice had been issued in the name of dead person, even though the original return was filed in the name of the legal heir since the assessee had died prior to the date of the accounting period. It was also pointed out that the AO himself had written in the assessment order that the notice was served on the assessee, therefore, the proceeding were invalid.

The reliance was placed on the following case laws:

1. CIT Vs Suresh Chandra Jaiswal 325 ITR 563 (All.)
2. CIT Vs Shital Prasad Kharag Prasad 280 ITR 541 (All.)
3. Shaikh Abdul Kadar Vs ITO AIR 1959 MP 101
4. Mrs. Jerbanoo N. Wadia Vs ACIT (1991) 36 ITD 185 (Mum)

Contention of the Revenue:

Revenue supported the order of the AO and contended that the assessment is as per law.

Held by ITAT

1. In the present case, it is an admitted fact that the AO recorded the reasons for issuing the notice u/s 148 of the Act in the name of the deceased assessee Late Sh. Somnath Malhotra and got the approval of the Addl. CIT, Range-20, also in the same name. The AO issued notice dated 31.03.2010 u/s 148 of the Act in the name of the deceased assessee and also mentioned in the body of the assessment order dated 27.12.2010 that the notice u/s 148 of the Act was issued and served upon the assessee by Post within the statutory time period prescribed.

2. In the present case, the assessee had already expired on 06.12.2002 and the legal heir Smt. Raj Rani Malhotra wife of the deceased assessee informed the AO on 03.05.2010 that the assessee had expired on 06.12.2002 and the return in the name of deceased assessee was filed by the legal heir on 29.08.2003. Thereafter also the AO did not issue any notice u/s 148 of the Act or 143(2) of the Act in the name of the legal heir, therefore, the assessment framed by the AO on the basis of the notice issued u/s 148 of the Act in the name of the deceased assessee was invalid.

3. On a similar issue the Hon’ble Allahabad High Court in the case of CIT Vs Suresh Chand Jaiswal (supra) has held as under:

“That the notice under section 148 of the Income-tax Act, 1961, was addressed to an assessee who was already dead on the date of issue of notice. The notice was issued on March 28,1985, while the assessee had died on March 20, 1985. The notice was not served upon the legal representatives of the assessee but on the munim. Even the name of the deceased assessee was not correctly mentioned in the notice. The notice was invalid.”

4. In the present case also the notice u/s 148 of the Act was issued on 31.03.2010 in the name of the deceased assessee and claimed to have been served upon the deceased assessee who had already expired on 06.12.2002. Therefore, the notice issued u/s 148 was invalid and the assessment framed on the basis of the said invalid notice was void ab ITA initio. In that view of the matter, we do not see any merit in this appeal of the department. In the result, the appeal of the department is dismissed.