Case Law Details
SMT. Sowmya S Vs ITO (Karnataka High Court)
The Karnataka High Court recently passed a significant judgment in the case of SMT. Sowmya S Vs ITO, emphasizing that assessment orders passed against deceased individuals are null and void. The petitioner, SMT. Sowmya S, challenged the validity of multiple assessment and penalty orders issued under various sections of the Income Tax Act, 1961. The primary contention was that these orders were issued after the petitioner’s death, rendering them legally untenable.
Case Background: The petitioner passed away on 21st May 2022, as evidenced by the Death Certificate. However, the Income Tax Department proceeded with issuing notices and orders under Sections 147, 148, and 148A of the Act even after the petitioner’s demise. The critical dates are as follows:
- Notice under Section 148A(b) and the order under Section 148A(d) were issued while the petitioner was still alive.
- Subsequent proceedings and the assessment order were carried out ex-parte after the petitioner’s death.
Legal Provisions and Arguments: Section 159(2)(a) of the Income Tax Act stipulates that any proceeding against a deceased person should continue against their legal representative from the point where it was left at the time of death. The petitioner argued that the Income Tax Department failed to adhere to this provision, as the assessment order and related notices were issued in the name of the deceased without involving the legal representatives.
Court’s Rationale: The Karnataka High Court concurred with the petitioner’s argument, stating that any assessment order passed against a deceased individual is a nullity. The court emphasized the importance of Section 159(2)(a) and held that the legal representatives must be brought into the proceedings to ensure a fair and just process.
The court set aside the following:
- Assessment order under Section 147 read with Section 144.
- Computation sheet and demand notice.
- Penalty order and related notices.
- The order of freezing the bank account.
The court remitted the matter to the stage post-issuance of the notice under Section 148, directing the Revenue to proceed in accordance with Section 159(2)(a).
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner has called in question the validity of the assessment order passed under Section 147 read with Section 144 of the Income Tax Act, 1961 (for short ‘the Act’) at Annexure-‘A1’, validity of computation sheet at Annexure-‘A2’, demand notice at Annexures-‘A3’ and B. The petitioner has also called in question the validity of the penalty order at Annexure-‘C1’, computation sheet at Annexure-‘C2’, the order passed under Section 148A(d) of the Act at Annexure-‘E1’ and the notice issued under Section 148 of the Act at Annexure-‘E2’. The petitioner has also sought for direction for de-freezing of accounts as a consequential relief.
2. The admitted facts being that the petitioner has stated to have died on 21.05.2022 as evidenced by the Death Certificate. It is not in dispute that as on the date of issuance of notice under Section 148A(b) of the Act and the order at Annexure-‘E1’ passed under Section 148A (d) of the Act as well as the notice under Section 148 of the Act dated 31.03.2022, the petitioner was alive. It is during the proceedings for assessment, subsequent to the notice issued under Section 148 of the Act, the petitioner has passed away on 21.05.2022. The assessment order at Annexure-‘A1’ is passed against a dead person.
3. It is further not in dispute that the proceedings have progressed ex-parte. In light of the assessee being dead as on the date of passing the assessment order under Section 147 read with Section 144 of the Act, the order against the dead person amounts to nullity and accordingly, requires to be set aside.
4. The procedure prescribed when the assessee dies during pendency of the proceedings is in terms of Section 159(2)(a) of the Act which provision reads as hereunder:
“Section 159. (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.”
5. In light of the same when the assessee dies during pendency of the proceedings, proceedings are to be continued through the legal representatives of the deceased. Accordingly, the order at Annexure-‘A1’ as well as computation sheet at Annexure-‘A2’, demand notice at Annexure-‘A3’, demand proceedings at Annexure-‘B’ and penalty proceedings at Annexures-‘C1’ and ‘C2’ are set aside.
6. Consequent to allowing the writ petition and setting aside of the assessment order, the order of freezing the bank account as evidenced at Annexure-‘K’ is set aside. Matter is remitted to the stage post to the notice issued under Section 148 of the Act. Revenue to take steps in accordance with Section 159(2)(a) of the Act.
7. Upon such steps being taken, the petitioner is at liberty to file their reply to the notice issued under Section 148 of the Act.
8. Accordingly, petition is disposed off. All other contentions are kept open.
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