Notice u/s 263 in the name of deceased person is invalid

Hiraben Babubhai Patel Vs PCIT (ITAT Ahmedabad)

ITAT Ahmedabad held that notice issued under section 263 of the Income Tax Act in the name of a deceased person is invalid. Accordingly, order passed thereon is also invalide in the eyes of law.

Facts- The assessee filed return of income for the impugned assessment year declaring total income of ₹ 83,52,43,311/-. The assessment order was passed accepting the returned income of the assessee and no additions were made to the income declared by the assessee.

Thereafter, the Principal CIT initiated proceedings u/s. 263 of the Act, and after taking the submissions of the assessee on record, he held that the order passed by the assessing officer is erroneous and prejudicial to the interests of the Revenue for the reason that firstly, the assessee had offered capital gains of ₹ 85.80 crores on sale of shares of VSPL, however, on perusal of the sale agreement, it is seen that there is a non-compete clause, and therefore income/consideration for transfer of shares should have been offered as business income u/s. 28(va) of the Act. Secondly, the long-term capital loss shown by the assessee amounting to ₹ 14.08 lakhs has been wrongly claimed, since the assessee’s share in property transferred was only 50%, whereas loss has been claimed by the assessee @100%. Accordingly, the Principal CIT set aside the assessment order holding the same to be erroneous and prejudicial to the interests of the Revenue.

Conclusion- Held that at the time when the notice under section 263 of the Act dated 15-02-2019 was issued by the Principal CIT, the assessee had already expired (on 23-02­2018). Further, during the course of 263 proceedings, this fact was brought to the notice of the Principal CIT, and a specific request was made to drop the 263 proceedings, since the assessee had expired. However, the Principal CIT did not deal with this aspect in the order passed u/s 263 of the Act, by him. It is a well settled proposition that a notice issued /order passed in name of a dead person is not a valid notice/order. Accordingly, keeping in view the facts of the instant case and the decisions rendered by Hon’ble Supreme Court and Hon’ble High Court Gujarat High Court on this issue, we are of the considered view that the order passed under section 263 of the Act is not valid in the eyes of law, having been passed on a deceased person.

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