AO fails to issue notice u/s 148 of Income Tax Act against all Legal Heirs, Issues only against Deceased: ITAT deletes Addition [Read Order]

The Hyderabad bench of the Income Tax Appellate Tribunal ( ITAT ) deleted the addition on grounds that the Assessing Officer ( AO ) failed to issue a notice under Section 148 of the Income Tax Act, 1961 to all legal heirs, issuing it only against the deceased.

The assessee Maddikunta Sanjeeva Reddy, was an individual. On verification from ITBA it was noticed that the assessee has not filed return of income for the assessment year under consideration, admitting income from Long Term Capital Gains. Therefore, the AO believed that the income of Rs.26,77,500/-, chargeable to tax in the hands of the assessee during the previous year relevant to the assessment year under consideration has escaped assessment within the meaning of Section 147 of the Income Tax 1961.

Accordingly, the AO initiated proceedings under Section 147 of the Income Tax Act, by issuance of a Notice dated 18.03.2020, under Section 148 of theAct , and the same has been duly served at the last known address of the assessee. In view of the non-compliance to the Notice issued under Section 148 of the Act, the Assessing Officer issued a detailed show cause letter dated 06.09.2021 along with a notice under Section 142(1) of the Income Tax 1961, wherein, the assessee has been required to show cause as to why the assessment should not be completed ex-parte as per Best Judgment as per the provisions of Section 144 of the Income Tax Act 1961.

Mr. Kali Kiran Kumar Kovvada, representing the assessee submitted that the Assessing Officer has failed to apply his mind and has wrongly issued a notice under Section 148 of the Income Tax Act against the deceased person and therefore, there is a jurisdictional error and the order passed by the Assessing Officer and the appellate order passed by the CIT (A) are liable to be quashed.

Per contra, Mr. Ranjan Agarwala representing the revenue submitted that after the fact of death came to the notice of the Assessing Officer, a notice dt.14.09.2021 was issued against the present appellant and therefore, there is no technical breach on the part of the Assessing Officer. Further also pointed out that at the time of appellate proceedings, none appeared before the CIT (A) and the above noted fact has not been brought to the notice of CIT (A) and therefore, the CIT (A) has rightly upheld the order passed by the Assessing Officer.

The bench found that a notice under section 148 of the Income Tax Act was issued against the deceased / dead person. Despite the fact that death came to the notice of the Assessing Officer, no fresh notice under Section 148 of the Income Tax Act, as permissible in law, was issued against the legal heirs within the period of limitation. Further, there is a failure on the part of the Assessing Officer to issue notice under Section 148 against all the legal heirs and the notice, as it was only issued against the deceased person.

The single member bench of the tribunal comprising Laliet Kumar (Judicial member) found that there was jurisdictional error in issuing the notice under Section 148 of the Income Tax Act against the deceased person. Hence, ITAT does not find any reason to uphold the addition made by the Assessing Officer, as everything was flowing from the notice under Section 148 of the Income Tax Act.

Accordingly, the assessment framed on the basis of the defective notice issued against the deceased person was hereby quashed. Thus, the appeal of the assessee was allowed.

To Read the full text of the Order CLICK HERE

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