In a recent ruling, the Madras High Court quashed the income tax assessment due to order issuance against deceased and insolvent individuals. The court directed the tax authorities to proceed through an official assignee.
Sai Siva Jyothi, wife of A. Ravi Shankar Prasad, the petitioner’s husband passed away on 11.07.2013. The petitioner’s husband was declared insolvent on 09.08.2017, and his estate was handled by the Official Assignee.
Despite his death, notices, and orders related to tax assessments for the year 2012-13 were issued in his name. The petitioner challenged the notices before the Madras HC questioning whether notices and tax assessment orders can be issued in the name of a deceased person, especially after insolvency proceedings were concluded.
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The petitioner’s counsel argued that the issuance of notices and assessment orders in the name of a deceased person is not valid. Since the husband was declared insolvent, all legal proceedings should be directed to the Official Assignee.
The petitioner’s counsel further argued the attachment of bank accounts was unjustified as the estate was already under the jurisdiction of the insolvency court.
On the contrary, the revenue counsel argued that the notices were initially issued without knowledge of the assessee’s death and the proceedings were legitimate as some assets were transferred to the petitioner and other legal heirs.
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A single bench led by Justice Krishnan Ramasamy noted that after the petitioner’s husband passed away, he was declared insolvent, and an Official Assignee had taken over his estate. The court observed that the Income Tax Department’s orders were not legally sustainable, as any claims or demands should have been directed to the Official Assignee managing the deceased’s assets.
The court emphasized that the correct legal procedure would be for the Tax Department to pursue any claims through the Official Assignee under the relevant provisions of the Presidency Towns Insolvency Act, 1909. Therefore, the court quashed the notices and orders. The writ petition was allowed.
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