Provisions of Deemed Valid Notice not applicable to Legal Representatives: Delhi HC quashes Notice issued to Dead Person [Read Judgment]

The Delhi High Court, while quashing the notice issued to the dead person under Section 148 of the Income Tax Act, 1961, held that the provisions of section 292BB of the Income Tax Act, 1961 prescribing the conditions for assuming a notice as valid is applicable on assessee only and not to legal representatives.

Information was received by the AO that in Financial Year 2011-12, the assessee, Shri Mohinder Paul Kapila had cash deposits of Rs. 10,00,000 in his bank account, time deposits of Rs. 11,05,586 and receipts of Rs. 25,414 as per Form 26AS.

It was noticed that no return had been filed and the source of the deposits and receipts remained unexplained and had escaped assessment. Accordingly, the case of the assessee was selected under Section 147 and 148 of the Act 1961, after recording of reasons and approval of PCIT-15, Delhi on  March 28, 2019.

However, late Shri Mohinder Paul Kapila (deceased-assessee) had already expired on December 21, 2018. The deceased assessee is survived by two sons and two daughters.

The Notice dated March 21, 2019, under Section 148 of the Act 1961 for was issued, i.e. on the last date of limitation, in the name of deceased assessee Shri Mohinder Paul Kapila.

The division bench of Justices Manmohan and Sajeev Narula held that the issuance of a notice under Section 148 of the Act is the foundation for the reopening of an assessment. Consequently, the sine qua non for acquiring jurisdiction to reopen an assessment is that such notice should be issued in the name of the correct person. This requirement of issuing notice to a correct person and not to a dead person is not merely a procedural requirement but is a condition precedent to the impugned notice being valid in law.

“As in the present case the proceedings were not initiated or pending against the assessee when he was alive and after his death, the legal representative did not step into the shoes of the deceased assessee, Section 198 of the Act, does not apply in the present case,” the bench noted.

“The impugned notice dated 31st March 2019 and all consequential orders/proceedings passed/initiated thereto including orders dated 21st November 2019 and 27th December 2019 is quashed,” the bench said.