Legal Heir Fails to Inform AO of Assessee’s Death: ITAT Remands Case to CIT(A) after Income Tax Dept Raises No Objection [Read Order]

The Ahmedabad bench of Income Tax Appellate Tribunal (ITAT) has remanded a reassessment of deceased person to the Commissioner of Income Tax (Appeals) [CIT(A)] observing that the assessee had died before the issuance of the Section 148 notice, and the legal heir had admittedly failed to inform the Assessing Officer (AO) about the death.

According to the facts concerned, late Gandabhai Prabhatbhai Rabari-assessee had not filed a return for AY 2012-13. Based on non-PAN transaction data showing two property sales amounting to ₹73,08,000 and ₹25,38,000, the AO reopened the case by issuing a Section 148 notice dated 30 March 2018, nearly three years after the assessee’s death on 9 December 2015.

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Since no replies were made during reassessment, the AO proceeded ex parte and computed long-term capital gains using stamp-duty value, adding ₹50,19,825 as taxable income under Sections 144 and 147.

The legal heir, Ganeshbhai Gandabhai Rabari-petitioner of this case, challenged the assessment before the CIT(A), asserting that the reopening was void since the notice was issued to a deceased individual, and therefore the entire reassessment lacked jurisdiction.

Although this legal objection was specifically raised in Form 35, the CIT(A) did not adjudicate it and instead merely remanded the matter to the AO to examine the merits of the long-term capital gains computation. Aggrieved, the legal heir approached the ITAT, pressing only the jurisdictional ground and withdrawing the remaining grounds related to capital gains computation.

During the hearing, the counsel for the assessee acknowledged that no intimation of death had been given to the AO at any stage. However, he argued that the failure to inform should not prevent adjudication of the foundational legal issue, since the assessment proceedings had proceeded entirely against a deceased person.

The Department’s representative stated that the Revenue had no objection if the matter was remanded to the CIT(A) to decide the legal ground.

Accordingly the bench of Suchitra Kamble (Judicial member) and Narendra Prasad Sinha (Accountant member) observed that the CIT(A) had erred in not deciding the jurisdictional issue regarding the validity of issuing notice under Section 148 to a deceased person a legal defect that goes to the root of the proceedings.

Therefore, appellate tribunal, set aside the matter to the CIT(A) with a specific direction to adjudicate the legal ground afresh, ruling that such consideration was necessary before proceeding to merits. The other grounds relating to capital gains and cost indexation were not pressed and were dismissed accordingly.

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