The Allahabad High Court at Lucknow has held that the Income Tax Department cannot invoke Section 159, which allows proceedings against a deceased assessee's legal representative, to continue reassessment proceedings initiated in the name of a dead person.

It held that where the notice is issued after the assessee's death, the department must issue a fresh notice to the legal representatives within the limitation period.

It also held that the legal representative is under no statutory obligation to intimate the death of the assessee to the department. It further held that her conduct in filing the deceased's return in his own name, though itself unlawful, does not empower the revenue with a jurisdiction the statute does not give it.

The bench of Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary held,

“The revenue's invocation of Section 159 to validate a notice issued after the death of the assessee is, therefore, wholly misconceived. Section 159 presupposes a valid foundational notice issued during the lifetime of the assessee. Where the initiating notice itself is void, Section 159 has no substratum to operate upon. The correct course, as mandated by Section 159(2)(b), was to issue a fresh notice within limitation directly upon the legal representative which was admittedly never done in the present case.”

Petitioner's husband, employed as Chief Management Officer in the U.P. Secretariat, purchased a residential flat in Grand Omaxe, Lucknow along with his son on October 15, 2020 for a total consideration of Rs. 82,83,353/-, of which he paid Rs. 55,52,954/- through banking channels. A search under Section 132 of the Act was conducted on the Omaxe group on April 1, 2021, in which a cash transaction of Rs. 25,97,000/- was alleged against him.

The assessee died on January 7, 2024. After completing the last rites, petitioner left for the United States and returned in September 2024, whereafter she instructed her chartered accountant to file her husband's return. The return was filed in the name of the deceased and verified through his Aadhaar OTP.

On the strength of a discrepancy of Rs. 27,44,000/- traced to the seized documents, and after approval from the Principal Commissioner of Income Tax, notice under Section 148 was issued on March 28, 2025 in the name of the deceased for Assessment Year 2021-22. A notice under Section 142(1) followed on January 7, 2026.

Petitioner replied on February 2, 2026 informing the department of her husband's death and objecting that proceedings against a dead person were void ab initio. The Department rejected the objections on February 20, 2026 on grounds that it had never been intimated of the death, and that the factum of death had been actively misrepresented by the filing of the return. The Department substituted the petitioner's name for that of the deceased, and directed compliance with the earlier notices.

The reassessment order under Section 147 and the consequential demand order under Section 156 were passed on March 24, 2026 in petitioner's name, assessing additional income of Rs. 69,06,520/- and a tax liability of Rs. 39,67,330/- on the unaccounted cash transaction. This was challenged by the petitioner before the High Court.

The Court held that Section 159 of the Income Tax Act operates where the proceedings are pending or initiated against a living person or where the heirs of the deceased have stepped into his/her shoes.

Reading the two limbs of Section 159(2) as operating in distinct fields, the Court held that clause (a) applies where proceedings stood initiated against the deceased before his death, while clause (b) requires fresh proceedings to be initiated in the name of the legal representative and not in the name of the dead person.

“….after the death of the assessee, proceedings must be initiated against the legal heirs to treat the legal heirs as deemed assessees. Any notice issued in the name of a dead person cannot make the legal heirs binding unless a proper notice is issued on the legal heirs within limitation for liability of deceased assessee.”

It held that the deeming provision in Section 159(3), which treats the legal representative as an assessee, only enables a notice under Section 159(2)(b) and cannot be read as an enabling provision to issue a reassessment notice on a dead person.

“If the proceedings were not initiated during the lifetime of the deceased and the notice was issued against the assessee subsequent to his death then the proceedings in terms of Section 159 cannot be continued against the legal representative/heir of the deceased. For proceeding against the legal representative of the deceased the notice under Section 148 ought to have been issued against the legal representatives of deceased assessee at the first instance within limitation.”

The Court further held that the statute does not mandate or provide that factum of death be communicated to the department.

Case Title: Smt. Asha Dubey v. Union of India Thru. Secy. Ministry of Finance Deptt. Revenue Sectt. New Delhi and 2 others

Click Here To Read/Download Order