Bombay High Court Declares Notices And Proceedings Under Income Tax Act For Deceased Assessee As Null And Void

The Division Bench of Justice Dhiraj Singh Thakur and Justice Kamal Khata observed, “In our view, if the concerned officers follow the settled law and abstain from issuing notices which are null and void, would not only help the citizenry but also the courts in the country who are already overburdened. In fact, it would be in tune with the Finance Act 2021 which aims to achieve the ultimate object of simplifying the tax administration, ease compliance and reduce litigation.”

The Court's decision came in response to a case where the petitioner, who is the legal heir of the deceased assessee, challenged the reopening of assessment proceedings after the assessee's demise. The deceased had filed her income tax return on June 5, 2018, declaring a total income of ₹1,94,28,890/- earned from capital gains and other sources, primarily through share investments.

The petitioner informed the court that the deceased and her family had applied for a change of address in the Permanent Account Number (PAN) and transfer of jurisdiction due to their shift in residence from Mumbai to Gandhinagar. While the files of other family members were transferred to Gandhinagar, the deceased's file remained untransferred without any explanation from the respondents.

Following the demise of the assessee, the petitioner's request to be registered as the legal heir was approved on April 13, 2020, after submitting necessary documents such as the death certificate, will, and PAN card. The petitioner then filed the deceased assessee's income tax return for the assessment year 2020-21 on July 20, 2020. The return was processed with no demand on February 4, 2021, under section 143(1) of the Income Tax Act.

Despite the petitioner's repeated attempts to inform the respondents about the death of the assessee, the PAN of the deceased remained active. Finally, on January 29, 2022, the respondents acknowledged the death of the assessee and requested indemnity bonds, the deletion of the original PAN card, and other legal heir documents.

After considering the facts and submissions made, the court admitted, “The impugned notice for reopening the assessment was issued on a dead person. There are several judgments of different High Courts holding that the notice issued on a dead person or reopening of assessment of a dead person is null and void in law and the requirement of issuing a notice to a correct person is not merely a procedural requirement but a condition precedent for a notice to be valid in law.”

The court referred to the judgment in Principal Commissioner of Income Tax, New Delhi vs Maruti Suzuki India Ltd. [(2019) 107 taxmann.com 375(SC)], wherein the Supreme Court had ruled that issuing a notice and passing an order in the name of an old entity was legally invalid. While placing reliance on the same, the court reiterated that such an error cannot be cured under Section 292B of the Income Tax Act, as the same constituted a substantive illegality and not a mere procedural violation.

The court also referred to the decision in the case of CLSA India Private Limited vs The Deputy Commissioner of Income Tax & Ors., where it was held that the revenue's claim of justifying reassessment due to the active PAN of a non-existent entity does not dilute the principles enunciated by the Supreme Court.

Considering that the tax department was aware of the demise of the assessee and acknowledging that the ITBA system is undergoing changes and updates, the Bombay High Court quashed the notices issued under Sections 148 and 148A(b), thereby allowing the petitioner's petition.

Cause Title: Dhirendra Bhupendra Sanghvi v. Assistant Commissioner of Income Tax Circle – 27(3) and Ors. WRIT PETITION NO. 10163 OF 2022

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