Income Tax Dept Can Invoke S.159 When Reassessment Notice Was Issued During Lifetime Of Deceased Assessee: Delhi HC

The Delhi High Court has held that Section 159 of the Income Tax Act can be invoked to proceed against the legal representative of an assessee, only in cases where the reassessment notice was issued to the assessee during his lifetime, not after. When a person dies, the provision makes his legal representative liable to pay any sum which the deceased would have been liable to pay if he had not died. Sub-section (2) thereof clearly stipulates that any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased. In the case hand, the assessee passed away in July 2021 however, the reassessment notice was issued in his name only in march 2023. Even though the deceased assessee's son apprised the Department of his father's demise, the latter passed a reassessment notice under Section 148, deeming financial transactions amounting to ₹14,55,000/- as the deceased assessee's taxable income for the relevant Assessment Year. The son then moved the High Court, citing Savita Kapila v. Assistant Commissioner of Income Tax (2020) whereby a Division Bench of the High Court dealt with similar circumstances where a reassessment notice was issued to a dead person. It was held therein, “The sine qua non for acquiring jurisdiction to reopen an assessment is that notice under section 148 should be issued to a correct person and not to a dead person. Consequently, the jurisdictional requirement under section 148 of the Act, 1961 of service of notice was not fulfilled in the present instance.” The Department on the other hand sought to invoke Section 159, contending that the defect in the notice is curable and notice to legal heir is not bad in law. At the outset, the division bench of Justices Yashwant Varma and Dharmesh Sharma noted that “Section 159 of the Act is applicable when proceedings are initiated and pending against an assessee during their lifetime, and the legal representative assumes responsibility after the assessee's death.” This was not the factual scenario in the present case; therefore, Section 159 of the Act is not applicable here, the Court held. The High Court also emphasized that no notice was issued to the legal heir of the deceased under Section 159(2)(b) of the Act, despite the Department being informed of the death. “We may also refer to decision of this Court in Dharamraj (supra), wherein also the assessee had died much prior to the issuance of the notice under Section 148 of the Act, and the issuance of such a notice was held to be unsustainable in law, inter-alia holding that even section 292B 6 of the Act does not apply in such a situation,” Court said and quashed the reassessment proceedings. Appearance: Mr. Rohan Gupta & Mr. Vaibhav Grover, Advs for Petitioner; Mr. Vipul Agrawal, SSC with Mr. Gibran Naushad & Ms. Sakashi Shairwal, JSCs for Respondent/Revenue Case title: Late Sh. Lal Chand Verma Through His Legal Heir v. Union Of India & Anr.Citation: 2025 LiveLaw (Del) 23 Case no.: W.P.(C) 8184/2023 Click Here To Read/Download The Order

Income Tax Dept Can Invoke S.159 When Reassessment Notice Was Issued During Lifetime Of Deceased Assessee: Delhi HC

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