Amit Sood and Sh. Rishab v. Income Tax Officer

1. The petitioner by filing this writ petition seeks directions to £■.l'« "J H Sfi' ''fit ' quash a notice dated 29.03.2017 issued under Section 148 of the Income Tax Act, 1961 (hereafter called the "Act") to the deceased assessee, late Smt. Rukmani Sehgal (hereafter called the "deceased assessee") and to prohibit the respondent Assessing Officer (hereafter called the "AO") from conducting proceeding for re-assessment in any manner or take any consequential action under the Act for the assessment year (AY) 2010-11.

2. The undisputed facts are that the deceased assessee had filed income tax returns and continued to do so, till her death. The return for AY 2010-2011 was processed, in a routine manner and the deceased assessee was intimated about it. On 17.01.2015, the said assessee died. The impugned reassessment notice was issued under W.P.(C)No.11255/2017 Page 1 of[7] 2018:DHC:9041-DB Section 148 of the Act to the said deceased; the petitioner, a legal representative of the deceased, Rajendra Kumar Sehgal (hereafter called the "petitioner") and he was intimated this faet; without prejudice. Thereafter,vide letter dated 15.05.2017,the petitioner also sought a copy ofthe"reasons to belieye". The revenue furnished the "reasons to believe"recorded on its file in support ofits opinion that reassessment was neeessary. This,indicated that according to information received, the deceased had shown some transactions which led to a claim for losses brought forward, pertaining to one Varun Capital Serviees Limited. The petitioner protested that this was not correct;after rejecting the objections received from the petitioners, the AO issued a clarification, ostensibly "clarifying" that the entity from which the deceased had received the amounts and claimed losses was different, and that the original "reason to believe" contained a \ z ffr"' typographical error.

3. The petitioner approached this court,seeking the reliefs thatshe has claimed, primarily on three grouhds: firstly, the Act does not provide any mechanism for issuing aiid carrying on reassessment in I fe irespectofa dead person,ifthe reassessmentnotice is issuedagainsta deceased. It is urged, secondly, that the "clarification" issued camouflages the faet that the so ealled "reasons to believe" was not based on application ofmind and was also premised on no reason.The third ground is that the AO completed the reassessment without, - 1 issuing notice under Seetion 143(2)ofthe Act

4. In support of the first submission, the petitioner cites the Division Bench ofthis court, in Vipin Walia Vs. 770(2016)382 ITR W.P.(C)No.l1255/2017 Page2of? 19,which was followed by the High CourtofGujaratat Ahmadabad in the case of Rasld Lala Vs. ITO [Special Leave Application No.18987of2016,decided on29.11.2016].

5. The revenue resists the petition;its counsel relies onSfyLight HospitalityLLPv.AC(CT)(2018)90Taxmann.Com and submitsthat the error, in issuing the notice to a non-existent person or entity is capable ofcorrection and by reason ofSection 292B ofthe Act,the notice is not invalid. He also relied on Pankajbhai Rameshbhai Zalavadia vsJethabhaiKalabhaiZalavadiya(Deceased)throughLRs & Ors(2017),.9-See 700to,contendihafhiiy assessrhent made in the present case carinot betreated«as void., t - Analysisadd Conclusions ». < '

6. The provision relevantto.decide the first issue is Section 159 of the Act,which reads as follows:' "159.(I) Where aperson digs, liisjegal representative shall be liable to pay ar^ sunr whichjhe deceased would have been liable topay0he hdd^riotdied, in the like manner and to the same extentas the deced'sTd. (2)For the purpose ofmaking an assessment(including an assessment, reassessmentsor re^compMtption under section 147)ofthe incomei'oftHe'decec^fdimfbr the purpose of levying any sum in the hands ofthe legal representative in accordance with theprovisionsofsub-section(1),- (a) 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 representativefrom the stage atwhich itstoodon the date of the death ofthe deceased; W.P.(C)No.l1255/2017 Page3of? (b)anyproceeding which could have been taken againstthe deceased if he had survived, may be taken against the legalrepresentative;and (c)alltheprovisionsofthisActshallapplyaccordingly. (3) The legal representative ofthe deceased shall,for the purposesofthisAct, be deemedto be an assessee. (4)Every legal representative shall be personally liablefor any tax payable by him in his capacity as legal representative if, while his liability for tax remains undischarged, he creates a-charge on or disposes oforparts with any assets qffheestdte ofthe deceased,, which are in, or may come into, his possession, but such liability shall be limited to the value ofthe msetjso charged, disposed ofor parted with. (5) Theprovisions ofsiib-section(2)ofsection 161, 162 and 167shall, sofar as mdy be and to the extent to which they are notinconsistent with theprovisions ofthissection, apply in relation to a legalrepresentative: ■ 'v' ■ (6) The liability ofa legal representative under this section shall, subject to the provisions ofsub-section (4) and sub section (5), be limited to the extent to which the estate is capable ofmeeting t^e,liability,"' ^ ^

7. Afternoticingthefa^ofthecase,theDivisionBench,in Vipin Walia(supra)(where again the reassessment notice was issued in the name of the deceased5^nd,jm^_ notice,^ issued to the legal '""'i-W'-'i' J-"''" representative),held that: '' | "11. Section 159(2)ofthe Act makesa specific reference to a reassessment proceeding underSection 147of the Act. WhileSection 159 (2)(a)ofthe Act talks ofa proceeding already taken againstan Assessee 'before his death'.Section 159(2)(b)ofthe Actenvisages anyproceeding which could have been taken against the deceased ifhe had survived. It permitssuch aproceeding to be taken againstthe LRsofthe deceasedAssessee even ifit had nottaken while the Assessee W.P. (C)No.11255/2017 Page4of[7] was alive.Section 159 (2)(b) is relevant as far as the presentcase is concerned.

12. What was sought to be done by the ITO was to initiate proceedings underSection 147 of the Act against the deceased Assessee for AY 2008-09. The limitation for issuance ofthe notice underSection 147/148 ofthe Actwas 31stMarch 2015. On 27'^ March 2015, when the notice was issued, the Assessee was already dead. Ifthe Department intended to proceed underSection 147ofthe Act, it could have donesoprior to SfMarch 2015 by issuinga notice to the LRs ofthe deceas^d/Bfyonflhatdate it could not have proceeded in the matter-even'by issuing notice to the LRs of the Assessee.",

8. This courtsees no re^omto.-.dis^ee^vs^ilhthe decision in Vipin Walia (supra); the summation of the,'^Mneipl'^ applicable, given the plain words of the statute are ui^e;xC;|p|ionable. The >irevenue's argument that the "defect" was,curabib^^|n r to the issuance of notice, to a deceased indivilual|li|||to|lthe opinion of this court, untenable. The phraseology;6fi 292BB precludes the contention.Thatprovision|^badslisT|ll||^^^^^^ "292BB.Notice de(^hedmmmi>HV valid m certain circumstances.—Where ah assessee has appeared in any proceeding or cooperated in any inquiry relating to an assessmentorreassesf^ent^iffhaff^^^ thatanynotice underanyprovision of4kis'^j^c^^w^im isrequiredto beserved upon him, has been duly served upon him in time in accordance with the provisions ofthis Act and such assessee shall be precluded from taking any objection in any proceedingorinquiry under thisActthatthe notice was— (a )notserved upon him;or (b )notserved upon him in time;or (c )served upon him in an improper manner: W.P.(C)No.11255/2017 Page5of? Providedthat nothing contained in this section shall apply where the assessee has raised such objection before the completion ofsuch assessmentor reassessment."

9. If the original assessee had lived and later participated in the proceedings,then, by reason ofSection 292BB,she would have been precluded from saying that no notice was factually served upon her. When the notice was issued in her name- when she was no longer of this world, it is inconceivable that she could have participated in the reassessment proceedings, (nor is that the; revenue's case) to be estopped from contending that she.did not receive it. The plain language ofSection 292BB,ih^puniopin its application, contrarytotherevenue's argu^nt:; '/

10. As far as Zalavadiya (supra) is concerned,this courtnoticess^^T^SijuId^entis an authority on the proposition that rejection ofan(ap|)hGation under Order XXII Rule 4 ' ■-til' I''. CPC without acyudicating^it^^ itiien!|^^^not per se a bar for impleadment ofthe legal hffrs and succe||i^pbfaparty under Order-! Rule 10(2) CPC. This coufr.isiLofriJpmfe the absence of any provision m the Act, to fasten revenue liability upon a deceased individual, in the absehcp^|^ndmg?||i« previously instituted proceedmg which is really what the present case is all about, renders fatal the effort ofthe revenue to impose the tax burden upon a legal representative.

11. As far as the second argument, with regard to the clarification is concerned, this court is unpersuaded by the revenue's argument. The petitioner's objection that the transaction with an entity attributed to the deceased was unsupported by the books furnished to the revenue, W.P.(C)No.ll255/2017 was straightaway rejected. However, the "reasons to believe" are premised upon such a transaction with one Varun Capital Services Ltd.(as is evident from the table at Appendbc B to that document). After rejection, ofthe objection, which meant that according to the revenue, such a transaction was indeed recorded in the deceased's booh,therevenueattemptedto"correct"the "error"bychangingthe name ofthe entity(with whom thesuspecttransaction occurred).This court is of opinion that such ^'correction" is neither innocuous nor innocent; it was clearly aimed-at;improving what was a fatally defective "reasons to belieye^Ssand mask the reality, to wit, that the revenue authorities utterly^fafr^id to apply their^minds to therfacts and circumstances ofthe case.0rfe|he;:lastNissue^^^^^ the fatality attached to the completed reassessmenfTn-tliC'.-. a notice under Section 143(2),this courtnotices that)theli'missio'fr the assessment(or reassessment as in this case)^^difr-'a'p0pb oflaw enunciated in Asstt. CITV. HotelBlue Moon(2010)321 ITR 362.

12. In view of the foregoing conclusions, the impugned reassessment notice and all consequent proceedings- including the reassessment order-have to be and are, hereby quashed. The writ petition is accordingly allowed,but without order on costs.

S.RAVINDRABHAT (JUDGE)

PRATEEKJALAJN NOVEMBER 19,2018 (JUDGE) W.P.(C)No.l1255/2017 Page?of[7], !-:,L j 'i),.!;