Reassessment Proceedings Can't Be Initiated Against Deceased Assessee: Kerala High Court Directs Fresh Proceedings Against Legal Heir
Kerala High Court ruled that reassessment proceedings cannot be initiated against a deceased taxpayer (assessee).
The Bench of Justice Gopinath P. observed that “the procedure contemplated by Section 148A of the Income Tax Act, 1961 contemplates the issuance of a show cause notice etc., before reassessment proceedings are commenced. This cannot be a mere formality.”
Section 148 of the Income Tax Act, 1961 addresses the notice that the income tax department may send regarding any income that may have escaped assessment in prior assessment years.
Section 148A of the Income Tax Act allows the Income Tax officers to initiate reassessment proceedings when they suspect that a taxpayer may have concealed income during any assessment year.
Section 148A(d) of the Income Tax Act, 1961 provides that before issuing a notice under Section 148, the Assessing Officer must assess whether it's appropriate to do so based on available records and the taxpayer's response. This assessment should be completed within one month from the end of the month in which the taxpayer's reply is received. If no reply is received, the AO has one month from the expiration of the time allowed for the reply.
Section 148A(b) of the Income Tax Act, 1961 provides that the assessing officer must issue a notice to the taxpayer under Section 148A(b), providing information and adverse material suggesting that income has escaped assessment. The taxpayer can respond with their own material and evidence.
Section 159(2)(a) of the Income Tax Act, 1961 states any proceedings taken against the deceased before his death shall be deemed to have been taken against the legal representative.
In this case, the reassessment proceedings were initiated against the Late Thomas Boby Cherian (assessee) in respect of assessment year 2015-16 and an order under Section 148A(d) of the Income Tax Act, 1961 was issued on 06-05-2022 in the name of late Thomas Boby Cherian, after he had passed away on 14-06-2016.
The petitioner (legal heir of assessee) has approached the Kerala High Court challenging the reassessment proceedings against the deceased assessee.
The department submitted that the assessee had not filed his return of income for the assessment year 2015-16. The assessee had made two terms deposits of Rs.50 lakhs each during the financial year 2014-15 and in the absence of return of income for the year 2015-16 it was deemed that certain income chargeable to tax had escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961 and accordingly a show cause notice under Section 148A (b) of the Income Tax Act, 1961 was issued on 31-03-2022. It was submitted that since there was no response to the notice, an order under Section 148A (d) was issued.
The department further pointed out with reference to provisions of Section 159(2) that the assessment could be continued against the representative assessee. The issuance of an order under Section 148A(d) of the Income Tax Act, 1961 against the deceased assessee has not caused any prejudice to the petitioner.
The bench observed that the procedure contemplated by Section 148A of the Income Tax Act, 1961 contemplates the issuance of a show cause notice etc., before reassessment proceedings are commenced. This cannot be a mere formality. Therefore, the contention that the petitioner is not prejudiced cannot be accepted.
The bench directed the competent authority to initiate fresh proceedings by issuance of notice under Section 148A(b) of the Income Tax Act, 1961 and concluding the proceedings against representative assessee (the petitioner) and to any other legal heir of late Thomas Boby Cherian.
The bench opined that since the proceedings were commenced in the year 2022, for determining any period of limitation, the period from the date of which the initial notice under Section 148A(b) of the Income Tax Act, 1961 was issued till the date on which fresh notice is issued shall stand excluded.
In view of the above, the bench allowed the petition.
Counsel for Petitioner/ Assessee: Aditya Unnikrishnan and Priyadarsini S.
Counsel for Respondent/ Department:
Case Title: Smt. Celin Thomas v. The Income Tax Officer
Case Number: WP(C) NO. 16401 OF 2024