ITAT Mumbai: Reassessment Against Deceased Person Held Void; Section 54F Benefit Allowed on Merits

Background of the Dispute

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) in Nisha RajendraMavani Legal Vs ITO examined the validity of a reassessment framed in the name of a deceased assessee and also considered the taxability of compensation received on surrender of tenancy rights.

The appeal arose from an order passed by the CIT(A)/NFAC dated 13.08.2025 for AY 2012-13. The core questions before the Tribunal were:

  1. Whether a reassessment order issued and completed in the name of a person who had died prior to conclusion of proceedings is legally sustainable.
  2. Whether the amount of ₹1,20,00,000 received as compensation for surrender of tenancy rights, which was invested in a new residential house, could be taxed as unexplained investment under Section 69B, or whether the assessee was entitled to exemption under Section 54F.

Grounds Raised in Appeal

The assessee challenged the order of the CIT(A)/NFAC broadly on the following issues:

  • The reopening of assessment under Section 147/148 was claimed to be illegal.
  • The assessment order was challenged as invalid since it was passed in the name of a deceased person.
  • The addition of ₹1,20,00,000 made under Section 69B was contested.
  • Interest charged under Section 234A and Section 234B was also disputed as a consequence of the above additions.

The assessee also reserved the right to amend, modify, or delete any of the grounds.

Key Facts and Chronology

Death of the Assessee and Assessment Proceedings

  • The assessment order was passed on 06.12.2019.
  • The assessee had died on 23.10.2019, and a copy of the death certificate was produced before the Tribunal.
  • The reassessment proceedings were initiated by the Assessing Officer (AO) by issuing a notice under Section 148 dated 27.03.2019 on the basis of information that the assessee had purchased immovable property for ₹1.20 crore.
  • According to the assessment order, the assessee did not file any return in response to the Section 148 notice and did not respond to such notice.
  • The reassessment was completed under Section 144 read with Section 147.
  • No notice under Section 148 or any other statutory notice was ever issued to or served upon the legal heirs or executor of the deceased assessee.
  • When the appeal was filed before the CIT(A)/NFAC, the appellant clearly mentioned in Form 35 (specifically in para 6 of the statement of facts/claim) that the assessee had expired on 23.10.2019.
  • It was also brought on record that neither the deceased assessee nor the executor was residing at the address referred to in the assessment order (Flat No. 7B, Ganga Lahri); they were residing at a different address, and no notice was received at any relevant point of time.

Despite being made aware of these facts, the CIT(A)/NFAC:

  • Did not take any remedial steps to correct the defect,
  • Did not direct substitution of legal heirs in place of the deceased assessee, and
  • Proceeded to pass the appellate order again in the name of the deceased person and confirmed the assessment.

Tribunal’s Analysis on Jurisdictional Defect