Gujarat High Court on Invalidity of Section 148 Notice Issued to Deceased Person

Overview

The Gujarat High Court in Rajendrakumar Padmshibhai Padshala Vs ITO (Gujarat High Court) examined whether reassessment proceedings initiated under Section 148 of the Income Tax Act 1961 in the name of a deceased person could be sustained when the legal heir neither filed a return nor submitted to the jurisdiction, but instead consistently challenged the validity of the notice.

The Court concluded that:

• A notice under Section 148 issued to a deceased person is a jurisdictional defect, not a curable irregularity.
• Where the proceeding under Section 147 was not initiated during the lifetime of the assessee, the Department must issue a valid notice to the legal representative under Section 159(2)(b).
• Section 292B cannot be resorted to when the very foundation of jurisdiction is missing.
• If the legal representative objects from the very beginning and does not participate in the reassessment, the proceeding cannot be validated through deemed waiver or curative provisions.

On this basis, the Court quashed the Section 148 notice dated 27.03.2019, the consequential assessment order dated 29.11.2019 passed under Section 144 read with Section 147, and the penalty order under Section 271F.

Factual Background

Parties and Relationship

• The petitioner, Rajendrakumar Padmshibhai Padshala, is the grandson of late Karsanbhai Gagajibhai Padashala.
• Late Karsanbhai passed away on 13.03.2019.
• The petitioner resides at Una, District Gir Somnath.
• The deceased resided at Village Khilavad, Taluka Gir-Gadhada, District Gir Somnath.

Basis for Reopening

The Assessing Officer initiated reassessment proceedings on the premise that:

• Late Karsanbhai had deposited Rs. 14,50,000/- in cash into State Bank of India.
• He had earned interest income of Rs. 31,839/- from Veraval Mercantile Co-operative Bank Ltd.
• These transactions related to Financial Year 2011-12, relevant to Assessment Year 2012-13.
• No return of income was filed disclosing the above cash deposit, and the source of funds remained unexplained.

On this information, the Assessing Officer issued a notice dated 27.03.2019 under Section 148 in the name of late Karsanbhai.

Subsequent Proceedings by Assessing Officer

• The Section 148 notice and further notices were sent to the deceased’s address at Village Khilavad.
• No reply was filed to the notice dated 02.08.2019 or the subsequent notice dated 29.08.2019 issued under Section 142(1) because they were addressed to the deceased.
• A final show cause notice dated 24.10.2019 was issued.
• Thereafter, an ex parte assessment order dated 29.11.2019 was framed under Section 144 read with Section 147, determining total income at **Rs. 17,31,839/-`.
• A demand notice under Section 156 was issued raising a tax demand of **Rs. 9,86,200/-`.
• Penalty proceedings under Section 271F were initiated.
• By order dated 03.01.2022, penalty of Rs. 5,000/- was levied under Section 271F.

Intimation of Death to the Department

Following the assessment:

• The petitioner addressed a letter dated 09.01.2020 to the Assessing Officer, informing that his grandfather had died on 13.03.2019, prior to the issue of the notice for reopening.
• The petitioner enclosed the death certificate and requested withdrawal of the assessment order passed in the name of the deceased.
• The petitioner clarified that no notice or correspondence had been received by the family after the death of his grandfather at the relevant time.

Reliefs Sought in the Writ Petition

The petitioner approached the Gujarat High Court under Article 227 of the Constitution of India seeking:

• Quashing of notices issued by the Income Tax Department at the address of the petitioner in respect of the deceased.
• A direction restraining the Department from issuing future demand notices on the petitioner’s address based on such invalid proceedings.

Contentions on Behalf of the Petitioner

Invalidity of Notice to Deceased Person

Counsel for the petitioner submitted: