DCIT CIRCLE-52(1), INCOME TAX V. PRANAV GUPTA, LEGAL HEIR OF LATE SH. VIJAY KUMAR GUPTA, NEW DELHI

ITA 2192/DEL/2023

AI Insights

The case revolves around an appeal by the Revenue against the order of the Ld. CIT(A) which had deleted the addition made by the AO on account of long-term capital gains from the sale of a property. The primary legal issue was the validity of the notice under Section 148 of the Income Tax Act, 1961, which was issued to the deceased assessee, Shri Vijay Kumar Gupta. The legal heir, Pranav Gupta, contested the notice's validity, leading to the CIT(A)'s decision in his favor, which was subsequently upheld by the ITAT.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 653171 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Other Referred Cases: Mahagun Realtors Pvt. Ltd. vs. PCIT, Maruti Suzuki India Ltd. vs. PCIT, Braham Prakash vs. ITO, Savita Kapila vs. ACIT, Vipin Walia vs. ITO, Alamelu Virappan vs. ITO, Sumit Balkrishna Gupta vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S. KRISHNAN; HARSHIT CHAUHAN
• Assessee Lawyers: MANINDER KAUR
• Keywords: Question of law; Period of limitation; Principle of natural justice; Search and seizure; Time period of passing order
• Section: 147; 148

Judgement Text

"1 ITA No. 2192/Del/2023 DCIT v. Pranav Gupta A.Y. 2009-10 THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F”, DELHI BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER ITA No.2192/Del/2023 (Assessment Year 2009-10) DCIT, Cir-52(1) 1405, 14th Floor, E-2, Block, Civic Centre, Delhi- 110002 Vs. Sh. Pranav Gupta, Legal heir of Late Sh. Vijay Kumar Gupta, 11, Darya Ganj, New Delhi- 110002 \u0001थायीलेखासं./जीआइआरसं./PAN/GIR No: AAIPG0797N Appellant .. Respondent Appellant by : Sh. S. Krishnan, Adv. & Sh. Harshit Chauhan, Adv, Respondent by : Dr. Maninder Kaur, Sr. DR Date of Hearing 07.04.2025 Date of Pronouncement 20.06.2025 O R D E R PER MADHUMITA ROY, JM: The instant appeal filed at the behest of the Revenue is directed against the order passed by the Ld. CIT(A)-31, Delhi, dated 08.06.2023 arising out of the 2 ITA No. 2192/Del/2023 DCIT v. Pranav Gupta A.Y. 2009-10 Assessment Order dated 30.12.2016 passed by the ITO, Ward 52(3) New Delhi under Section 147/143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) Assessment Year 2009-10. 2. The question before us as to whether the deletion of addition of Rs.8,71,56,676/- on account of long term capital gain made by the Ld. CIT(A) is sustainable or not. In this regard the maintainability of the proceedings being the notice under Section 148 of the Act having been served on a dead person was under challenge before the Ld. CIT(A) and ultimately decided in favour of the assessee. Having regard to the question of law as argued by the Ld. AR in support of the order passed by the Ld. CIT(A), we have proceeded to deal with the same at the very threshold. 3. The brief fact leading to the case is this that the appellant filed original return of income on 22.07.2009 declaring total income of Rs.209,13,750/- which was processed under Section 143(1) of the Act accepting the return filed by the assessee. In the said return of income the long term capital gain out of the sale of house property lying and situated at C169 Greater Kailash, New Delhi was disclosed. The computation of income declared a sale consideration of 3 ITA No. 2192/Del/2023 DCIT v. Pranav Gupta A.Y. 2009-10 Rs.275,00,000/- from said transaction. The original assessee Shri Vijay Kumar Gupta passed away on 02.10.2015 but thereafter a notice under Section 148 of the Act was issued on 31.03.2016 in the name of Shri Vijay Kumar Gupta upon receipt whereof the son of the assessee requested the Ld. AO in writing on 19.04.2016 to drop the proceeding as the notice was a nullity having been issued in the name of the dead person. On the contrary the legal heir of the assessee was directed to file the return of income, whereupon the son of the assessee again reiterated the prayer of dropping of the proceeding and filed the return already filed dated 22.02.2009 by his father. Further that, he asked for providing a copy of the reasons recorded. 4. In fact, it appears from the reasons recorded, inter alia, that a search and seizure action dated 17.09.2013 was carried out at the premises of Shri Naresh Gupta, a deed writer wherefrom a hard disk of his computer containing deeds pertaining to various properties transactions indicating cash billing in respect of the same was retrieved; the print out of such deeds from his computer was confronted to Shri Naresh Gupta on 08.11.2013 which was replied to have been based on clients instructions. Two agreements in respect of the sale of the premises at C169 Greater Kailash-1 New Delhi mentioning some amount which is different 4 ITA No. 2192/Del/2023 DCIT v. Pranav Gupta A.Y. 2009-10 to that of the amount mentioned in the registered sale deed of that particular premises were found. 5. The Ld. AO adopted an amount of Rs.9.90 crores in respect of one of the draft agreements found from the computer of Shri Naresh Gupta as the actual sale consideration and computed the amount of LTCG at Rs.8,71,156,675/-. The assessee filed an appeal before the First Appellate Authority who in turn deleted the entire addition. Hence, the instant appeal before us. 6. At the very threshold of the matter before the First Appellate Authority the assessee challenged the validity of the notice under Section 148 of the Act issued to the dead person. It is a trite law that in order to undertake proceeding in respect of deceased person the legal heir needs to be identified and notice are required to be served upon such legal heir being deemed assessee. Such notices, however, are also required to be served within the time limit. Notice to assume jurisdiction under Section 148 of the Act issued to a dead person and/or non-existent entity is a case of substantive illegality when it is not the legal obligation on the part of the legal heir to suo moto inform the department on the date of the demise of the original assessee, the father, as in the case in hand; no notice under Section 148 was validly served when he was alive or on the deemed assessee i.e. the appellant 5 ITA No. 2192/Del/2023 DCIT v. Pranav Gupta A.Y. 2009-10 before us renders the assumption of jurisdiction invalid as was the ultimate finding of the Ld. CIT(A) particularly relying upon the judgement passed by the Hon’ble Supreme Court in the case of Mahagun Realtors Pvt. Ltd. reported in (2022) 443 ITR 194 (SC). He therefore, held the assumption of jurisdiction to be invalid and allowed the appeal preferred by the assessee with the following observations: “6.7 The sum and substance of the above rulings is that a notice issued in the name of a dead person is not a valid notice. Further, in order to undertake proceedings in respect of a deceased person, his Legal Heirs need to be identified and notices are required to be served to such Legal Heirs, being deemed assessees, in their names and in their capacity as Legal Heirs of the deceased. The said notices are required to be served within the time- limitation prescribed. Moreover, as held by the Apex Court in the case of PCIT Vs. Maruti Suzuki India Ltd. (416 ITR 613), participation in proceedings by the appellant cannot operate as estoppel against law. It is also held by the Courts that notice to assume jurisdiction, such as notice u/s.148, when issued in respect of a dead person/non-existent entity is a case of substantive illegality and not a procedural violation of the nature adverted to in section 292BB. Here, it would be appropriate to mention that the Apex Court in the case of Mahagun Realtors (P.) Ltd. [2022] 443 ITR 194 (SC) had distinguished its judgement in the case of Maruti Suzuki (Supra) in upholding the assessment order in the name of the amalgamating company (non-existent entity) on the basis of peculiar facts of the case where ITR was filed and also assessment was completed in the name of non- existent company and the assessee never brought the fact of amalgamation to the notice of AO Further, the assessee had duly objected to the notice being issued in the name of the deceased. Moreover, in various judgments cited above, it has been held that the assessee was under no legal obligation to suo motu inform the Department on the demise of his father. It is accordingly held that no notice u/s.148 was validly served either on Sh. Vijay Gupta when he was alive or on the (deemed) assessee viz. the appellant, which renders the assumption of jurisdiction invalid. Therefore, 6 ITA No. 2192/Del/2023 DCIT v. Pranav Gupta A.Y. 2009-10 proceedings carried out in pursuance of such wrongly-assumed jurisdiction are void ab-inito. Ground no.2 is accordingly allowed.” 7. At the time of hearing of the appeal the Ld. DR vehemently argued in support of the order passed by the Ld. AO. 8. On the other hand the Ld. Counsel appearing for the assessee submitted before us that admittedly the notice under Section 148 of the Act was issued in the name of the father of the appellant who was no longer alive as on the date of issuance of the notice by the Department. Having regard to this particular aspect of the matter, the Ld. Counsel Mr. S. Krishnan referred the provision of law envisaged in Sections 159(2), 159(2)(a), 159(2)(b) and 159(3) of the Act. 9. It was further contended by the Ld. Counsel that by virtue of section 159(3) of the Act the legal heir of the deceased shall be deemed to be an assessee and in that view of the matter in the event of death of a person, his legal heirs need to be identified and notice under Section 148 of the Act is required to be served on such legal heirs within the limitation period in the absence of which there would be no proper assumption of jurisdiction and the subsequent proceedings would be bad in law as was his ultimate submission before us. In this regard he has relied upon very many judgments including the judgments passed by the jurisdictional High Court 7 ITA No. 2192/Del/2023 DCIT v. Pranav Gupta A.Y. 2009-10 in the case of Braham Prakash vs. ITO, reported in (2005) 275 ITR 242; Savita Kapila vs. ACIT reported in (2020) 426 ITR 502; Vipin Walia vs. ITO (2016) 382 ITR 19; judgment passed by the Hon’ble Madras High Court in the case of Alamelu Virappan vs. ITO, reported in 2018 (6) TMI 760. He has further relied upon the judgment passed by the Hon’ble Apex Court in the matter of PCIT vs. Maruti Suzuki India Ltd, reported in 416 ITR 613 and in the case of Mahagun Realtors Private Limited, reported in(2022) 443 ITR 194(SC). In the absence of notice under Section 148 of the Act validly served either on the original assessee Shri Vijay Kumar Gupta when he was alive or on the deemed assessee being the legal heir of the assessee, the appellant before us renders the assumption of jurisdiction as invalid and therefore, liable to be quashed as prayed by the ld AR before us. 10. We have heard the rival submissions made by the respective parties. We have also perused the relevant materials available on record including the orders passed by the authorities below and the judgments relied upon. Under the present facts and circumstances of the matter it is evident that admittedly the original assessee passed away on 02.10.2015, therefore, no notice could have been served upon him in April 2016 and moreso the dead person could not file the return of income as required by notice under Section 148 of the Act. Admittedly the notice 8 ITA No. 2192/Del/2023 DCIT v. Pranav Gupta A.Y. 2009-10 was issued in the name of the deceased on 31.03.2016 i.e. at the fag end of the limitation prescribed under the law and it was incapable of being served upon him and in that view of the matter the entire proceedings become nonest in the eyes of law. 11. Having regard to the jurisdictional condition envisaged under Section 148 of the Act not met we have further considered the judgment relied upon by the Ld. AR in the case of Braham Prakash vs ITO (supra), wherein on the identical facts and circumstances of the matter when the notice was not even found to have been served upon the deemed assessee, the subsequent proceedings were found to be bad in law as there was breach of the principle of natural justice as well as the mandatory provisions contained in Section 148 of the Act. 12. In the case of Savita Kapila versus ACIT (supra), the Hon’ble Delhi High Court has been pleased to observe categorically that the sine qua non for acquiring jurisdiction to reopen an assessment is that such notice should be issued in the name of the correct person. This requirement of issuing notice to a correct person and not to a dead person is not merely a procedural requirement but is a condition precedent to the impugned notice being valid in law. Reliance was placed on the judgment passed by the Hon’ble Bombay High Court in the case of Sumit Balkrishna Gupta vs. ACIT, reported in(2019) 2 TMI one 209. 9 ITA No. 2192/Del/2023 DCIT v. Pranav Gupta A.Y. 2009-10 13. We have further considered the judgment passed by the Hon’ble Madras High Court in the case of Alamelu Virappan vs. ITO (supra), wherein it has been further held that in the absence of statutory mandate, no responsibility could be cast upon the survivors of an assessee to intimate fact of his/her demise to the tax Department. It was held “there is no statutory requirement imposing an obligation of all legal heirs to intimate the death of the assessee” 14. The Hon’ble jurisdictional High Court in the case of Vipin Walia, supra has been pleased to hold that “what was sought to be done by the ITO was to initiate proceedings under Section 147 of the Act against the deceased assessee for Assessment Year 2008-09. The limitation for issuance of the notice under section 147/148 of the Act was 31 March 2015. On 27 March, 2015 when the notice was issued, the assessee was already dead. If the department intended to proceed under Section 147 of the Act, it could have been done so prior to 31 March, 2015 by issuing notice to the legal heirs of the deceased. Beyond that date it could not have proceeded in the matter even by issuing notice to the legal heirs of the assessee”. Needless to mention that the fact of the above matter is identical to the case in hand before us and thus the judgment is found to be applicable here. 15. We find that in the case of PCIT versus Maruti Suzuki India Ltd.(supra), it is held that participation in proceedings by the appellant cannot operate in estoppel 10 ITA No. 2192/Del/2023 DCIT v. Pranav Gupta A.Y. 2009-10 against law. It was further held that notice to assume jurisdiction, such as notice under section 148 of the Act, when issued in respect of a dead person/non-existent entity is a case of substantive illegality and not a procedural violation of the nature adverted to in Section 292BB of the Act. In the case in hand the legal heir of the assessee before us duly objected to the notice being issued in the name of the deceased. However, it has been time and again decided as already narrated hereinabove that it is neither the obligation on the part of the legal heir of the assessee to bring it to the notice of the fact of demise of the original assessee to the Department suo moto, the father of the assessee in the case in hand before us. 16. Section 159(2) of the Act makes a specific reference to the reassessment proceeding under Section 147 of the Act. While Section 159(2) (a) of the Act speaks of a proceeding already taken against an assessee ‘before his death’, Section 159(2)(b) of the Act envisages any proceeding which could have been taken against the deceased if he had survived. It further permits such a proceeding to be taken against the legal heirs of the deceased assessee even if it had not been taken while the assessee was alive. Section 159(2)(b) of the Act is, therefore, applicable to the case in hand. Taking into consideration this particular provision of law it was the duty incumbent upon the AO to initiate proceeding under Section 148 of the Act against the deceased assessee for Assessment Year 2009-10. The limitation for 11 ITA No. 2192/Del/2023 DCIT v. Pranav Gupta A.Y. 2009-10 issuance of the notice under Section 148 of the Act was 31 March 2016. However, on that particular day when the notice was issued the assessee was already dead. In that view of the matter if the Ld. AO intended to proceed under Section 147 of the Act he could have done so prior to 31 March 2016 by issuing notice to the legal heir of the deceased. Beyond that date he could not have proceeded in the matter even by issuing notice to the legal heirs of the assessee. 17. We note that the notice issued in the name of a dead person is, thus, not a valid notice. In order to undertake the proceeding in respect of a deceased person the legal heirs need to be identified and notices are required to be served upon such legal heirs being deemed assessees, in the names and in that capacity as legal heirs of the deceased and that particular notices are required to be served within the statutory time limit prescribed, which is absent in the case in hand. As admittedly, no notice under Section 148 of the Act was served upon the original assessee when was alive or on the deemed assessee, the appellant before us having regard to the provision of law as narrated hereinabove, the entire proceeding is vitiated; the same is void ab initio and therefore, liable to be quashed which has been rightly taken care of by the Ld. CITA in the order impugned in deleting the addition made against the assessee; the same is found to be just and proper so as not to warrant any interference. 12 ITA No. 2192/Del/2023 DCIT v. Pranav Gupta A.Y. 2009-10 18. Since the legal issue argued on behalf of the assessee before us is addressed in favour of the assessee the grounds raised by the Revenue in its appeal have become of academic interest only and need not to be adjudicated upon. 19. The appeal preferred by the revenue is, thus, found to be devoid of any merit and thus, dismissed. Order pronounced in open court on 20.06.2025. Sd/- Sd/- (SMT. ANNAPURNA GUPTA) (MS. MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 20.06.2025. *MP* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "