INCOME-TAX OFFICER, WARD-4(2)(1), AHMEDABAD , AHMEDABAD V. LATE KHODAJI RANCHHODJI THAKOR LEGAL HEIR NARENDAKUMAR KHODAJI THAKOR, AHMEDABAD

ITA 948/AHD/2025

AI Insights

The case revolves around the Income Tax Department's attempt to assess the income of Late Khodaji Ranchhodji Thakor for the Assessment Year 2017-18, based on unexplained cash deposits and investments noted during the demonetization period. The Assessing Officer issued notices under sections 142(1) and 148 of the Income Tax Act, 1961, in the name of the deceased, leading to an ex-parte assessment under section 144. The legal heir contested the validity of these proceedings, arguing that they were initiated posthumously and thus void. The CIT(Appeals) annulled the assessment, a decision which the Tribunal upheld, citing that notices and assessments cannot be issued in the name of a deceased person.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 783778 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 30-04-2025
• Other Referred Cases: Chuharmal v. CIT, Smt. Srilekha Banerjee v. CIT, Mrs. Sripathi Subbaraya Manohara v. PCIT, Delhi, Neena Jatin Shah vs. Income-tax Officer, Utpala Pradeep Jain vs. Assistant Commissioner of Income-tax, Income-tax Officer v. Bhupendra Bhikhalal Desai, Principal Commissioner of Income-tax v. Maruti Suzuki India Ltd., Chandreshbhai Jayantibhai Patel v. Income-tax Officer
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B.P. SRIVASTAVA
• Assessee Lawyers: CHETAN AGARWAL
• Keywords: Condonation of delay; Set aside; Invalid notice; Reassessment proceedings; Unexplained investment; Income from undisclosed sources; Principle of natural justice; Source of fund
• Section: 148; 144; 142(1); 69; 133(6)

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद Ɋायपीठ “A“,अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD ] ] BEFORE DR. BRR KUMAR, VICE PRESIDENT AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकर अपील सं /ITA No.948/Ahd/2025 िनधाŊरण वषŊ /Assessment Year : 2017-18 The ITO Ward-4(2)(1) Ahmedabad – 380 015 बनाम/ v/s. Late Khodaji Ranchhodji Thakor Legal Heir Narendrakumar Khodaji Thakor Ahmedabad – 382 481 ̾थायी लेखा सं./PAN: AFWPT 1453 K (अपीलाथŎ/ Appellant) (Ů̝ यथŎ/ Respondent) Assessee by : Shri Chetan Agarwal, AR Revenue by : Shri B.P. Srivastava, Sr.DR सुनवाई की तारीख/Date of Hearing : 18/09/2025 घोषणा की तारीख /Date of Pronouncement: 06/11/2025 आदेश/O R D E R PER SIDDHARTHA NAUTIYAL, JM: The present appeal has been preferred by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 24/02/2025 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Year (AY) 2017-2018. 2. The Revenue has raised the following grounds of appeal: “(a) The Led. CITTA) has erred in law and on facts in quashing the notice und consequent assessment and deleting various additions totalling to Rs. 1,73,64,690/- (Rs. 1,41,94,690/- on account of unexplained money and Rs. 31,70,000/-on account of unexplained investment) on the ground that the assessee had expired before issue of Notice u/s. 142(1) of the Act. despite the fact that: Printed from counselvise.com ITA No.948/Ahd/2025 ITO vs. Late Khodaji Ranchhodji Thakor Legal Heir Narendrakumar Khodaji Thakor Asst. Year : 2017-18 2 (i) The legal heir of the assessee had not informed the department about) death of assessee at any stage prior to completion of assessment. (ii) During assessment proceedings, various statutory notices were issued on 21.02.2018, 10.05.2019, 10.06.2019, 23.08.2019 and 20.09.2019 were issued and duly served upon the email id of the assessee. However, the Legal Heir had neither complied the statutory notices nor informed the department about death of assessee. Further, the L/h did not take any steps for registration himself as a legal heir for assessment. Hence, the AO had rightly passed ex-parte order u/s. 144 of IT Act in the name of assessee. (iii) The L/h of the assessee had not raised ground regarding challenging the validity of Notice u/s. 148 as the same was issued in the name of deceased person. (b) The Ld.CIT(A) has erred in law and on facts in not deciding the appeal on merits of the case. (c) The Ld.CIT(A) ought to have set aside the assessment order to the file of the AO to pass the assessment order after taking the legal heir on record. (d) The appellant craves leave to add, alter and/or to amend all or any the ground before the final hearing of the appeal.” 3. The brief facts of the case are that the assessee, Shri Khodaji Ranchhodji Thakor, an individual residing at Ahmedabad, had not filed any return of income for Assessment Year 2017–18. Based on data analysis conducted by the Income Tax Department under “Operation Clean Money,” it was found that the assessee had deposited substantial cash in various bank accounts maintained with Punjab National Bank during the demonetization period from 9th November 2016 to 30th December 2016. The total cash deposit during this period amounted to Rs. 15,05,500/-, in addition to total credits of Rs. 1,41,84,687/- appearing in multiple savings and current accounts held by the assessee. Since the assessee had not filed any income tax return for the relevant year, the source of these cash deposits remained unexplained. Accordingly, the Assessing Officer (AO) issued a notice under section 142(1) of the Act, on 21.02.2018 requiring the assessee to file a return of income and explain the source of deposits. Despite several notices and reminders issued Printed from counselvise.com ITA No.948/Ahd/2025 ITO vs. Late Khodaji Ranchhodji Thakor Legal Heir Narendrakumar Khodaji Thakor Asst. Year : 2017-18 3 thereafter, including show-cause notices dated 23.08.2019 and 20.09.2019, the assessee failed to respond or furnish any details or explanation regarding the source of the cash deposits or the nature of his income. As a result, the AO proceeded to complete the assessment under section 144 of the Act — a best judgment assessment — based on the material available on record. During the course of proceedings, the AO obtained information from Punjab National Bank under section 133(6) of the Act. The bank confirmed that substantial cash deposits were made in old currency notes during the demonetization period and that large credit entries had also been recorded throughout the year. The AO also verified information through the Annual Information Report (AIR) and the AIMS database, which revealed a mismatch between the total cash deposits reported by the bank (Rs. 6.34 lakh) and that reflected in departmental data (Rs. 15.05 lakh). The assessee was further found to have made an investment in immovable property valued at Rs. 95,10,000/-, with his individual share being Rs. 31,70,000/-, for which no satisfactory explanation regarding the source of funds was furnished. After considering the material evidence, the AO concluded that the assessee had deposited cash and received other credit entries aggregating to Rs. 1,41,84,687/- in his bank accounts, which were not recorded in any books of account nor supported by any credible explanation. Accordingly, the AO held that the conditions prescribed under section 69A of the Act were satisfied — namely, that the assessee was the owner of the money, that such money was not recorded in any books of account, and that the nature and source thereof remained unexplained. Relying upon the judgments of the Hon’ble Supreme Court in Chuharmal v. CIT [(1988) 172 ITR 250 (SC)] and Smt. Srilekha Banerjee v. CIT [1964 AIR 697 (SC)], the AO observed that where the source of money is not satisfactorily proved, such money can be treated as income from undisclosed sources. Accordingly, the AO made an addition Printed from counselvise.com ITA No.948/Ahd/2025 ITO vs. Late Khodaji Ranchhodji Thakor Legal Heir Narendrakumar Khodaji Thakor Asst. Year : 2017-18 4 of Rs. 1,41,84,687/- as unexplained money under section 69A of the Act and taxed the same under section 115BBE at the rate of 60%. Further, the AO made an addition of Rs. 31,70,000/- representing the assessee’s investment in immovable property, which was treated as unexplained investment under section 69 of the Act. The total income of the assessee was thus assessed at Rs. 1,73,54,690/-. The assessment was therefore finalized under section 144 of the Act, assessing to total income at Rs. 1,73,54,690/-. 4. Aggrieved by the assessment order, an appeal was filed before the Ld. CIT(A), Delhi, on 03.10.2023 by the legal heir of the deceased assessee, Shri Narendra Khodaji Thakor. The appeal was delayed, and an application for condonation of delay was filed, explaining that the assessee had expired on 21.03.2017 due to liver failure, much before the initiation of the reassessment proceedings. It was submitted that the deceased’s wife was illiterate, and his son lived separately; hence, none of the statutory notices or orders served via the assessee’s registered email were known to the family. The family only came to know of the assessment order when a recovery notice was received in late 2022, after which the legal heir consulted a tax professional and filed the appeal. Considering the reasons and in the interest of substantial justice, the CIT(A) condoned the delay in filing the appeal and admitted it for adjudication. In the appeal, the legal heir submitted that the assessment order passed under section 144 was invalid since the notices under sections 142(1) and 148 of the Act were issued after the death of the assessee and in his name, rendering the proceedings void. It was further submitted that the cash deposits and investments were sourced from the sale of ancestral agricultural land amounting to Rs. 4,35,00,000/-, out of which the deceased’s share was Rs. 54,54,800/-. Various supporting documents such as the sale deed, bank statements, cash book, and details of commission and Printed from counselvise.com ITA No.948/Ahd/2025 ITO vs. Late Khodaji Ranchhodji Thakor Legal Heir Narendrakumar Khodaji Thakor Asst. Year : 2017-18 5 interest income were filed, stating that the total taxable income was below the basic exemption limit and that the additions made by the AO were contrary to law and natural justice. The CIT(A), after carefully considering the submissions, the assessment order, and the documents placed on record, observed that the assessee had expired on 21.03.2017, whereas the notice under section 148 was issued on 31.03.2021 — nearly four years after his death. The Commissioner noted that the Assessing Officer appeared unaware of the death and had proceeded to issue notices and frame the assessment in the name of a deceased person. The CIT(Appeals) held that a notice under section 148 can only be issued to a living person, and any assessment made pursuant to a notice issued in the name of a dead person is null and void in law. The CIT(A) referred to the legal principle that jurisdictional requirements under section 148 are mandatory, and non-compliance renders the entire reassessment proceedings invalid. It was also noted that section 292BB, which cures defects in the service of notice, applies only to a living assessee and cannot validate a notice issued in the name of a deceased person. Further, the CIT(A) relied on the judgment of the Hon’ble Delhi High Court in Mrs. Sripathi Subbaraya Manohara (Legal Heir of Late Sripathi Subbaraya Gupta) v. PCIT, Delhi (W.P. (C) No. 2678/2020, CM 9286/2020), wherein it was held that a notice issued in the name of a dead person is invalid and the proceedings based thereon are non est in the eyes of law. In light of these facts and judicial precedents, the CIT(A) held that the notice issued under section 148 and the assessment framed under section 144 in the name of the deceased assessee were void ab initio and without jurisdiction. Consequently, the entire assessment proceedings were declared invalid and annulled. Accordingly, the CIT(A) held that the reassessment proceedings initiated against the deceased person were bad in law and annulled the Printed from counselvise.com ITA No.948/Ahd/2025 ITO vs. Late Khodaji Ranchhodji Thakor Legal Heir Narendrakumar Khodaji Thakor Asst. Year : 2017-18 6 assessment order passed by the Assessing Officer. The appeal of the assessee was, therefore, allowed. 5. The Department is in appeal before us against the order passed by CIT(Appeals) allowing the appeal of the assessee. We have heard the rival contentions and perused the material on record. 6. We have heard the rival contentions and perused the material on record. The core issue involved in the present appeal filed by the Department is the validity of the assessment order passed in the name of a deceased person, late Shri Khodaji Ranchhodji Thakor, who had expired on 21.03.2017, much prior to the issuance of statutory notices and completion of assessment under section 144 of the Act. It is an undisputed fact on record that all notices, including those issued under sections 142(1) and 148 of the Act, were issued in the name of the deceased assessee and were served through his registered e-mail address, of which the legal heirs had no knowledge. The legal heir, Shri Narendra Khodaji Thakor, came to know of the assessment proceedings only upon receipt of the recovery notice in late 2022. These facts have been duly verified and recorded by the learned CIT(Appeals), who in our view correctly held that the assessment framed in the name of a dead person is void ab initio and not sustainable in law. It is a settled position of law that proceedings initiated and completed against a deceased person are a nullity and without jurisdiction. The Hon’ble Gujarat High Court in Chandreshbhai Jayantibhai Patel v. Income-tax Officer [(2019) 101 taxmann.com 362 (Guj)] categorically held that a notice issued under section 148 of the Act in the name of a deceased person is invalid and the consequent assessment is non est in the eyes of law. The Court further observed that the obligation lies upon the Revenue to ascertain the legal heirs before initiating proceedings, and section Printed from counselvise.com ITA No.948/Ahd/2025 ITO vs. Late Khodaji Ranchhodji Thakor Legal Heir Narendrakumar Khodaji Thakor Asst. Year : 2017-18 7 292BB cannot cure such a fundamental defect because that provision applies only to a living assessee. The Hon’ble Supreme Court has also upheld this legal principle. In Income-tax Officer v. Bhupendra Bhikhalal Desai [2021] 131 taxmann.com 40 (SC), the Hon’ble Supreme Court upheld the Gujarat High Court’s decision holding that a notice issued under section 153C of the Income-tax Act, 1961, in the name of a deceased person is unenforceable and void in law. In that case, the assessee, Shri Bhupendra Bhikhalal Desai, had passed away on 23.04.2017, yet the Assessing Officer issued a notice under section 153C on 29.03.2019 in his name. The legal heir informed the AO about the assessee’s death and requested that the proceedings be dropped, but the AO rejected the objection on the ground that the department was unaware of the death. The High Court quashed the notice and assessment, holding that the Revenue cannot justify an invalid notice merely because it lacked knowledge of the death of the assessee. The Supreme Court dismissed the Revenue’s Special Leave Petition, thereby affirming that any notice issued to a deceased person is void and without legal effect. In Principal Commissioner of Income-tax v. Maruti Suzuki India Ltd. [(2019) 416 ITR 613 (SC)], the Hon’ble Court held that an assessment order passed in the name of a non-existent entity, being void ab initio, cannot be validated by section 292B or section 292BB of the Act. The Court held that participation or lack of objection by the assessee does not confer jurisdiction upon the Assessing Officer when the very foundation of the proceedings is fundamentally defective. The ratio of this judgment applies with equal force to cases where assessment proceedings are initiated in the name of a deceased person, who, in law, ceases to exist. In the case of Neena Jatin Shah vs. Income-tax Officer [2025] 179 taxmann.com 498 (Bombay)[30-09-2025], the Hon'ble High Court held that notice under section 148 could not be issued to a dead person, and if it was done, same was null and void. In the case of Printed from counselvise.com ITA No.948/Ahd/2025 ITO vs. Late Khodaji Ranchhodji Thakor Legal Heir Narendrakumar Khodaji Thakor Asst. Year : 2017-18 8 Utpala Pradeep Jain vs. Assistant Commissioner of Income-tax [2023] 153 taxmann.com 700 (Gujarat)/[2024] 467 ITR 592 (Gujarat), the Hon'ble High Court held that where assessee died and thereafter Assessing Officer issued notice under section 148 in his name to reopen assessment, initiation of reassessment proceeding in name of deceased assessee and not in name of his legal representative were illegal and liable to be quashed. 7. In the present case, the CIT(Appeals) has recorded a clear finding that the assessee had expired much prior to the initiation of proceedings and that the notices were issued and assessment was completed in the name of the deceased person. The learned CIT(Appeals) has rightly applied the binding judicial precedents to hold that such assessment proceedings are void ab initio and non est in law. We also note that the Revenue has not disputed the fact of the assessee’s death prior to the issuance of notice or brought any material on record to show that the proceedings were ever validly continued against the legal heirs in accordance with section 159 of the Act. Considering the totality of facts and the consistent legal position laid down in the judicial precedents referred to above, we find no infirmity in the order passed by the learned CIT(Appeals). 8. In the result, the appeal filed by the Revenue is, therefore, dismissed. Order pronounced in the Open Court on 06/11/2025 at Ahmedabad. Sd/- Sd/- (DR. BRR KUMAR) VICE PRESIDENT (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 06/11/2025 T.C. NAIR/Tanmay, Sr. PS True Copy Printed from counselvise.com ITA No.948/Ahd/2025 ITO vs. Late Khodaji Ranchhodji Thakor Legal Heir Narendrakumar Khodaji Thakor Asst. Year : 2017-18 9 आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ ) अपील ( / The CIT(A)- (NFAC) 5. िवभागीय Ůितिनिध , अिधकरण अपीलीय आयकर , राजोकट/DR,ITAT, Ahmedabad, 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad 1. Date of dictation (word processed by H-JM on his computer) : 03.11.2025 2. Date on which the typed draft is placed before the Dictating Member. : 03.11.2025 3. Date on which the approved draft comes to the Sr.P.S./P.S : 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 5. Date on which fair order placed before Other Member : 6. Date on which the fair order comes back to the Sr.P.S./P.S. : 7. Date on which the file goes to the Bench Clerk. : 06.11.2025 8. Date on which the file goes to the Head Clerk. : 9. The date on which the file goes to the Assistant Registrar for signature on the order. : 10. Date of Despatch of the Order : Printed from counselvise.com "