KRISHNAAWTAR KABRA L/H OF JAGANNATH RAMPAL KABRA V. THE INCOME TAX OFFICER WARD-2(1)(1)

SCA/1515/2022

AI Insights

The case revolves around a writ application filed by Krishnaawtar Kabra, the legal heir of the deceased Jagannath Rampal Kabra, challenging a notice issued under Section 148 of the Income Tax Act for the assessment year 2017-18. The notice was issued in the name of the deceased, who had passed away prior to the issuance of the notice. The primary legal issue was whether the reopening of the assessment against a deceased person was valid. The court examined the provisions of the Income Tax Act, particularly Sections 159 and 292B, and relevant case law to determine the validity of the notice and the continuation of proceedings against the legal representative.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 748759 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 29-03-2022
• Assessment Year: misc
• Other Referred Cases: Chandreshbhai Jayantibhai Patel vs. Income Tax Officer, Commissioner of Income Tax vs. Laxman Das Khandelwal
• Laws Referred To: Article 226 of the Constitution of India, Section 148 of the Income Tax Act, Section 292B of the Income Tax Act, Section 159 of the Income Tax Act, Section 292BB of the Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: M R BHATT CO
• Assessee Lawyers: HARDIK VORA; HARDIK A VYAS
• Keywords: Invalid notice; Jurisdiction; Legal representative; Notice to deceased; Reassessment; Writ of Certiorari
• Section: 148; 292BB; 292B; 159

Judgement Text

"C/SCA/1515/2022 JUDGMENT DATED: 29/03/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 1515 of 2022 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MS. JUSTICE NISHA M. THAKORE ============================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ============================================= KRISHNAAWTAR KABRA L/H OF JAGANNATH RAMPAL KABRA Versus THE INCOME TAX OFFICER WARD-2(1)(1) ============================================= Appearance: MR. HARDIK V VORA(7123) for the Petitioner(s) No. 1 MS HARDIKA VYAS(11450) for the Petitioner(s) No. 1 M R BHATT & CO.(5953) for the Respondent(s) No. 1 ============================================= CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MS. JUSTICE NISHA M. THAKORE Date : 29/03/2022 ORAL JUDGMENT (PER : HONOURABLE MS. JUSTICE NISHA M. THAKORE) Page 1 of 12 C/SCA/1515/2022 JUDGMENT DATED: 29/03/2022 1. By this writ application under Article 226 of the Constitution of India, the writ applicant has prayed for the following reliefs: “a) Writ of Certiorari or any other Writ, order or direction in the nature of Certiorari quashing the impugned notice dated 31.03.2021 issued u/s 148 of the Act in the name of deceased person for the assessment year 2017-18; b) Pending the admission, hearing and final disposal of this petition, restrain the respondent from passing the order of re- assessment; c) Pass any other order(s) as this Hon’ble Court may deem fit and more appropriate in order to grant interim relief to the Petitioner; d) Any other and further relief deemed just and proper be granted in the interest of justice; e) To provide for the cost of this petition.” 2. The brief facts, as emerges from the record, are as under: 2.1 The writ applicant is the Son of deceased Assessee namely late Shri Jagannath Rampal Kabra, who passed away of 07.07.2020. The father of the writ applicant was assessed as an individual however, the Notice under Section 148 of the Act addressed to the deceased- Jagannath Rampal Kabra for the A.Y. 2017-18 came to be issued on 31.03.2021. The writ applicant claims that in response to the aforesaid Notice, return of income was filed on 26.05.2021 declaring total income of Rs.14,45,710/-. Subsequently, the respondent authority had provided copy of reasons vide letter dated 11.11.2021 thereby seeking reopening of the assessment for the year under consideration. 2.2 The main reason cited by the Assessing Officer was Page 2 of 12 C/SCA/1515/2022 JUDGMENT DATED: 29/03/2022 based on information received whereby prima facie, the Assessing Officer had formed opinion that the deceased - Jagannath Rampal Kabra had claimed bogus accommodation entry for an amount of Rs.50,00,000/- and there was escapement of income for the assessment year under consideration. The writ applicant submitted objections on 22.11.2021 responding to the reasons served upon the deceased -assessee. The main objection raised by the writ applicant was that the proceedings are initiated against the deceased-assessee and therefore, the Notice is void in the eye of law and thereby, requested to drop the proceedings. 2.3 The attention of the Assessing Officer was also drawn on the merits of the case. However, without considering the preliminary objection of the writ applicant about Notice being void as served upon the deceased person, the Assessing Officer on the basis of materials on record, proceeded to disposed of all the objections in the name of deceased- assessee vide order dated 18.12.2021. In such circumstances, the writ applicant is here before this Court with the present writ application. 3. We have heard Mr. Hardik Vora, the learned counsel appearing for the writ applicant and Mr. M.R. Bhatt, the learned Senior Standing Counsel assisted by Mr. Karan Sangani, the learned counsel appearing for the respondent – department. 4. The question of law which falls for our consideration is whether the reopening of assessment is void-ab-initio as the Notice under Section 148 of the Act has been issued to dead person? Page 3 of 12 C/SCA/1515/2022 JUDGMENT DATED: 29/03/2022 5. The aforesaid question of law is no more res-integra. The issue came to be considered by this Court in the case of Chandreshbhai Jayantibhai Patel vs. Income Tax Officer, reported in [2019] 413 ITR 276 (Guj.). The relevant observations read thus: “12. In the backdrop of the aforesaid facts, it is an admitted position that the notice under section 148 of the Act was issued to a dead person. The petitioner being the heir and legal representative of the deceased, upon receipt of the notice, immediately raised objection against the validity of the impugned notice and did not submit to the jurisdiction of the Assessing Officer by filing a return of income, but kept on objecting to the continuation of the assessment proceedings pursuant to the impugned notice. The Assessing Officer, however, instead of taking corrective steps under section 292B of the Act and issuing notice to the heirs and legal representatives, insisted on continuing with the proceedings pursuant to the impugned notice which was issued in the name of a dead person. Since strong reliance has been placed by the learned counsel for the respondent on the provisions of section 2(7) and 2(29) read with sections 159 and 292B of the Act, reference may be made to the said provisions, which read as under: “Section 2(7) \"assessee\" means a person by whom any tax or any other sum of money is payable under this Act, and includes - (a) every person in respect of whom any proceeding under the Act has been taken for the assessment of his income or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person; (b) every person who is deemed to be an assessee under any provision of this Act; (c) every person who is deemed to be an assessee in default under any provision of this Act; “Section 2(29) \"legal representative\" has the meaning assigned to it in clause (11) of section 2 of the Code of Civil Procedure, 1908;” “159. Legal representatives. - (1) Where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased. Page 4 of 12 C/SCA/1515/2022 JUDGMENT DATED: 29/03/2022 (2) For the purpose of making an assessment (including an assessment, reassessment or recomputation under section 147) of the income of the deceased and for the purpose of levying any sum in the hands of the legal representative in accordance with the provisions of subsection (1).- (a) any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased; (b) any proceeding which could have been taken against the deceased if he had survived, may be taken against the legal representative; and (c) all the provisions of this Act shall apply accordingly. (3) The legal representative of the deceased shall, for the purposes of this Act, be deemed to be an assessee. (4) Every legal representative shall be personally liable for any tax payable by him in his capacity as legal representative if, while his liability for tax remains undercharged, he creates a charge on or disposes of or parts with any assets of the estate of the deceased, which are in, or may come into, his possession, but such liability shall be limited to the value of the asset so charged, disposed of, or parted with. (5) The provisions of sub-section (2) of section 161, section 162 and section 167, shall, so far as may be and to the extent to which they are not inconsistent with the provisions of this section, apply in relation to a legal representative. (6) The liability of a legal representative under this section shall, subject to the provisions of sub-section (4) and subsection (5), be limited to the extent to which the estate is capable of meeting the liability.” “292B. Return of income, etc., not to be invalid on certain grounds. - No return of income, assessment, notice, summons or other proceeding furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.” Page 5 of 12 C/SCA/1515/2022 JUDGMENT DATED: 29/03/2022 13. Thus, the expression “assessee” includes every person who is deemed to be an assessee under any provision of the Act. Sub-section (3) of section 159 of the Act, postulates that the legal representative of the deceased shall, for the purposes of the Act, be deemed to be an assessee. Subsection (2) of section 159 of the Act says that for the purpose of making an assessment (including an assessment, reassessment or recomputation under section 147) of the income of the deceased and for the purpose of levying any sum in the hands of the legal representative in accordance with the provisions of sub-section (1), – (a) any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased; (b) any proceeding which could have been taken against the deceased if he had survived, may be taken against the legal representative; and (c) all the provisions of the Act shall apply accordingly. 14. Thus, clause (a) of sub-section (2) of section 159 of the Act provides for the eventuality where a proceeding has already been initiated against the deceased before his death, in which case such proceeding shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased. In the present case, the proceeding under section 147 of the Act had not been initiated against the deceased before his death, and hence, clause (a) would not be applicable in the facts of this case. 15. Clause (b) of sub-section (2) of section 159 of the Act provides that any proceeding which could have been taken against the deceased if he had survived may be taken against the legal representative. The present case would, therefore, fall within the ambit of section 159(2)(b) of the Act and, hence, the proceeding can be taken against the legal representative. Now, it cannot be gainsaid that a proceeding under section 147 of the Act of reopening the assessment is initiated by issuance of notice under section 148 of the Act, and as a necessary corollary, therefore, for taking a proceeding under that section against the legal representative, necessary notice under section 148 of the Act would be required to be issued to him. In the present case, the impugned notice under section 148 of the Act has been issued against the deceased assessee. In the opinion of this court, since this is not a case falling under clause (a) of sub-section (2) of section 159 of the Act, the proceeding pursuant to the notice under section 148 of the Act issued to the dead person, cannot be continued against the legal representative. 16. On behalf of the revenue, it has been contended that Page 6 of 12 C/SCA/1515/2022 JUDGMENT DATED: 29/03/2022 issuance of the notice to the dead assessee is merely a technical defect which could be corrected under section 292B of the Act. Reliance has been placed on the above referred decisions of the Supreme Court as well as the High Courts for contending that the proceedings would not be null and void merely because the notice has been issued against a dead person as the legal representative had received the notice and has objected to the validity of the notice and further continuation of the proceedings. In the opinion of this court, here lies the distinction between those cases and the present case. In the relied upon cases, the legal representative, in response to the impugned notice, filed return of income and participated in the proceeding and then raised an objection to the validity of the proceeding and, therefore, the court held that this was a case of waiver and that a technical defect can be waived; whereas in this case, right from the inception the petitioner has objected to the validity of the notice and thereafter to the continuation of the proceeding and has at no point of time participated in the proceeding by filing the income tax return in response to the notice issued under section 148 of the Act. Had the petitioner responded to the notice by filing return of income, he could have been said to have participated in the proceedings, however, merely because the petitioner has informed the Assessing Officer about the death of the assessee and asked him to drop the proceedings, it cannot, by any stretch of imagination, be construed as the petitioner having participated in the proceedings. 17. Insofar as reliance placed upon section 292B of the Act is concerned, the said section, inter alia, provides that no notice issued in pursuance of any of the provisions of the Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such notice if such notice, summons is in substance and effect in conformity with or according to the intent and purpose of the Act. 18. The question that therefore arises for consideration is whether the notice under section 148 of the Act issued against the deceased assessee can be said to be in conformity with or according to the intent and purposes of the Act. In this regard, it may be noted that a notice under section 148 of the Act is a jurisdictional notice, and existence of a valid notice under section 148 is a condition precedent for exercise of jurisdiction by the Assessing Officer to assess or reassess under section 147 of the Act. The want of a valid notice affects the jurisdiction of the Assessing Officer to proceed with the assessment and thus, affects the validity of the proceedings for assessment or reassessment. A notice issued under section 148 of the Act against a dead person is invalid, unless the legal representative submits to the jurisdiction of the Assessing Officer without raising any objection. Therefore, where the legal representative does not waive his right to a notice under section 148 of the Act, it cannot be said that the notice issued against the dead person is in conformity with or according to the intent and purpose of the Act which requires issuance of notice to the assessee, Page 7 of 12 C/SCA/1515/2022 JUDGMENT DATED: 29/03/2022 whereupon the Assessing Officer assumes jurisdiction under section 147 of the Act and consequently, the provisions of section 292B of the Act would not be attracted. In the opinion of this court, the decision of this court in the case of Rasid Lala v. Income Tax Officer, Ward-1(3)(6) (supra) would be squarely applicable to the facts of the present case. Therefore, in view of the provisions of section 159(2)(b) of the Act, it is permissible for the Assessing Officer to issue a fresh notice under section 148 of the Act against the legal representative, provided that the same is not barred by limitation; he, however, cannot continue the proceedings on the basis of an invalid notice issued under section 148 of the Act to the dead assessee. 19. In the facts of the present case, as noticed hereinabove, the notice under section 148 of the Act, which is a jurisdictional notice, has been issued to a dead person. Upon receipt of such notice, the legal representative has raised an objection to the validity of such notice and has not complied with the same. The legal representative not having waived the requirement of notice under section 148 of the Act and not having submitted to the jurisdiction of the Assessing Officer pursuant to the impugned notice, the provisions of section 292B of the Act would not be attracted and hence, the notice under section 148 of the Act has to be treated as invalid. In the absence of a valid notice, the Assessing Officer has no authority to assume the jurisdiction under section 147 of the Act and, hence, continuation of the proceeding under section 147 of the Act pursuant to such invalid notice, is without authority of law. The impugned notice as well as the proceedings taken pursuant thereto, therefore, cannot be sustained.” 6. Mr. M.R. Bhatt, the learned Senior Counsel, has heavily placed reliance upon Section 292BB of the Act and has contended in the facts of the case, the writ applicant being the legal representative of the deceased – original assessee by submitting objections on merits, has participated in the proceedings and in view of the Section 292BB of the Act, the assessee cannot raise the objection that the impugned Notice is without jurisdiction. In our view, the aforesaid issue is squarely covered by the decision of the Supreme Court. 7. The Supreme Court in the case of Commissioner of Income Tax vs. Laxman Das Khandelwal, reported in [2019] 417 ITR 325(SC), had an occassion to consider the effect of Section 292BB of the Act in light of the similar set of facts Page 8 of 12 C/SCA/1515/2022 JUDGMENT DATED: 29/03/2022 where the Assessing Officer sought assessment by issuing Notice under Section 143(3) read with Section 153(D) of the Act. The Revenue had preferred the appeal challenging the judgment and order passed by the High Court on the ground that the expression “so far as may be, apply” indicates that it is not expected to follow the provisions of Section 142(2)(3) of Section 143 strictly for the purpose of block assessments. Further, reliance was placed on Section 292BB of the Act to contend that once the assessee has participated in the proceedings, it shall be deemed that any notice which is required to be served upon was duly served and the assessee thereafter, would be precluded from taking any objections that the Notice was (a) not served upon him; (b) not served upon him in time or; (c) served upon him in an improper manner. 8. Thus, the Supreme Court has examined the aspect of applicability of requirement of Notice under Section 143(2) of the Act, more particularly, from the point of impact of Section 292BB of the Act. The relevant observations are reproduced as under: “8. The law on the point as regards applicability of the requirement of notice under Section 143(2) of the Act is quite clear from the decision in Blue Moon’s case2. The issue that however needs to be considered is the impact of Section 292BB of the Act. 9. According to Section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself.” Page 9 of 12 C/SCA/1515/2022 JUDGMENT DATED: 29/03/2022 8. Thus, dismissing the appeal preferred by the Revenue, the Supreme Court held that Section 292BB shows that if the assessee has participated in the proceedings, it shall be deemed that any Notice which is required to be served upon was duly served and the assessee would be thereafter precluded from taking any objections that the Notice was (a) not served upon him; (b) not served upon him in time or; (c) served upon him in an improper manner. It is therefore, clear that Section 292BB would be applicable as regards the infractions as detailed in sub section more particularly, with regard to mode of service of notice having certain infirmities to be considered by way of legal friction valid if, there was requisite participation on the part of the assessee. 9. At the outset we may observe that as per scheme of the Act the AO gets jurisdiction under the Act for assessment upon suo moto filing of return by the assessee or by issue of notice requiring him to file the return. In the present case, there is no scope/occasion for filing a voluntary return for escapement of income and the only provision under which return can be filed is on issue of a notice under Section 148. Indisputably, the assessment proceedings for escaped income were initiated by issue of notice under Section 148 of the Act and therefore the AO was vested with jurisdiction over the case. However, issuing notice upon the deceased assessee is as good as no valid notice in eye of law resulting in irregularity, which is not curable. It would be a nullity, as it hits upon the inherent jurisdiction of AO. On a bare reading of the provision, it is evident that issuance of valid notice confers power upon the AO to assume jurisdiction for initiation of proceedings for Page 10 of 12 C/SCA/1515/2022 JUDGMENT DATED: 29/03/2022 assessment of escapement of income. It is a cardinal proposition in law that not issuing notice at all or issuing that beyond statutory period or issue of an invalid notice under Section 148 does affect the jurisdiction of AO and would make the assessment/reassessment \"null and void\" because the notice under this section is not a mere procedural requirement but a condition precedent to assume jurisdiction and to make a valid assessment/reassessment. Absence of such a notice would make the assessment invalid and without jurisdiction in view of the decisions of Y Narayana Chetty v. ITO, 35 ITR 388 (SC); CIT v. Thayaballi Mulla Jeevaji Kapasi , 66 ITR 147 (SC); CIT v. Kurban Hussain Ibrahimji Mithiborwala, 82 ITR 821 (SC); Nayalchand Malukchand Dagli v. CIT, 62 ITR 102 (Guj); Madanlal Agarwal v. CIT, 144 ITR 745 (All); PN Sasikumar v. CIT, 170 ITR 80 (Ker); and Electro Steel Castings Ltd. 264 ITR 410 (Cal)-SLP Dismissed 266 ITR (St.) 104 (SC). The existence of a valid section 148 notice being a condition precedent for the exercise of the jurisdiction by the Assessing Officer to assess or reassess under Section 147, it does not confer any right to the assessee, which he could abandon. Want of a notice affects the jurisdiction of the Assessing Officer to proceed with the assessment and failure to give the requisite notice shall deprive the Assessing Officer of his jurisdiction as held in Ghansham Dass (1964) 51 ITR 557 (SC); Brij Bushan Lal v. CIT 81 ITR 497 (Punj); T.A. George v. Ag. ITO 153 ITR 721 (Ker); and CIT v. Hindusthan Steel Ltd , The Income Tax Officer and Ors. vs. Sukhini P. Modi and Ors. (19.01.2007 - ITAT Ahmedabad) : MANU/IB/5013/2007. 10. We have therefore, no hesitation in coming to the conclusion that the impugned notice dated 31.03.2021 Page 11 of 12 C/SCA/1515/2022 JUDGMENT DATED: 29/03/2022 admittedly, being issued upon deceased – assessee is void ab initio and the consequential proceedings and the orders passed thereon are any without jurisdiction and are therefore, hereby quashed and set aside. The writ application succeeds to the aforesaid extent. (J. B. PARDIWALA, J) (NISHA M. THAKORE,J) NEHA Page 12 of 12 "