MRS VANITHA GOPAL SHETTY V. THE ASSISTANT COMMISSIONER OF INCOME TAX

WP/19840/2019

AI Insights

The case involves a writ petition filed by the legal heirs of Kurkal Gopal Shetty, challenging various notices and a reassessment order issued by the Assistant Commissioner of Income Tax for the assessment year 2011-12. The primary contention was that the notices were issued to a deceased person and not to his legal heirs within the statutory time frame, rendering them invalid. The court examined the procedural validity of the notices under the Income Tax Act, particularly focusing on Sections 148, 142(1), and 159, and the implications of these sections on the issuance of notices to legal representatives of a deceased assessee.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 763114 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 05-07-2021
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax vs. Kurban Hussain Ibrahimji Mithiborwala, Alamelu Veerappan v. ITO, Savitha Kapila v. Assistant Commissioner of Income Tax, Parashuram Pottery Works Co. Limited vs. Income Tax Officer, Circle-I, Gujarat, The Commissioner of Income Tax and another v. Shri. I. Mahabaleswarappa
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: SANMATHI
• Assessee Lawyers: CHYTHANYA
• Keywords: Assessment Year 2011-12; Income Tax; Legal heirs; Notice; Reassessment; Writ petition
• Section: 147; 148; 144; 142(1); 271F; 292B; 156; 226; 159(2); 227

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 5TH DAY OF JULY, 2021 BEFORE THE HON'BLE MR.JUSTICE S. SUNIL DUTT YADAV WRIT PETITION No.19840/2019 (T-IT) Between: 1. Mrs. Vanitha Gopal Shetty Legal Heir of Kurkal Gopal Shetty Aged about 75 years # 2-11-833, Kadri Kambala Road Bejal, Battagudda Mangalore - 575 004. 2. Mr. Ajeeth Kumar, Legal Heir of Kurkal Gopal Shetty Aged about 46 years # 40, William Harvey House Whitlock Drive Southfields London SW196SQ United Kingdom. 3. Mrs. Anjala Shetty Legal Heir of Kurkal Gopal Shetty Aged about 49 years # 21, Sutton Place London E96EH United Kingdom. … Petitioners (By Sri Chythanya K.K., Advocate) And: The Assistant Commissioner of Income Tax Circle 26(1) C-10, Bandra, Mumbai, 2 Pratyakshakar Bhavan, C-10, Bandra Kurla Complex, Bandra East Mumbai - 400 051. … Respondent (By Sri Sanmathi E.I., Advocate) This Writ Petition is filed under Articles 226 and 227 of the Constitution of India, praying to quash, as far as the petitioner is concerned, by an appropriate writ or order in the nature of certiorari or otherwise, the two impugned notices issued under Section 148 dated 28.03.2018 by the respondent for the Assessment Year 2011-12, as enclosed in Annexure-A1 and Annexure-A2 and etc. This Writ Petition coming on for preliminary hearing in 'B' Group this day, the Court, made the following: ORDER Petitioners who are the legal heirs of Kurkal Gopal Shetty have sought for the following reliefs: (a) Quashing of notice issued under Section 148 of the Income Tax Act, 1961 (for short ‘the Act’) vide Annexures – A1 and A2; (b) Quashing of notice issued under Section 142(1) vide Annexure-B; (c) Quashing of notice issued under Section 142(1) in the names of legal heirs i.e., petitioners herein vide Annexure-C; 3 (d) Quashing of notice issued under Section 142(1) in the names of legal heirs vide Annexure-D; (e) Quashing of reassessment order passed under Section 144 read with Section 147 for the Assessment year 2011-12 enclosed at Annexure- E; (f) Quashing of demand notice issued under Section 156 vide Annexure-F1; (g) Quashing of recovery notice vide Annexure-F2 and (h) Quashing of show cause notice issued under Section 274 read with Section 271F vide Annexure-G. 2. The petitioners, admittedly, are the legal heirs of Late Kurkal Gopal Shetty. It comes out from the facts that a notice came to be issued under Section 148 of the Act on 28.03.2018 with respect to the assessment year 2011-12 stating that the authority had reasons to believe that the income chargeable to tax for the Assessment Year 2011-12 had escaped assessment within the meaning of Section 147 of the Income Tax Act and had expressed their intention to 4 reassess the income and called upon the noticee to file return in the prescribed form for the said assessment year within 30 days from the service of the said notice, which is enclosed at Annexures-A1 and A2 issued contemporaneously. Subsequently, it comes out that a notice under Section 142(1) of the Act came to be issued for the assessment year 2011-12 in the name of deceased Kurkal Gopal Shetty dated 12.07.2018. 3. An aspect to be taken note of at this juncture would be that the said Kurkal Gopal Shetty was a Citizen of United Kingdom since 02.03.1988 as evidenced from Annexure-P and that he had died on 11.11.2014 at a Hospital in United Kingdom as is evident from the Death Certificate of the Competent Authority. Copy of the said certificate is enclosed at Annexure-N. Accordingly, as on the date of issuance of notice at Annexure-A1 dated 28.03.2018, admittedly, Kurkal Gopal Shetty had died which fact is not in dispute. It is also relevant to note that subsequently, during the course of proceedings the 5 department is stated to have been notified regarding the death of Kurkal Gopal Shetty as per the e-mail communication by Ajeeth Kumar – 2nd petitioner herein. The authority after ascertaining the details has issued a fresh notice to the legal representatives with respect to the proposed re-assessment proceedings as per the notice at Annexure-C dated 19.11.2018 and notice dated 21.12.2018 to the legal representatives of the deceased Kurkal Gopal Shetty. It would also be relevant to note that in the notice of 19.11.2018 issued under Section 142(1) of the Act, there is a reference to the communication by the legal representative of the assessee stating that Kurkal Gopal Shetty has died. It is also necessary to take note of the e- mail communication of the 2nd petitioner who in his e-mail dated 30.05.2018 had specifically furnished the date of death of late Kurkal Gopal Shetty and the said fact was taken note of by the Authorities concerned as is noticed from the communication at Annexure-K. It comes out that the reassessment order has been passed vide Annexure-E with respect to the assessment year 2011-12 in the names 6 of the legal representatives of Kurkal Gopal Shetty which is best judgment assessment order. Recovery proceedings has been initiated pursuant to such reassessment order which is in challenge as noticed from the enumeration of the reliefs supra. 4. It is the contention of Sri. Chythanya K K, learned counsel for the petitioner that the period available for initiation of reassessment proceedings under Section 148 as per Section 149 would be 6 years from the end of the assessment period i.e., from 31.03.2012 which would extend till 31.03.2018. It is contended that notice issued at Annexure-A1 on 28.03.2018 within the time prescribed, was issued as against the deceased assessee but a formal notice as regards to the petitioners herein came to be issued only on 19.11.2018 and 21.12.2018 and that these notices were only 142(1) notices and no notices were issued under Section 148. It is further contended that the power of issuance of notice viz-a-viz legal representatives is as provided under Section 159(2) of the Act and the notice insofar as the legal representatives of the deceased will 7 have to be in terms of Section 159(2)(b) and such notice must be within the period prescribed under Section 148 and in the present case, no notice having been issued within the period of 6 years i.e., before 31.03.2018, the notice issued to the deceased Kurkal Gopal Shetty would not come to the aid of the department to save the notices issued to petitioners. It is contended that the notices under Section 142 were also issued subsequently and the assessment order though issued in the names of the petitioners when the very commencement of the reassessment proceedings as per the notice at Annexure-A1 is invalid, the reassessment order passed in the names of the petitioners would automatically go. 5. Learned counsel for the petitioners has relied on the following judgments: a. Commissioner of Income Tax vs. Kurban Hussain Ibrahimji Mithiborwala – (1971) 82 ITR 821 (SC) – on the point that any invalidity of the notice in relation to Section 34 (Pari materia with 8 Section 148) of the New Act would result in vitiation of the entire proceedings for want of jurisdiction. b) Alamelu Veerappan v. ITO – (2018) 257 Taxman 72 – on the ground that notice issued to the legal representatives beyond the period of limitation would be impermissible though notice under Section 148 was issued to the deceased assessee. c) Savitha Kapila v. Assistant Commissioner of Income Tax (2020) 118 Taxmann.com 46 – on the same point as (b) supra and also on the point that there was no statutory requirement imposing obligation on the legal heirs to intimate regarding the date of death of the assessee as required. d) Parashuram Pottery Works Co. Limited vs. Income Tax Officer, Circle-I, Gujarat – 1977(106) ITR 1 SC on the point that the authorities entrusted with the task of tax assessment ought to be 9 well-versed with the procedure and any remissness on their part would necessarily result in loss of revenue. e) Judgment dated 16.06.2021 in ITA No.561/2013 - The Commissioner of Income Tax and another v. Shri. I. Mahabaleswarappa – on the point that observations in para 8 were in the context of continuation of proceedings where the assessee had died and would not apply in circumstances where the proceedings were initiated against the dead assessee. 6. Sri. E. I. Sanmathi, learned counsel for the revenue on the other hand would contend that notice at Annexure-A1 issued against the assessee i.e., Kurkal Gopal Shetty was within the time prescribed under Section 148 and defect in such notice ought to be construed as not vitiating the proceedings in light of Section 292B and that notice to dead assessee with subsequent notice under Section 142 to the legal representatives ought to be read in its entirety and in light of the legal representatives having 10 responded to the notice by providing details of the date of death etc., same ought to be protected and saved. 7. It is further contended that under Section 2(7) of the Act, the word ‘assessee’ has been defined as in Section 2(7)(b) 'every person who is deemed to be an assessee under any provisions of this Act' and in Section 2(7)(c) ‘every person who is deemed be an assessee in default under any provisions of this Act'. He also draws attention to Sections 159(3) and (4) of the Income Tax Act, which provides that the legal representative of the deceased, shall for the purpose of the Act, be deemed to be an assessee and shall be personally liable for any tax payable by the original assessee. It is further contended that without prejudice to his other contentions that even if the reassessment order is set aside, the right of initiation of proceedings de novo ought to be protected and the matter may be remanded for reconsideration by the Assessing Authority. 8. Heard both sides. 11 9. The admitted facts relevant for the present purpose are that the assessee - Kurkal Gopal Shetty has died on 11.11.2014 in United Kingdom and the notice under Section 148 for the first time was issued on 28.03.2018 in the name of Kurkal Gopal Shetty. It must also be noted that the last date for initiation of assessment proceedings for the assessment year 2011-12 was 31.03.2018. 10. The relevant extract of Section 159 of the Act reads as follows:- \"159. (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. (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 sub-section (1),— 12 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 undischarged, 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.\" 13 11. The question that is required to be answered in light of the contentions advanced is as follows: Whether notice issued to the deceased assessee on 28.03.2018 within the time prescribed could save the reassessment order passed in the name of the legal representatives who are the petitioners herein? 12. It is to be noted that Section 159 which falls under Chapter XV, envisages two situations, namely (a) where assessment proceedings having been initiated when the assessee is alive, is subsequently continued as against his legal representatives (b) when proceedings are taken against the legal representatives which are proceedings that could have been taken against the deceased if he had survived. 13. It becomes clear that insofar as the proceedings against an assessee who is alive at the time of initiation of proceedings, the same proceedings could be continued as against his legal representatives from the stage at which it 14 stood on the date of death of the deceased. Insofar as the right of the revenue to initiate proceedings as regards to the deceased assessee, Section 159(2)(b) permits proceedings to be initiated against the legal representatives as regards all proceedings which could have been taken against the deceased if he had survived. 14. In the present facts, admittedly, the proceedings are initiated under Section 148 for reassessment relating to escapement of income of late Kurkal Gopal Shetty and such proceedings as has been initiated in the year 2018 by when Kurkal Gopal Shetty had already died (on 11.11.2014). The proceedings in terms of Section 159(2)(b) ought to have been taken against the legal representatives of late Kurkal Gopal Shetty at the first instance. It ought to be noted that the period allowable for initiating the proceedings under Section 148 is the period prescribed under Section 149(1) (b) which position is not in dispute and accordingly, proceedings ought to have been initiated as on 31.03.2018. 15 15. The question as to whether proceedings initiated against the deceased Kurkal Gopal Shetty was sufficient to continue proceedings of reassessment as regards the legal representatives is a matter that requires to be answered. The learned counsel for the revenue would contend that the concept of abatement cannot be extended to assessment proceedings and where the original assessee has died, the proceedings against his legal representatives would be good in law as made out under Section 159(2) of the Act as well as in light of the definition of assessee under Section 2(7)(b) read with Section 159 is a matter that also requires consideration. 16. There is no dispute as regards to the general proposition that proceedings against an assessee would continue even after his death as against his legal representatives and there would be no abatement of such proceedings. However, in the present case, the question is as regards to the initiation of proceedings under Section 148 vis-à-vis the legal representatives of the deceased 16 Kurkal Gopal Shetty. As noticed earlier, notice issued at the first instance on 28.03.2018 is as regards Kurkal Gopal Shetty and at that relevant point of time, the said assessee was dead. It comes out from the subsequent proceedings that the revenue, upon being informed by the 2nd petitioner through an e-mail on 30.05.2018 that Kurkal Gopal Shetty had died, has issued notice to the legal representatives on 19.11.2018 and on 21.12.2018 under Section 142 and hence, in effect, there was no notice to the petitioners with respect to the initiation of proceedings for reassessment under Section 148. The proceedings under Section 142 being a part of the re-assessment proceedings, the starting point for initiation of proceedings under Section 148 is the issuance of notice, which notice to be valid is required to be initiated within the time prescribed under Section 149(1)(b). Notice issued against Kurkal Gopal Shetty on 28.03.2018 being against a dead person, at the very inception would not be a tenable notice for initiation of proceedings under Section 148 as regards the legal representatives insofar as any proceedings against the legal 17 representatives are to be governed by Section 159. While Section 159(2)(a) provides for continuation of proceedings against the legal representatives when initiated against the assessee when he was alive. Clearly Section 159(2)(b) would require a separate notice to be issued under Section 148 within the time prescribed under Section 149(1)(b) as against the legal representatives directly. If such proceedings are initiated beyond the time prescribed under Section 149(1)(b) such proceedings would not be valid. 17. In the present case while the notice at its inception to Kurkal Gopal Shetty who is dead is invalid insofar as any claim by the department as against the dead assessee should be only by issuance of notice to the legal representatives in terms of Section 159(2)(b) and except this procedure, there can be no other procedure envisaged. This would flow from the premise that any act which is required to be done in a particular manner must be done in that manner or not at all which is a settled legal proposition. In the present case, it also ought to be noted that though 18 notice was issued to the dead assessee, the contention that as there is no abatement, and proceedings must be permitted to be continued against the legal representatives, is an argument that is liable to be rejected as the question of continuation of proceedings of an assessment against the legal representatives is only in the scenario as contemplated under Section 159(2)(a) i.e., where the assessee is alive at the initiation of proceedings and has subsequently died. In the case on hand, the assessee having died on 11.11.2014, claims or proceedings, if any against the deceased assessee ought to be under Section 159(2)(b). As Section 159 does not permit of any ambiguity, any elasticity to the time period fixed under Section 149 and the manner of initiation of proceedings against the deceased assessee as provided under Section 159(2)(b) is impermissible. 18. It also ought to be noted that the assessment proceedings initiated against Kurkal Gopal Shetty under Section 148 is sought to be continued and concluded as against the legal representatives not by way of any fresh 19 notice to the legal representatives under Section 148 but by way of notice to furnish return under Section 142 which again relates to a subsequent stage of reassessment proceedings. The judgment in the case of Alamelu Veerappan (supra) provides that notice issued to the legal representatives beyond the period of limitation prescribed is without jurisdiction and unenforceable in law. The judgment in the case of Rajendra Kumar Sehgal v. ITO - (2019) 414 ITR 286 is also on the same lines. In addition, the contention of Sri. E.I.Sanmati, learned counsel for the revenue that the notice issued to the dead assessee ought to be saved by virtue of Section 292B, has also been considered in the case of Rajendra Kumar (supra), where the Court has rejected such contention. 19. Section 292B reads as follows: “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 20 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.” 20. Section 292B provides for saving of the proceedings if such proceedings are in substance and effect in conformity with or according to the intent and purpose of this Act. As noticed earlier, the procedure prescribed as regards to proceedings to be initiated against the deceased assessee is as contained under Section 159(2)(b). Accordingly, notice issued against a dead person as regards his affairs which ought to have been issued under Section 159(2)(b) to the legal representatives cannot be saved by recourse to Section 292B. 21. As regards the contention of learned counsel - Sri. E.I.Sanmathi, seeking for remanding of the matter back for fresh consideration by the Assessing Authority by 21 permitting de novo proceedings with respect to the same assessment year by rectifying the formal defect in notices issued, by placing reliance on the judgments referred in paragraph No.5 above, it ought to be noticed that no doubt in all the 3 orders relied upon by Sri. Sanmathi, learned counsel (Judgment dated 12.02.2018 passed in ITA No.100042/2017; Judgment dated 03.09.2019 passed in ITA No.877/2018 and the judgment in the case of St. Sudha Prasad v. Chief Commissioner of Income Tax - 275 ITR Page 135), the Court had permitted de novo proceedings to be initiated for the same assessment year against the legal representatives. However, what does not come out from the facts in the aforesaid cases is the consideration of the point of limitation vis-à-vis the proposed proceedings against the legal representatives. If the case was that proceedings were initiated against the deceased assessee and subsequently on coming to know the details regarding the legal representatives, fresh notice is issued and such notice is challenged by the legal 22 representatives as being invalid as against them, consideration would have been different. If the notice to the said legal representatives at the second instance were issued within the time prescribed under Section 149, such fact would be of relevance wherein a contention is raised regarding the absence of jurisdiction to initiate proceedings vis-à-vis legal representatives as has been considered above. The Court in none of the above judgments has recorded a finding as to whether issuance of notice to the deceased in contravention of Section 159(2)(b) could be saved which point was not raised nor considered in the said judgments and accordingly, the Court not having expressed a view as regards to the power to initiate proceeding against the legal representatives, such judgments are of no avail. 22. The other circumstance that is required to be noticed is that the legal representatives in the present case were not issued with any notice regarding proceedings under Section 148 and it is only under Section 142 notice 23 was issued to the legal representatives which fact is also taken note of while refusing to reserve liberty to the authority by remanding the matter to the Assessing Authority to initiate proceedings. It must also be noted that exercise of power under Article 226 is not made out in the present case as granting of any relief would be contrary to the statutory period available to initiate proceedings against the legal representatives in terms of Section 159(2)(b) read with Section 149(1)(b) as discussed above. 23. The position of law regarding invalidity of the notice vitiating the proceedings pursuant thereto being settled as noticed from the judgment in the case of Kurban Hussain (supra) and in light of the discussions made above and in the absence of any notice under Section 148 in terms of Section 149(1)(b) of the Act, the assessment order passed in the names of the petitioners enclosed at Annexure-E for the assessment year 2011-12 passed under Section 144 read with Section 147 of the Act is set aside. Consequent to setting aside of assessment order, demand 24 notice, recovery notice and show cause notice issued pursuant thereto vide Annexures - F1, F2 and G respectively are also set aside. 24. Writ petition is disposed off accordingly. Sd/- JUDGE VP "