Proceedings Initiated Against Income Tax Assessee After His Death Cannot Be Continued Against Legal Representative: Karnataka HC

The Karnataka High Court has said proceedings initiated against an Income Tax Assessee by issuing notice after his demise cannot be continued against his/her legal representative.

A division bench of Justice Krishna S Dixit and Justice G Basavaraja said, “Had the proceedings been initiated against the Assessee during his lifetime, they could have continued against the legal representatives of the deceased Assessee.”

The bench held thus while dismissing an appeal filed by the Income Tax officer challenging a single judge bench order which had favoured the petition filed by Preethi V and set aside the demand notice and penalty notice and any other consequential proceedings if any, raising demand were also set aside.

It was the case of the Authority that Assessee Ramanatha Gurulakshmi had huge cash deposits and that during the Assessment Year 2016-17, she had made transactions pertaining to immovable properties and further that she had not filed her Returns, declaring interest from the deposits and capital gains.

Thus a notice dated 31.01.2023 was issued to her u/s. 148A(b) of the Income Tax Act, 1961 by Speed Post whereby she was asked to show why notice u/s.148 should not be issued. Further, a second notice was sent on 15.02.2023. Since no reply was filed to the above notices, order u/s.148A(d) came to be passed on 11.03.2023 and further notice u/s.148 also was issued directing the Assessee to file her returns.

A statutory notice dated 15.11.2023 came to be issued u/s.142(1). The respondent then sent a reply dated 28.11.2023 mentioning that the Assessee died on 14.10.2022. However, the Assessing Authority after referring to Sec.159(2)(d) of the Act made the Assessment u/s.147 r/w Sec.144, on 29.03.2024 against the deceased Assessee for the Assessment Year 2016-17.

The panel counsel for the revenue relied on Section 159(2)(a)(b)&(c) of the Income Tax Act to alter the impugned judgment. To which the court said “The above provisions are as clear as Gangetic Waters; they inter alia indicate with clarity that the proceedings initiated against the Assessee during his lifetime can be continued against his Legal Representatives, and their liability could be co-extensive with the value of the estate of the deceased. They do not admit the kind of interpretation sought to be placed by the Revenue to the effect that initiation of proceedings can be made against the deceased Assessee and orders passed therein would bind or can be enforced against the Legal Representatives.”

It emphasised that “If the Parliament intended that, a proceeding of the kind can be initiated against the Assessee posthumously and orders passed therein should bind his Legal Representatives, the language of the provision would have been much different.”

Rejecting the contention of the Revenue that liberty ought to have been reserved to the Revenue for initiating fresh proceedings against the Legal Representatives of the Assessee, once proceedings taken up against the deceased Assessee are set at naught, the court said “This contention is structured on a premise that the Legal Representatives i.e., persons who hold estate of the deceased Assessee in their hands are under a legal obligation to inform the Revenue as to the death of the Assessee. To support such a premise, no provision of law in general and no section of 1961 Act in particular are brought to our notice.”

It added, “If the statutorily prescribed time limit has expired as against the deceased himself, as has happened in this case then no proceedings can be taken against his LRs.”

Accordingly, it dismissed the appeal.

Appearance: Advocate Y V Raviraj for Appellant.

Advocate Sandeep Huilgol for R1.

Citation No: 2025 LiveLaw (Kar) 22

Case Title: The Income Tax Officer & ANR Preeti V

Case No:WRIT APPEAL NO. 1407 OF 2024

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