Karnataka HC: Tax Proceedings Against Deceased Assessee Cannot Continue Against Legal Heirs

Karnataka High Court, proceedings initiated against an Income Tax taxpayer via 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 stated, “Had the proceedings been initiated against the Assessee during his lifetime, they could have continued against the legal representatives of the deceased Assessee.”

As per the bench, it mentioned that while dismissing a plea furnished via the income tax officer contesting a single judge bench order that favoured the plea submitted via Preethi V and set aside the demand notice and penalty and any additional resultant proceedings if any asking demand was too set aside.

It was the matter of the authority that taxpayer Ramanatha Gurulakshmi had huge cash deposits and that at the time of the AY 2016-17, she made a transaction related to the immovable properties and additionally that she has not submitted her returns, specifying interest from the deposits and capital gains.

On 31.01.2023 a notice was issued to her under section 148A(b) of the Income Tax Act, 1961 via speed post whereby she was asked to show why the notice under section 148 must not be issued. Also, a second notice was sent dated 15.02.2023. As no answer was submitted to the aforesaid notices, an order under section 148A(d) came to be passed dated 11.03.2023, and subsequently, under section 148 the notice was issued asking the taxpayer to submit her returns.

On 15.11.2023 a legal notice was issued under section 142(1). Thereafter on 28.11.2023, the respondent sent a response citing that the taxpayer died dated 14.10.2022. However, the Assessing Authority post referring to Sec.159(2)(d) of the Act made the Assessment under section 147 r/w Sec.144, on 29.03.2024 against the deceased taxpayer for the Assessment Year 2016-17.

For the revenue, the panel counsel relied on Section 159(2)(a)(b)&(c) of the Income Tax Act to change the impugned judgment. The court expressed “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 stressed 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.”

Read Also: Quick Guide to Income Tax Section 148A with New Changes

Denying the revenue’s contention that the obligation needed to have been reserved for initiating fresh proceedings against the taxpayers’ Legal Representatives, once the proceedings opted against the deceased taxpayer are set at nought, the court cited that “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 the 1961 Act in particular are brought to our notice.”

It was mentioned that “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.”

The plea as per that has been dismissed.