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No tax notice to legal heir: ITAT quashes order on dead person

Mumbai, Nov 17, 2023

The Income-tax Appellate Tribunal (ITAT), Mumbai bench, has held an assessment order passed in the name of a deceased taxpayer to be ‘non-est’ (does not exist) and quashed the addition made to the taxable income of the deceased individual.

The taxpayer had passed away in August 2015 and the assessment order, which resulted in an addition of Rs 1 crore to his taxable income for financial year 2009-10, was issued in February of the next calendar year. This addition was upheld by the Commissioner (Appeals) – Faceless Appeals Center, in an order dated May 2023.

Subsequently, the legal heir, who was his wife, filed an appeal with the ITAT. She submitted that the Commissioner (Appeals) was duty-bound to bring her on record but had failed to do so. She pointed out that in another order passed by the ITAT in November 2020 she had been clearly mentioned as the legal heir.

The tax tribunal observed, “Undisputedly in the present case, after the death of the taxpayer (Late M.H. Bothra), no notice was issued in the name of the legal heir.”

Under Section 159 of the Income- Tax (I-T) Act, when a person is no more, his or her legal heir is liable to pay tax dues which the deceased would have been liable to pay if he or she were alive.

“Thus, if a valid assessment is carried out, the legal heir will be responsible for the demand raised on the deceased taxpayer. In this case, as the assessment order framed in the name of the deceased taxpayer was held non-est in law, consequently the tax demand raised would not be valid,” said Amarpal Singh-Chadha, tax partner and India mobility leader at EY-India.

The order provides insights which would be of help to legal heirs in tax assessments involving deceased family members.

While there was no intimation to the tax officer by the legal heir regarding the demise of the late Bothra, the appellate tribunal in quashing the assessment order relied on several high court decisions.

The Delhi high court, in the case of Savita Kapila (issued in 2020) had held, “This court is of the view that in the absence of a statutory provision it is difficult to cast a duty upon the legal representatives to intimate the factum of death of a taxpayer to the income tax department. After all, there may be cases where the legal representatives are estranged from the deceased taxpayer or the deceased taxpayer may have bequeathed his entire wealth to a charity.”

Singh-Chadha advises, “Various judgements have held that there is no statutory obligation on legal heirs to intimate the death of a taxpayer to the revenue authorities. However, in order to file the I-T return of the deceased taxpayer, they are required to register as ‘legal heir’ in the income-tax portal and follow the process laid down.”

[The Times of India]

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