The Karnataka High Court.
Credit: DH File Photo
Bengaluru: The Karnataka High Court has ruled that proceedings initiated against a deceased assessee by issuing a notice after their demise cannot be continued against their legal representative.
A division bench of Justice Krishna S Dixit and Justice G Basavaraja held that once the statutorily prescribed time limit for action against the deceased has expired, no proceedings can be pursued against the legal representatives.
The judgment arose from a case involving the Income Tax Department’s actions against one Ramanatha Gurulakshmi, a Bengaluru resident, for alleged huge cash deposits during the 2016-17 assessment year. Gurulakshmi had also conducted transactions involving immovable properties, but failed to file income tax returns declaring interest from these deposits and capital gains.
On January 31, 2023, the department issued a notice under Section 148A(b) of the Income Tax Act, asking Gurulakshmi to explain why a reassessment notice under Section 148 should not be issued. When no reply was received, an order under Section 148A(d) was passed on March 11, 2023.
However, it later came to light that Gurulakshmi had passed away on October 14, 2022.
Her legal representative, V Preethi, responded on November 28, 2023, informing the department of the assessee’s death. Despite this, on March 29, 2024, the department issued an assessment order under Section 147 read with Section 144, citing Section 159(2)(d) of the IT Act to justify continuing proceedings against the deceased’s legal representative for the 2016-17 assessment year.
Preethi challenged the assessment order, computation sheet, notice of demand, and notice of penalty, arguing that these were issued against a deceased individual and were therefore, null and void.
While a single bench quashed the notices and orders, the department moved the division bench, contending that Section 159(2)(a)(b) and (c) of the IT Act allowed it to reopen and reassess escaped tax through legal representatives.
The division bench rejected this argument, observing that the IT Act does not provide for excluding the time elapsed during proceedings against a deceased assessee when calculating the limitation period for initiating action against their legal representatives.
The bench noted: “Had the proceedings been initiated against the assessee during his/her lifetime, they could have continued against the legal representatives of the deceased assessee. However, that is not the factual position here. Therefore, the order of the single bench cannot be faltered in quashing what was challenged before him.”