Income Tax--Current Issues

Practice Update

V.K. Subramani

VALIDITY OF ASSESSMENT WHEN THERE IS FAILURE TO ISSUE NOTICE UNDER SECTION 143(2)/148 ON THE ASSESSEE AND/OR ON LEGAL REPRESENTATIVE

Section 292BB says that an assessment would get validated even though the notice prior to the assessment was not served upon the assessee or not served in time or was served in an improper manner. In other words, section 292BB is a deeming provision intended to protect the income tax authority by deeming that everything was done correctly even though there were some errors in service of notice, prior to assessment. The assessee has to raise objection before completion of assessment to make section 292BB inoperative. In which case, the income tax authority cannot take shelter under section 292BB.

The apex Court in CIT v. Laxman Das Khandelwal (2019) 417 ITR 325 (SC) : 2019 TaxPub(DT) 5081 (SC) has held that the protection given by section 292BB is only where there is service of notice and does not cover cases where there is absence of notice. The legal provision only rescues the Revenue in respect of procedural errors in service of notice and does not cover where there is altogether an absence of notice.

With faceless assessment under section 144B in place these kind of lapses may not take place in future for the reason that the service of notice would be on the registered account of the taxpayer in the website of the e-filing portal and thus the impact of section 292BB may fade away from the statute book or atleast its relevance, in due course of time.

In Savita Kapila L/H of Shri Mohinder Paul Kapila v. Asstt. CIT (2020) 192 DTR (Del) 73 : 2020 TaxPub(DT) 2938 (Del-HC) a notice under section 148 was sent to the last known address of the deceased-assessee and no notice was either served on the deceased assessee or on the legal heirs. Subsequently, the proceedings were transferred to the PAN of the petitioner (being one of the legal heirs of the assessee). The Court held that the assessment/reassessment proceedings were barred by limitation due to absence of notice under section 148. Some more observations of the Court were noteworthy viz. (i) section 159 would not apply since no proceedings were initiated when the assessee was alive and the legal heirs do not step in to the shoes of the deceased in such case; and (ii) in the absence of a statutory provision it is difficult to cast a duty upon the legal representative to intimate the factum of death of an assessee to the Department.

In Late Bhupendra Bhikhalal Desai (since decd.) through L/H Raju Bhupendra Deasi v. ITO (2021) 200 DTR (Guj) 313 : 2021 TaxPub(DT) 1589 (Guj-HC) the Court following its own precedent in Chandreshbhai Jayantibhai Patel v. ITO (2019) 177 DTR (Guj) 451 : 2019 TaxPub(DT) 0496 (Guj-HC) reiterated its position by holding that (i) issue of notice on a dead person is not a mere technical defect and the very assessment subsequently made would be null and void; and (ii) issue of an invalid notice on a dead person would be invalid unless the legal representative submits to the jurisdiction of the assessing authority without raising any objection.