Facts of the Case

Based on AIR information regarding substantial cash deposits in a bank account during FY 2008-09, the Assessing Officer issued a notice under section 148 in the name of Shri Anand Jeewan Verma. However, he had expired on 10.11.2006, well before the issuance of the notice and the relevant financial year.

After learning of the death during attempted service, the Assessing Officer proceeded against the legal heir, Shri Amit Verma, and completed a best-judgment assessment under section 144, adding ₹28,21,330 as unexplained income in the hands of the legal heir. The CIT(A), NFAC dismissed the appeal primarily due to non-compliance.

 Issues Involved

  1. Whether reassessment proceedings initiated through notice issued to a deceased person are legally valid.
  2. Whether bank credits arising after the death of an assessee can be taxed in the hands of the legal heir.
  3. Whether assessment in the status of legal heir is permissible without proper initiation against the correct taxable entity.

Petitioner’s Arguments

The legal heir contended that the notice under section 148 issued in the name of a person who had died years earlier was wholly illegal, rendering the entire proceedings void.

It was further submitted that the bank account was a joint account and the deposits occurred after the death of Shri Anand Jeewan Verma; therefore, they could not be attributed to him. Even otherwise, the legal heir was independently carrying on the poultry feed business and regularly assessed to tax in his own capacity.

Reliance was placed on judicial precedents holding that proceedings initiated against non-existent or deceased persons are nullities in law.

Respondent’s Arguments

The Revenue argued that the notice had been issued based on departmental records and that the legal heir should have informed the Department about the death. It was also contended that since the legal heir had taken over the business and operated the bank account, the credits were assessable in his hands.

Court Order / Findings (ITAT Allahabad)

The Tribunal held that issuance of a notice under section 148 to a person who had already expired renders the proceedings void ab initio. Courts have consistently ruled that assessment cannot be framed in the name of a non-existent or deceased person.

The Tribunal also observed that there is no statutory obligation on legal heirs to inform the Department about the death of the assessee in the absence of specific legal provisions.

On Taxability of Bank Credits After Death

It was noted that the deposits occurred in FY 2008-09, nearly two years after the death of Shri Anand Jeewan Verma. Therefore, such credits could not be attributed to him and consequently could not be assessed in the hands of his legal heirs in that capacity.

Even if the legal heir was operating the account for his own business, he constituted a separate taxable entity, and any assessment—if warranted—should have been made in his individual capacity, not as legal representative of the deceased.

Final Decision

Holding that the reassessment proceedings were initiated against a deceased person and therefore invalid, the Tribunal quashed the assessment order in entirety and allowed the appeal of the legal heir.

Important Clarification

The Tribunal emphasized that tax proceedings must be initiated against the correct legal person. Assessment based on a notice issued to a deceased individual is void, and liability cannot be shifted to legal heirs without proper legal foundation or fresh valid proceedings against the appropriate assessee.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771065888_LATEANANDJEEWANVERMALEGALHEIRAMITVERMAALLAHABADVS.ITOWARD11ALLAHABAD.pdf

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