The Calcutta High Court has held that the Income Tax Department cannot generate a reassessment notice on the PAN of a deceased assessee merely because the legal heirs have not been identified or brought on record. 

Dismissing the Department’s appeal, the Bench of Justice Rajarshi Bharadwaj and Justice Uday Kumar ruled that once the Department has knowledge of the assessee’s death, it cannot continue reassessment proceedings in the name of a non-existent person. 

The bench further observed that administrative or technical difficulties in identifying legal heirs do not validate proceedings initiated against a deceased individual.

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The dispute arose from reassessment proceedings for the Assessment Year (AY) 2020-21. The Income Tax Department had received information through the Insight Portal alleging bogus purchases by the assessee, Chiranji Lal Agarwala. Based on this information, the Assessing Officer issued a notice under Section 148A(b) of the Income Tax Act, 1961. In response, the assessee’s representative uploaded the death certificate, revealing that Chiranji Lal Agarwala had passed away on 28 April 2021. 

Despite being informed of the death, the Department subsequently issued a show cause notice seeking details of the legal heirs and later passed an order under Section 148A(d), followed by a notice under Section 148, addressed to the “Legal Heir of Late Chiranji Lal Agarwala.” 

The Department contended that it was unable to identify the legal heirs because no one had registered as a legal heir on the income tax e-filing portal and therefore proceeded using the deceased’s Permanent Account Number (PAN). 

The Department challenged the order of the Single Judge, who had quashed the reassessment proceedings, arguing that the Assessing Officer had no practical means of identifying the legal representatives and that the notices substantially complied with the statutory requirements as they were addressed to the legal heir. 

The Court noted that this was not the first occasion on which the Department had proceeded against the deceased assessee. Earlier, for AY 2018-19, a reassessment notice issued to the same deceased individual had already been quashed by the High Court after the Department had been informed of his death. 

The Bench observed that despite possessing the death certificate and despite an earlier judicial order setting aside a similar notice, the Department again initiated reassessment proceedings in the name of the deceased for another assessment year. The Court described the Department’s conduct as “astonishing” and held that the use of the deceased’s PAN on the ground of technical constraints could not validate proceedings initiated against a person who was no longer alive. 

Rejecting the Department’s argument that the representative’s failure to register as a legal heir justified its actions, the Court held that non-cooperation by the representatives cannot override the settled legal principle that proceedings initiated against a deceased person are void ab initio. The Court emphasized that once the Department had actual knowledge of the death, it was under a legal obligation to proceed strictly in accordance with law against duly identified legal representatives rather than continue proceedings in the name of the deceased. 

The Division Bench further agreed with the findings of the Single Judge that the Department had effectively proceeded against a non-existent entity. It observed that repeating the same procedural defect after an earlier judicial pronouncement demonstrated disregard for settled legal principles governing reassessment proceedings involving deceased assessees. 

The Court dismissed the Income Tax Department’s appeal as well as the connected application, holding that there was no reason to interfere with the order quashing the reassessment proceedings. No order as to costs was passed. 

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