No legal obligation on heirs to inform IT Dept about death of assessee: Delhi HC

The Delhi High Court has said that legal heirs are under no statutory obligation to intimate the death of the assessee to the Income Tax Department. Also, the responsibility of paying dues will lie with the legal representative, if she/he steps into the shoes of the deceased assessee.

These observations came in a matter involving Savita Kapila, legal heir of late Mohinder Paul Kapila and the tax department. This case referred to quashing of a notice dated March 31, 2019, in the name of late Kapila, who expired on December 21, 2018. Since this notice could not be served, two more notices were issued in August and September 2019, respectively, but elicited no response. Hence, a show cause notice was issued in October last year.

Pursuant to another notice issued to the banks of the deceased assessee, it was revealed to the department that the same address of Dwarka, Delhi, was mentioned in the KYC and this helped the officials get hold of his telephone number. A call played on the number was picked up by the petitioner who said she was the daughter of the assessee, her father had passed away. Subsequently, a death certificate was uploaded by the petitioner on the e-portal of the tax department during October last year.

After that, the tax department passed an order for penalty, imposed upon deceased assessee through legal heir, for non-compliance with notices. Another show cause notice was issued to the assessee, through legal heir, directing to file the return and produce relevant documents failing which an order would be issued. As she was one of the legal heirs of the deceased, she was asked to pay the due.

Hearing the arguments, the court said that the notice was issued to the deceased after his death and thus the said notice could never have been served upon him. This means requirement under law has not been fulfilled.

“Section 159 (Where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died) of the Act, 1961 applies to a situation where proceedings are initiated/pending against the assessee when he is alive and after his death the legal representative steps into the shoes of the deceased assessee,” the court said, adding that since that is not the present factual scenario, this particular section does not apply to the present case. Finally, the court quashed all the notices and orders by the tax department.

According to Amit Maheshwari, Tax Partner at AKM Global, the court has reiterated the legal position that a notice served on a deceased person is invalid and is not a curable defect. Unfortunately, there is no obligation under tax laws on the legal heirs to immediately intimate the death of taxpayers to the tax department.

Counsel of Revenue raised an interesting argument as to how the assessing officers could keep track of the 44.5 crore PAN issued and come to know who has died or who hasn’t. This seems logical but generally the Assessing Officer needs to also do his/her own diligence while collecting information, which forms the basis for reasons to believe. Due diligence could have revealed that the taxpayer had passed away.

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