Tracing the law: Error in notices sent by the IT Department

Section 292B is pertinent for tracing the law in relation to the errors in notices sent by the IT Department as Revenue authorities seek to place reliance on the said provision to 'cure' the said defect. It is reproduced herein below: 

“Return of income, etc., not to be invalid on certain grounds.

292B. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.”

Cases held in favor of the Assessee: 

Hon'ble Supreme Court in the case of CIT v. Amarchand N. Shroff, [1963] 48 ITR 59, held that no income tax assessment can be made in the name of a dead person. It has been held by the Hon'ble Andhra Pradesh High Court in the case of Deccan Wine & General Stores v. CIT, [1977] 106 ITR 111 (AP), that an individual under the Income-tax Act, 1961 means only a human being. Consequently, a dead person will not fall within the scope of expression 'person' under section 2(31) of the 1961 Act. Therefore, any notice issued to a dead person for making assessment or reassessment will be invalid. Reliance is placed on Shaikh Abdul Kadar v. ITO, [1958] 34 ITR 451 (MP); CIT v. Shital Prasad Kharag Prasad, [2005] 147 Taxman 441 (All.)

Hon’ble Karnataka High Court in CIT Vs. Intel Technology, 380 ITR 272, held that the framing of an assessment against a non-existing entity is not a procedural irregularity but a jurisdictional defect which goes to the root of the matter. While dismissing the appeal filed by the revenue, it was held that since the proceedings were initiated against a non-existing assessee company even after amalgamation with the successor company, therefore, the assessment was not valid and the department was not entitled to the benefit of section 292B of the IT Act. The Hon’ble Karnataka High Court while holding so relied on the decision of Hon’ble Delhi High Court in the case of Spice Enfotainment Limited Vs. CIT, 247 CTR (Delhi) 500.

In CIT v. M. Hemanathan, 384 ITR 177 (Mad.) it was held that when revenue is aware of fact that assessee is dead and yet it chooses to pursue notice served upon assessee against his legal heir, said legal heir cannot be made liable. Deeming fiction which creates liability of legal representative under section 159(3) will be available to revenue if it issues notice to legal heir himself and not otherwise.

The Hon’ble Supreme Court in case of CIT v. Kurban Hussain Ibrahimji Mithiborwala, [1971] 82 ITR 821 (SC) was posed with the question of validity of a notice wherein the notice issued under section 34 the ITO sought to reopen the assessment of the assessee for the assessment year 1948-49 but in fact he reopened the assessment of the year 1949-50. In this case the court held that by Tax Authority is invalid for any reason the entire proceedings taken by him would become void for want of jurisdiction.

In ACIT v. Ramesh Pershad Goel, [2004] 91 ITD 440 (Hyd.) the Tribunal set aside an assessment on ground that it was made on dead person as it was a nullity in eye of law and Revenue filed an application under section 254(2), it was held that it was not a mistake apparent from record.

In BDR Builders & Developers (P.) Ltd. v. ACIT, 347 ITR 529 the High Court of Delhi noted that "At the outset it requires to be noted that the effect of the order passed by this Court on 20-2- 2013 was that the VBPPL (which was one of the transferor companies) amalgamated with the petitioner with effect from 1-4-2012. Therefore, by operation of law, VBPPL ceased to exist with effect from 1-4-2012. The fact that the order of the High Court may have been passed only on 20-2-2013, and that the Department became aware of that fact even later, will not make any difference to the legal position.”

Against the assessee:

In Sky Light Hospitality LLP v. ACIT, [2018] 254 Taxman 109 (Delhi) the assessee was converted into an LLP from a Private Limited company and a notice under 147 of the IT Act was issued thereafter such conversion in the same of the Company. The Delhi HC held that re-assessment notice issued in name of erstwhile private limited company despite company ceasing to exist as it had been converted into LLP would not invalidate re-assessment proceedings as same was not a jurisdictional error, but an irregularity and procedural/technical lapse which could be cured under section 292B. 

In case of Spice Infotainment Ltd., [2012] 247 CTR (Del.) 500, relied by petitioner, was distinguished on facts and it was held that since in such case it was not the notice u/s. 148 of the Act which was declared to be void but the assessment order which was declared void and invalid being passed in the name of and against a juristic person which had ceased to exist and stood dissolved as per provisions of the Companies Act. Since Assessment Order was in the name of non-existing person, the same was treated as void.

Decisions in case of Dimension Apparels (P.) Ltd., [2015] 370 ITR 288 and Intel Technology India (P.) Ltd., [2016] 380 ITR 272 were also held as not applicable since in these cases also assessment orders had been passed in the name of non – existing assessee and therefor declared and void and invalid.

The decision of Sky Light Hospitality (supra) has been affirmed by the Supreme Court. 

Cases that distinguish Revenue's reliance on Delhi HC ruling in Sky Light Hospitality LLP on facts

Hon'ble Ahmedabad ITAT in case of Ishwarbhai Maganbhai Desai in ITA No. 90/Ahd/2017 dated 23/04/2018 held “the assessee is not harping upon any irregularity in the notice, rather he is challenging the very jurisdiction over the assessee, on account of issuance of notice in the name of a deceased person, and further, even after coming to know about status of the assessee as a deceased, passing of an assessment order in the name of deceased person would not be sustainable. Therefore, I allow this ground of appeal and quash the assessment order. Consequently, I do not deem it necessary to adjudicate other issues on merit.”

Similar to the above case, Hon'ble Delhi ITAT in Genpact Infrastructure (Kolkata) Pvt. Ltd. [IT Appeal No. 198 (Delhi) of 2015, dated 27/04/2018] has on similar facts, decided the issue in favour of assessee. The Brief facts of the case are that Genpact Infrastructure (Kolkata) Pvt. Ltd. was amalgamated with Genpact India with effect from April 1,2010 vide order of the Hon'ble Delhi High Court passed on November 19, 2010. The information regarding the said amalgamation was duly given to the AO vide a letter dated January 24, 2011. But still the AO passed the final order u/s. 143(3) read with section 144C on 28.11.2014 in the name of M/s. Genpact Infrastructure (Kolkata) Pvt. Ltd. which was not in existence as on 28.11.2014, having already been amalgamated with M/s. Genpact India with effect from April 1, 2010 as per the order of the Hon'ble Delhi High Court passed on November 19, 2010. The ITAT observed quoting the arguments of the Assessee that “He has submitted that keeping in view this substantial and affirmative material and evidence on record, the mistake in issuing the notice u/s. 148 in the name of erstwhile company M/s. Sky Light Hospitality Pvt. Ltd. was held to be an irregularly and procedural/technical lapse by the Hon'ble Delhi High Court which was curable u/s. 292B. As further pointed out by him, the issue involved in the case of Sky Light Hospitality LLP (Supra) relating to validity of notice u/s. 148 was also different than the issue involved in the present case relating to the validity of assessment made in the name of non-existent entity and this distinguishing aspect was taken note of by the Hon'ble Delhi High Court in the case of Sky Light LLP (Supra) when the decisions of the Court in the case of Spice Enfotainment Ltd. and Dimension Apparel (Supra) were cited by the assessee in support of his case. In this regard, it was observed by the Hon'ble Delhi High Court in para no. 18 and 20 of its judgment that these were not the cases wherein notice u/s. 147/148 of the Act was declared to be void and invalid and against a juristic person, which had ceased to exist was held to be void and illegal”

Hon'ble High Court of Madras in Alamelu Verrappan, [2018] 95 155 (Madras) [distinguishes Revenue's reliance on Delhi HC ruling in Sky Light Hospitality LLP on facts] allows petitioner's (deceased assessee's spouse) writ, quashing re-assessment notice issued u/s. 148 in the name of deceased-assessee, holding that petitioner cannot be compelled to participate in the proceedings and respond to Sec. 148 notice. In response to Sec. 148 notice issued in the name of assessee (within prescribed time-limit), petitioner intimated about assessee's death and the subsequent notice was issued by Revenue beyond the limitation period. HC remarked that "merely because the Department was not intimated about the death of the assessee, that cannot, by itself, extend the period of limitation prescribed under the Statute.", further clarifying that the issue relating to limitation is not a curable defect for the Revenue to invoke Sec. 292B.