Section 148 Notice Legal Heirs – ITAT Quashes Assessment

Case Details: Kanak Kumar Jain vs. Deputy Commissioner of Income-tax - [2025] 174 taxmann.com 729 (Jodhpur-Trib.)

Judiciary and Counsel Details

• Dr. Mitha Lal Meena, Accountant Member & Dr. S. Seethalakshmi, Judicial Member
• Rakesh Lodha, CA for the Appellant.
• Karni Dan, Addl. CIT for the Respondent.

Facts of the Case

The assessee was a legal heir of one of the partners of a partnership firm. A survey was conducted at the firm’s business premises. It was found that the firm did not maintain any books of account.

The Assessing Officer (AO) issued a notice under Section 148 in the name of the firm, although all partners of the firm had passed away. The assessee raised objections; however, the Assessing Officer completed the assessment arbitrarily without impleading the legal representatives of the deceased partners of the firm. On appeal, CIT(A) confirmed the validity of the issuance and service of notice and addition. The matter reached the Jodhpur Tribunal.

ITAT Held

The Tribunal held that the AO confirmed the legality of the assessment order passed under section 148 on the basis that one of the legal heirs of the deceased partner of the firm had participated in survey proceedings on behalf of the firm. However, such a finding was contrary to the material evidence. It was not apparent whether said legal heir was called upon to appear as the firm’s legal representative. No notice had been issued to the legal heirs of other partners for recording statements, etc.

Furthermore, it was noted that the only surviving partner also passed away during the period from the date of the survey to the issuance of the notice under Section 148. Hence, it was an undisputed fact that on the date of issuance of notice under section 148, none of the partners of the firm was alive. As per the provisions of the Partnership Act, 1932, as all the legal heirs did not agree to continue the business in partnership, the partnership firm ceased to exist.

Furthermore, the AO did not issue any speaking order to determine the legal representatives of the deceased partners of the firm and continued reassessment proceedings, thereby grossly violating the provisions of Section 189(3) and the principle of natural justice. All the legal heirs of the deceased partner(s) are jointly and severally liable for any tax, penalty, or other sum payable under the Act. Still, to impose such liability, all the legal heirs must be served with notices and made parties to the proceedings.

In this case, the AO issued notice under section 148 to the firm. When the objection was filed regarding the firm’s non-existence, he finalised the assessment in the name of the assessee without addressing the objections filed by the legal heir of one of the partners. No notices appear to have been issued to the legal heirs of all deceased partners, and not all of them were impleaded as such.

Therefore, there have been lapses in issuing notices under Section 148 and in serving such notices.

List of Cases Reviewed

• B.K. Jagan & Co. v. CIT [2004] 136 Taxman 343 (Punjab & Haryana) (para 6.1)
• Pr. CIT v. Maruti Suzuki India Ltd. [2019] 107 taxmann.com 375/265 Taxman 515/416 ITR 613 (SC) (para 6.1)
• CIT v. Spice Infotainment Ltd. (2018) 12 ITR-OL-134 (SC) (para 6.1) – followed

List of Cases Referred to

• B.K. Jagan & Co. v. CIT [2004] 136 Taxman 343 (Punjab & Haryana) (para 6.1)
• Pr. CIT v. Maruti Suzuki India Ltd. [2019] 107 taxmann.com 375/265 Taxman 515/416 ITR 613 (SC) (para 6.1)
• CIT v. Spice Infotainment Ltd. (2018) 12 ITR-OL-134 (SC) (para 6.1)
• Lala Madan Lal Agarwal v. CIT [1983] 13 Taxman 120/144 ITR 745 (Allahabad) (para 6.1).