Section 159

Section 159 — the law in short

What the courts have decided on section 159, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Shabina Abraham v Collector of Central Excise & Customs Supreme CourtHelps taxpayer
  The sole proprietor died while a demand was pending. Can the department carry on the assessment against his widow and daughters?
  Not under the Central Excises and Salt Act 1944. The Supreme Court held that assessment proceedings against a dead person's legal representatives cannot continue where the statute contains no machinery provision for it, and that Act, unlike the Income-tax Act, has none. Section 11 deals only with modes of recovery of sums already payable and says nothing about dead persons. Equitable or moral considerations, including unlawful enrichment, have no place in construing a taxing statute. The Kerala High Court's Division Bench judgment was set aside and the Single Judge's order quashing the proceedings restored.
• CIT v Amarchand N. Shroff Supreme CourtHelps taxpayer
  My father died and, years later, his firm's old fees kept coming in to us. Can the department tax those receipts as his income in our hands?
  No, on the law as it then stood. The Supreme Court held that the provision making a legal representative liable for a deceased person's tax extends the deceased's legal personality only for the previous year in which he died. Income received by his heirs after the end of that previous year is not income received by him and cannot be assessed in their hands under that provision. Amarchand died on 7 July 1949; realisations of the firm's old outstandings received in the five assessment years 1950-51 to 1954-55 were therefore not taxable as his income. A legal fiction is limited to the purpose for which it was created.
• Asha Dubey v Union of India High CourtHelps taxpayer
  They issued a 148 notice in my late husband's name. Can they just issue a fresh one now?
  Not if the s.149 period has run out. Allahabad held that a notice on a dead person is void ab initio and that an order quashing such a notice is not a 'finding or direction' under s.150(1), so it cannot be used to reopen limitation.
• Late Lal Chand Verma (through legal heir) v Union of India High CourtHelps taxpayer
  A notice arrives in the name of someone who has died. Is it valid?
  Not where the proceedings were never begun in their lifetime. Section 159(2)(b) requires the notice to go to the legal representative. Serving a person who no longer exists is a jurisdictional failure and s.292B cannot cure it.
• International Hospital Ltd v DCIT High CourtHelps taxpayerNo later treatment found
  The department is now citing Mahagun Realtors to say an assessment on the amalgamating company is curable. Has the Supreme Court moved away from Maruti Suzuki?
  On the Delhi High Court's considered view in this batch, no. Mahagun Realtors turned on the conduct of that assessee — who suppressed the amalgamation at search, filed a return in the amalgamating company's name recording 'not applicable' against business reorganisation, and litigated throughout in that name — and did not dilute or strike a discordant chord with Maruti Suzuki. Where the successor did tell the department of the merger and the notice or order still went out in the dead company's name, the defect remains fatal.
• Meet Lalwani v ITO High CourtHelps taxpayer
  I filed the death certificate and they still issued the 148 notice in my mother's name. Is it valid?
  No. The Madhya Pradesh High Court quashed the s.148 notice and the s.148A(d) order. Once the Department knew of the death, issuing the notice in the deceased's name was a failure to acquire jurisdiction, and ss.292B, 292BB and 159 do not cure it.
• Savita Kapila v ACIT High CourtHelps taxpayer
  A section 148 notice was issued in my late father's name after he had died. Is the reassessment valid because we never told the department?
  No. The Delhi High Court quashed the notice and everything that followed. Issuing the notice in the name of the correct person, and not a dead person, is not a procedural requirement but a condition precedent to a valid notice, so the jurisdictional requirement of section 148 was not met. No notice was ever issued to the legal heir within the limitation in section 149(1)(b); the proceedings were simply transferred to her PAN. Section 159 does not help the department where nothing was pending in the assessee's lifetime, and there is no statutory obligation on legal heirs to intimate the death. Sections 292B and 292BB do not cure it.
• R.P. Sarathy for Minor M. Pranuthi v Joint CIT High CourtHelps departmentNo later treatment found
  My ward is a minor whose parents are both dead. There is no parent to club her income with, so is her income simply not taxable at all until she turns eighteen?
  No. Section 64(1A) is a machinery provision, not a charging provision, so the absence of a parent does not take the minor's income out of charge. Where there is no parent to club with, s.160(1)(ii) applies and the guardian or manager of the minor is the representative assessee, bound to return that income and discharge the tax on it.
• Chooharmal Wadhuram (Deceased), by legal representatives, v Commissioner of Income-Tax, Gujarat II High CourtHelps taxpayer
  My father died and the officer reopened his assessment by serving the notice on only one of us, although he knew there were other heirs. Is that assessment valid against the estate?
  No. The Gujarat High Court held that where a person dies leaving more than one legal representative, the Assessing Officer must serve the reassessment notice on all of them, so that the estate is completely represented; service on one leaves the estate only partially represented and the assessment does not bind it. The Court recognised three exceptions: where one representative manages the entire estate; where one appears with the express or implied consent of the others; and where the officer, after diligent and bona fide enquiry, believes those served to be the only representatives. None applied here, since Daulatram had administered only one bank account, he had objected to the notice, and the officer knew of the other heirs and made no enquiry.
• Statutory position — s.170: the predecessor is assessed to the date of succession, s.170(2) where the predecessor cannot be found, and s.170(3) recovery of his tax from the successor CBDT Circulars & InstructionsCuts both ways
  I bought a running business in October. The Assessing Officer has issued a notice to me for the whole year, and a separate demand for the seller's tax for the year before I arrived. Who is supposed to be assessed on a succession, and when can the department recover the seller's tax from me?
  Section 170(1) splits the previous year at the date of succession: the predecessor is assessed on the income of the previous year in which the succession took place up to the date of succession, and the successor is assessed on the income of that previous year after the date of succession. Two provisions displace that split and both are narrow — s.170(2) allows the assessment to be made on the successor, but only where the predecessor cannot be found and only for the year of succession up to the date of succession and the previous year preceding that year; and s.170(3) allows tax assessed on the predecessor for those same two periods, and only that tax, to be recovered from the successor once the Assessing Officer has recorded a finding that it cannot be recovered from the predecessor.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.