Order Quashing Notice To Dead Person Is Not A 'Finding' To Issue Fresh Notice To Legal Heirs: Allahabad HC

The Allahabad High Court on 23 July held that an order quashing a reassessment notice issued in the name of a deceased person as void ab initio cannot be treated as a “finding” or “direction” under Section 150(1) of the Income Tax Act, 1961.

A Bench of Justices Shekhar B. Saraf and Abdhesh Kumar Chaudhary quashed the reassessment proceedings initiated against Smt. Asha Dubey, holding that the Income Tax Department cannot rely on an order quashing a notice issued in the name of a deceased person to bypass the limitation period and issue a fresh notice to the legal representative. The judges held:

“…. we make it clear that the order of quashing of the show cause notice by the High Court does not constitute a "finding or direction" within the meaning of Section 150(1), because the notice itself being void, no valid proceeding was ever pending before the court. Furthermore, the correct course mandated by Section 159(2)(b) was for the revenue to have initiated fresh proceedings directly against the legal representatives within the prescribed period of limitation, which having not been done the entire reassessment proceedings was foreclosed in law.”

The dispute arose after a search conducted in the Omaxe group, during which the Income Tax Department alleged that the deceased person had carried out an unaccounted cash transaction. The person died on 7 January 2024.

The Department issued a notice under Section 148 of the Act (which permits reassessment proceedings) in the name of the deceased person on 28 March 2025 for Assessment Year 2021-22. The reassessment proceedings later culminated in an order and demand dated 24 March 2026 against his widow, Smt. Asha Dubey, as the legal representative.

Smt. Asha Dubey challenged the proceedings before the High Court, arguing that the notice issued after the death of the person was void and that the Department could not issue a fresh notice under Section 150(1) after the limitation period under Section 149 had expired.

She contended that Section 150(2) restricts the operation of Section 150(1) where the assessment year had already become time-barred when the order forming the subject matter of the proceedings was passed. She argued that the Department had the seized material from April 2021 but failed to initiate proceedings within the prescribed period and issued the notice shortly before the limitation period expired on 31 March 2025.

The Department argued that Section 150(1) overrides the limitation period under Section 149 and permits issuance of a fresh notice against the legal representative. It submitted that the petitioner could not seek quashing of the existing notice while also preventing any fresh proceedings.

The Court examined the scope of Section 149 of the Act, which prescribes the time limit for issuing reassessment notices, and Section 150(1), which permits assessment or reassessment beyond the limitation period to give effect to a finding or direction contained in an order passed by a Court or authority in proceedings such as appeal, reference, revision or writ. It observed:

“A perusal of sub-section(1) of Section 150 of the Act carves out an exception to the period of limitation prescribed under Section 149. It provides that notwithstanding anything contained in Section 149, an assessment or reassessment may be made at any time for the purpose of giving effect to any finding or direction contained in an order passed by a court in any proceeding under any law, including by way of appeal, reference, revision, or writ.”

It held that Section 150(1) cannot apply where the assessment year had already become time-barred when the relevant order was passed. It observed that the provision does not permit the Department to revive proceedings that have already become barred by limitation. It added:

“The legal position, as consistently affirmed by the various High Courts and the Supreme Court, is that where a notice under Section 148 is issued against a deceased assessee and is quashed by a court as void ab initio, the revenue cannot invoke Section 150(1) to issue a fresh notice against the legal representatives beyond the period of limitation.”

Further, the Court held that once a notice issued against a deceased person is void, no valid proceedings existed before the Court. It observed that an order declaring such notice invalid merely records the legal consequence of the defect and does not create a finding or direction under Section 150(1). It rejected the Department's plea, and held that it cannot extend the limitation period merely on equitable considerations or by relying on Section 150(1). It added:

“Where the time prescribed under Section 149 for issuance of a notice under Section 148 has expired, the Department cannot revive a time-barred proceeding merely on equitable considerations or by relying upon Section 150(1).”

Lastly, the judges rejected the petitioner's argument that the reassessment order itself was beyond limitation. It held that the proviso to Section 150(2) permits an order under Section 147 to be passed within twelve months from the end of the financial year in which the notice was served, where the notice was issued on or after 1 April 2019.

Accordingly, the High Court quashed the notice dated 28 March 2025 and all consequential reassessment proceedings, orders and demands, and allowed the writ petition.

Counsel for Petitioner: Kartikey Dubey, Ramesh Chandra Mishra