Benjamin Franklin has rightly said that “In this world, nothing is certain except death and taxes”.

Any sudden death of a family member disrupts the entire family and any liability to pay taxes further burdens the family. It is pertinent to note that not only the alive but also the dead are required to file Income-tax return and pay their taxes.

Upon death of a person, his legal representatives to whom his estates pass on is liable for compliances and to pay any tax liability / tax arrears.

Before discussing the said provision of legal representatives, would like to mention that definition of the word legal representative is provided in Section 2(29) of the Income-tax Act, 1961 (hereinafter referred to as “Act”). Section 2(29) of the Act adopts definition from the section 2(11) of the Code of Civil Procedure, 1908: ‘Legal representative’ means a person who in law represents the estate of a deceased person and includes any person who inter-meddles with the estate of the deceased and where a party sues or is sued in a representative character, the person on whom the estate devolves on the death of the party so suing or sued. The term legal representative includes an heir, executors, administrator or other legal representative.

It is important to note here that a legal representative assessed under this section 2(29) of the Act is different from a representative assessee to whom section 160 to 167 of the Act applies. A legal representative does not fall within any of the categories of representative assessee enumerated in section 160 of the Act.

The legislative history of the term ‘legal representative’ corresponds to section 24B of the Income-tax Act, 1922 (herein after referred to as “IT Act”) which was as follows:

24B: Tax of deceased person payable by representative:

  1. Where a person dies, his executor, administrator or other legal representative shall be liable to pay out of the estate of the deceased person to the extent to which the estate is capable of meeting the charge of tax assessed as payable by such person, or any tax which would have been payable by him under this Act if he had not died.

The aforesaid section remained unchanged since its enactment till 1961. The above language made legal representative liable only for the tax assessed on, or payable by, deceased and casts no personal liabilities on the legal representative and did not deal step by step with the various stages of proceedings at the time of death.

The Income-tax Act, 1961 split up the charge of tax on the legal representative of the deceased assessee into two section, i.e. Section 159 and Section 168. These sections are redrafted provisions relating to the assessment of legal representative of the deceased persons contained in section 24B of Income-tax Act, 1922.

Provisions of Section 159 of the Income-tax Act, 1961 enables assessment being made and levy taxes on the income earned by the person who was alive during a previous year but died before the assessment proceedings could be completed. Death of a person does not relinquish him from the tax liability, his legal representative shall be obliged to pay any tax which the person would have paid had he been alive. This section is a machinery section and cannot be construed as to impose a tax liability on legal representative.

The Supreme Court of India dealing with section 24B of the IT Act, which is in pari materia with section 159 of the Act held in CIT v. Amarchand N. Shroff (1963) 48 ITR 59 (SC) that the personality of the deceased assessee, which ceased after his death, is extended for the duration of the entire previous year in the year of death. Therefore, the income received by him before his death and that received by his heirs and legal representatives after his death but in that previous year becomes assessable to income tax in relevant previous year

  1. Manner of computation of total income and filing of Income tax return of Deceased Person

Income of the deceased person for the purpose of computation can be categorized into following two:

  1. Income earned from 1 April till date of his death; and

  2. Income earned after his date of death.

Therefore, in the financial year in which the person died, two income-tax returns shall be filed. One by the legal representative till the date of his death under section 159 of the Act and thereafter as legal representative / executors for income on his estate under section 168 of the Act. [B. D Gupta & Sons v. ITO – 70 SOT 16 (Delhi Tribunal)]

  1. Income earned before the date of death

The income-tax return will be required to be filed as if the deceased had not died in the same manner and extent as the deceased did for income earned before the death. The legal representatives of the deceased person are liable file return of income and pay advance tax instalments, self-assessment tax, interest etc., for the period starting from the April 1st of the financial year up to the date of the death.

However, the liability of the legal representative shall be limited to the estate dwelled upon him, ie, he is not required to pay anything out of his pocket.

Income-tax return shall be filed in the PAN of the deceased person, however under the capacity of legal representative.

  1. Income earned after the date of death

Income earned after the date of death – income accruing on the estate of the deceased is taxable in the hands of executor under section 168 of the Act. However, section 168 is applicable only in case where the is a Will (Testate death).

In case of an intestate death (i.e. there is no valid Will) of a person, the estate of the deceased falls into the hand of legal heir as per the law of succession, who would be the legal representatives and liable under section 159 of the Act.

In case of a testate death (where valid Will is created before the death) income earned after the date of death shall be taxable under section 168 of the Act in the hands of the Executor / Administrator. [CIT v. P. Manonmani (245 ITR 48) Madras Tribunal – full bench].

Explanation to section 168 provides that “executors” includes an administrator or other person administering the estate of a deceased person.

The executor shall be assessed in respect of the income of the estate separately from his personal income. Thus, there would be a requirement to obtain a separate PAN to file Income-tax return in the capacity of an executor.

In case where there is more than one executor, the income of the estate of a deceased person shall be chargeable to tax as if the executor were an association of persons “AOP”. The executor would continue to be chargeable to income-tax under section 168 of the Act until the estate of the deceased is distributed completely to the beneficiaries thereof. In case of Navnit Lal Sakarlal v. CIT [193 ITR 16 (SC)] it is held that until estate of the deceased person is distributed, income from estate will be taxable in the hand of executors as per section 168 of the Act.

If the estate is partially distributed in a given year, then, the income from the assets so distributed gets excluded from the income of the estate (executor) and gets included in the income of the legatee. Legatee is chargeable to tax on income after the date of distribution. Even, if the executor is the sole beneficiary, it does not necessarily follow that he receives the income in latter capacity. The executor retains his dual capacity and hence, he must be assessed as an executor till the administration of the estate is not completed except to the extent of the estate applied to his personal benefit in the course of administration of the estate.

The residential status of the executor shall be decided according to the residential status of the deceased person during the year in which his death took place. The executor has the right to recover or to retain the amount utilized for payment of liability of the deceased person.

Therefore, income up to the date of death shall be assessable under section 159 of the Act on the legal representatives of the deceased. However, from the date of death till completion of administration of the estate and distribution of the property, it shall be assessable under section 168 of the Act in the hands of the executor or administrator.

Apportionment of income

The section 159 of the Act creates legal fiction only for the purpose of assessment proceedings for that year. Any income accrued during the year of death, may be apportioned up to the date of death and legal representative may be charged in respect of the income which accrued to the deceased up to the date of death. But certain income such as dividend do not accrue from day to day. If a dividend becomes payable after the death, a part thereof up to the period of death cannot be treated as income of the deceased.

  1. Assessment proceedings

On the death of an assessee, the legal representative of the deceased is deemed to be an assessee. All the proceedings taken against the deceased before his death are deemed to have been taken against the legal representative and would continue against the legal representative. Similarly, any proceedings, though not commenced, but could have been initiated against the deceased, had he survived, can be taken against the legal representative. The liability of the legal representative would be confined to the extent to which the estate of the deceased is capable of meeting the liability.

If the assessee died before the assessment proceedings were completed, the assessing officer is required to bring the legal representative of the deceased on record and proceed from the stage where it was as on date of death of the assessee. [CIT v. Dalumal Shyanumal (2005) 276 ITR 62 MP HC]

In the case of Savita Kapila, legal heir of late Shri Mohinder Paul Kapila v. ACIT (2020) (273 Taxman 148 (Delhi HC) held that the legal heirs of the deceased assessee are under no obligation to inform the income-tax department about the death of taxpayer and therefore, whether the PAN record was updated or not or whether the department was made aware by the legal representatives or not is irrelevant. However, with a view to avoid unnecessary litigation, it would be prudent for the legal representative or the executor as legal heir to register on the income-tax e-filing portal.

In case where death of an assessee occurs post completion of hearing but before making an assessment order, the non-issuance of notices to the legal representatives does not invalidate the assessment order in the name of deceased. This principle shall not hold good, if the assessee is already dead on the date of issuance of notice. In other words, notice cannot be issued in the name of a dead person and such notice will be null and void and proceedings cannot be continued against the legal representatives.

If there are more than one legal representative / executor, notice should be served on all of them. CIT v. Jayprakash Singh (1996) 85 Taxman 407 (SC). However, it would be sufficient if the assessing officer after diligent inquiry ascertain legal representative / executor and serve them the notice, who represent the estate of the deceased. Any omission or defect in notice may render assessment order an irregular, but not void and illegal.

  1. Reassessment Proceedings

In the case of reassessment on the deceased person, the notice for reassessment must be issued to the executor who have been appointed under the Will, and in case of intestate death, on administrator in the capacity as legal representative.

Sub-clause (a) of clause (2) of section 159 states any proceedings taken against the deceased before his death shall be deemed to have been taken against the legal representative. Reassessment relates to the income which is alleged to have been received by the deceased while he was alive and have escaped assessment. Therefore, said legal representative / executors shall be liable to pay any sum which the deceased person would be liable to pay in the like manner and to the same extent as the deceased.

  1. Refund receivable by the deceased

The legal representative of the deceased assessee is liable to receive the refund of the deceased in the same manner as he is liable to pay for any taxes.

Income-tax refund can be received when it was claimed / it was ordered and thereafter only it can be received. Any interest on the said income-tax refund shall be treated as income of the legal representative / heir in their individual capacity and not as in their legal representative capacity. [PV Chandran v. CIT (2001) 114 Taxman 599 Kerala High Court]

  1. Penalty Proceedings

The word “any sum” has been substituted in section 159 of the Act in place of word “any tax” which occurred in old section 24B of the IT Act so as to cover not only tax payable but also any penalty or interest. Therefore, the legal representatives of the deceased can by liable to pay penalty on behalf of the deceased assessee pursuant to the provisions of Section 159(1) of the Act. Further, section 159(4) of the Act states only “tax’. Hence joint reading of clause (4) and clause (1) suggests that only “tax” would be payable (if any) by legal representative and Penalty is quasi-criminal liability hence legal representative would not be liable.

Issuance of penalty notice could be either before the assessee dies or after his death. In case, if penalty proceedings were already initiated while assessee was alive, the same could be continued against the legal representative under section 159(2)(a). In case of Tapati Pal v. CIT (2002) (124 Taxman 123), High Court of Calcutta held that penalty proceedings for a default committed by deceased can be started or continued against the legal representative.

In case of Jai Narain Upadhyay v. ACIT (2012) (148 TTJ 529), Lucknow Tribunal held that if during the pendency of the penalty proceedings, assessee dies and no fresh notice is issued to the legal representatives, the penalty order passed will not be sustainable in view of the violation of principles of natural justice.

In case of ITO v. V. P. Sharma (2006) (154 Taxman 34), Delhi Tribunal held that penalty proceedings cannot be initiated against legal representative by taking recourse to section 159(2)(b).

In case of CIT v. Dr. KGC Verghese (2019) 416 ITR 155, Madras Tribunal, held that, as per section 271(1)(c) penalty can be levied only on that person who has concealed the particulars of income or filed inaccurate particulars of income. The use of the words ‘such person’ in section 271(1)(c) clearly mandates the authority to levy penalty only on the same person who has filed the return of income and concealed the particulars or filed inaccurate particulars in such return. In the present case, return was filed by the deceased, but penalty has been levied on the legal representatives. In the case on hand, return has been filed by the deceased assessee, against whom, no penalty proceedings have been initiated and levied any sum. Penalty was not levied on the same person. It was held that, no penal proceedings had been initiated against assessee, when he was alive and, moreover, assessment had not been done in hands of legal representative, penalty could not be levied on legal representative

Though above ruling was in the context of old penalty provisions, but the same analogy can be applied in the new penalty provisions also.

The penalty proceedings can be initiated against the legal representatives in case of concealment of any income of the deceased or on account of failure to file the correct Income-tax return or for failure to discharge the tax liability in his capacity as a legal representative.

  1. Search proceedings against a dead person

Any proceedings taken against the deceased before his death shall be deemed to have been taken against the legal representatives and may be continued against the legal representatives from the stage at which it stood on the date of the death of the deceased.

  1. Prosecution

The provision of section 159 of the Act does not enables initiating prosecution proceedings against legal representative for offence committed by the deceased. The prosecution for any offence would abate with the death of the deceased.

  1. Recovery of Tax

As per Section 159(6) of the Act states that the tax liability of the legal representative / heir of the deceased shall be limited to the estate of the deceased person.

  1. Hindu Undivided Family (HUF)

HUF is a legal entity and not a nature personal or living person who can die and hence cannot be regarded as deceased person. Section 159 and 168 are applicable only to a natural person. Further, on the death of Karta of HUF, the individual holding position of Karta dies and not the HUF. On the death of Karta of HUF, it cannot be said that family also died, nor the Karta can leave a Will in respect of properties held by HUF. The surviving member of the HUF have right under the Hindu law and under law of succession.


Filing of Income-tax return of the deceased / assessment proceedings may become a herculean task as practically it could be difficult to obtain details of income as the legal representatives may not be aware of the activities done by the deceased prior to his death.

Further, in case of any pending tax litigation or tax arrears and if the assets of the deceased do not have sufficient liquidity then the legal representative might be left with no other choice but to sell the assets in order to remit the liabilities.

If the legal heirs sell the inherited property, the amount will be charged to tax under the head Capital Gains as long term or short-term Capital Gain depending upon the period of holding. For the purpose of ascertaining the holding period, the period of holding of deceased shall also be considered and accordingly benefit of indexation will be available. Section 56(2) of the Act specifically excludes any sum received without consideration as a gift, under a Will or by way of inheritance from the purview of income tax.

The legal heirs merely by being aware of the provisions of Income-tax and following procedural formalities can save huge amount of interest and penalty.

A key point to be remembered is that PAN is an important identification document therefore legal heirs should only after completion of all the necessary tasks such as filing of income tax returns, closing bank accounts of the deceased and transferring assets, surrender the PAN Card of the deceased person by writing an application to the Assessing Officer under whose jurisdiction PAN is registered. The letter should contain the reasons for surrender, name, PAN, date of birth of the deceased and a copy of death certificate.

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