Legal representatives [Section 159] under Liability in Special Cases :

•  Meaning: Section 2(19) states that the term “legal representative‘‘ in the Income -tax Act, 1961 has the meaning assigned to it in clause (11) of section 2

of the Code of Civil Procedure, 1908. Section 2(11) of the Code of Civil Procedure provides as follows:

“Legal representative” means a person who in law represents the estate of a deceased person and includes any person who intermediates 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. It is not necessary that the legal representative should be the beneficial owner of the estate. Nor need he be in possession of any property of the deceased. It is sufficient that the estate devolves on him. So far as HUF is concerned it continues to exist as an assessable unit despite change in its composition including the change of its Karta by death or otherwise and consequently there is no scope or necessity for involving this section when a Karta dies. A legal representative assessed under this section is different from a representative assessee to whom sections 160 to 167 apply. Legal representative does not fall within any of the categories of representative assessee enumerated in section 160. Where a person leaves a will appointing executors, the executors are the legal representative. The Act expressly declares that the legal representative is deemed to be an assessee for the purpose of this Act.

•  Liability of legal representative: The Act imposes a liability on the legal representative not only in respect of tax but also any other sum (penalty, fine or

interest) which the deceased would have been liable to pay if he had not died. This liability is limited to the extent to which the estate is capable of meeting the liability.

•  Assessment on legal representative: This section applies irrespective of whether the assessment proceedings has not been started, or were pending, or

were completed and the assessment made, before the death of the deceased. If at the date of death of the deceased a return of income had not been made under section 139(1) and a notice under section 139(2) or section 148, as the case may be, had not been served on him, the Assessing Officer should first issue the notice under appropriate section to the legal representative of the deceased and then proceed to assess the income of the deceased in the hands of the representative as if the representative were the assessee. If there are more legal representatives than one, the notice should be served on all of them; but it would be sufficient if the notice is served on one or more who effectively represent the estate or who are ascertained, after diligent and bonafide inquiry by the Assessing Officer to be the legal representatives. It is obligatory upon the representative to comply with the notices appropriately served. Assessment may be made on the representative under section 147 in respect of income of the deceased which had escaped assessment in the relevant years.

•  Income upto the date of death and the end of the accounting year: Students should carefully note that section 159 applies in respect of the income of

the deceased only upto the date of death and not upto the end of the accounting year in which the death occurs. The income of the estate for the period from the date of death upto the end of the accounting year in which the death occurs should be assessed under section 168 in the hands of the executor. Thus in respect of the year of death two separate and distinct assessments would have to be made, the prior one on the legal representative and the latter one on the ‘executors‘ under section 168. This may even lower the incidence of tax for the year. The position will be the same even if the representative and the ‘executor‘ are one and the same.

•  Apportionment: As a consequence of two separate assessments as mentioned above apportionment of income between the two periods becomes

necessary. Here it is to be noted that certain incomes like dividends or interest if they become payable after the death cannot be apportioned to the period upto the date of death because they do not accrue from day to day.

•  Penalty on legal representative: Penalty proceedings for a default committed by the deceased can be started or continued against the legal

representative. He, being an assessee, is also liable to a penalty for his own default. Personal liability: We have noted that the liability of a legal representative is “limited to the extent to which the estate is capable of meeting the liability”. However, he becomes personally liable to the extent of the value of any asset of the estate which he disposes off while the liability for tax remains undischarged. This personal liability is imposed by sub-section (4) only in respect of tax and not in respect of penalty, fine or interest.

•  Recovery from legal representative: A legal representative must be regarded as an assessee for the purposes of recovery proceedings. A recovery

certificate issued to the tax recovery officer during the life-time of the assessee may, after his death, be enforced against his legal representative without the name of the latter being substituted in the certificate. But such proceeding cannot be started against him unless he has been served with a notice of demand under section 156. Further he is not personally liable for the tax payable by the deceased unless some assets of the deceased have come into his hands and are not properly applied or accounted for.