MIAN TAUQEER ASLAM, CHAIRMAN.---Titled sales tax appeal has been filed by the taxpayer/appellant against the order dated 12.08.2025, passed by the learned CIR (Appeals-II), Faisalabad, on the grounds as enumerated in the memo. of appeal.
2. The facts of the case, briefly stated, are that the taxpayer has failed to file sales tax returns for the tax periods from September-2024 to December-2024 and due to absence of reported sales figures, assessment was made in accordance with the provisions of section 11D of the Act, 1990. Accordingly, the proceedings were initiated for determination of the minimum tax liability under Rule 158 of Chapter XVII of Sales Tax Rules, 2006. Since, the highest amount of sales tax paid by the appellant during the last month was at Rs.342,751/- as declared in the sales tax return therefore, minimum liability of Rs. 1,371,004/- was proposed to be recovered for the tax periods in question. Consequently, a show cause notice dated 12.02.2025 was issued to the taxpayer. The adjudication proceedings were carried out on ex parte basis and the taxpayer was proceeded in absentia and all the charges as contained in the show cause notice were upheld vide order dated 05.06.2025 passed by the DCIR, RTO, Faisalabad.
3. Being aggrieved, the appellant filed the first appeal before the learned CIR(A) which was decided vide appellate order dated 12.08.2025, whereby he confirmed the assessment order. Being aggrieved, the taxpayer has now preferred the instant second appeal before this Appellate Tribunal.
4. The case was fixed for hearing. The learned AR at the very outset argued that Abdul Majeed sole proprietor of M/s. Zainab Textile Corporation was passed away on 26.06.2024 and placed on record the death certificate evidencing the fact of death. The learned AR contended that no proceedings could be initiated against a deceased person hence, impugned orders are liable to be annulled on this score alone. In order to strengthen the contentions, learned AR has relied upon (2001 SCMR 1), (2013 SCMR 464) and (218 PTD 2270). Learned counsel submits that the assessment order passed by the DCIR is illegal and unjustified as the same was issued against a person who had died on 26.06.2024 and intimation to this effect was also given to him, in the light of which the assessment should have been framed on legal heirs of the deceased person. He further submits that even the learned Commissioner Inland Revenue (Appeals) has not paid any heed to this fact. It was also stated by the counsel that impugned assessment proceedings are illegal and ab initio void, as no opportunity of hearing was ever given to the appellant to rebut or confront the allegations levelled against him and case was decided ex parte without affording him lawful right of being heard thus all the subsequent proceedings carried out are also illegal and unlawful. Learned AR submitted that a lease agreement was executed on 6th July, 2024, whereby the appellant's weaving factory was handed over to M/s. MAG Textile Corporation, Faisalabad, for a period of one year and appellant's business activities ceased in July-2024, and no taxable supplies were made thereafter hence, the appellant was not legally obliged to file sales tax returns for the relevant tax periods thus no tax was payable under law. In this regard, learned counsel produced copies of death certificate, SRO 350(I)/2024, Circular No. 04/2024, electricity bills for the months of August-2024 to December-2024 showing GST number of M/s. MAG Textile Corporation, Faisalabad (STRN 1100119020328) and lease agreement dated 06.07.2024. It was the view point of the learned AR that adjudicating officer unlawfully continued the assessment proceedings without impleading the legal heirs on record and ultimately passed an ex parte assessment order on 05.06.2025, i.e., almost one year after the demise of the taxpayer. In support to his contentions, learned AR placed reliance on reported judgments (2023 PLD 585), (1994 PTD 309), (2003 CLC 1860), (2004 PTD 2217), (2013 SCMR 1045) and (2018 PTD 2270). The learned AR concluded his arguments with a prayer for the acceptance of the appeal.
5. On the other hand, in rebuttal, the learned DR, while supporting the stance of the department, has endorsed the impugned orders for the reasons recorded therein and nothing newel has been advanced by him except a mere reiteration of the earlier set of contentions.
6. We have heard both the rival parties, carefully considered the facts of the case, examined the available record, and perused the relevant legal provisions as well as case law on the subject matter. There is no cavil to the fact that the taxpayer, Mr. Abdul Majeed, had passed away on 26.06.2024, as evidenced by the death certificate placed on record. Despite this, the assessing officer initiated proceedings much later, on 12.02.2025, through issuance of a show-cause notice under section 11(D) of the Sales Tax Act, 1990, and subsequently proceeded to pass an ex parte assessment order on 05.06.2025 despite having knowledge of the death of the taxpayer, the DCIR unlawfully continued the assessment proceedings without impleading the legal heirs on record and ultimately passed an ex parte assessment order almost one year after the demise of the taxpayer. It is a well-settled principle of law that any proceedings initiated against a deceased person are a nullity in the eyes of law, as such proceedings lack a lawful foundation from their inception, and no substitution can subsequently be made in place of a person who was already deceased at the time of initiation of the proceedings. Hence, entire proceedings carried out by the department against the sole respondent/defendant, who had already passed away, are invalid, nonexistent, and a nullity in the eyes of law. We are of the considered view that any legal proceedings initiated against a deceased person are void ab initio, since the law does not permit the initiation or continuation of proceedings against a dead person. Similarly, in the case of "M/s. Hafiz Brothers (Pvt.) Ltd. v. Pakistan industrial Credit and Investment Corporation Ltd. (2001 SCMR 1), Hon'ble Supreme Court of Pakistan has laid down hereunder:--
There is no cavil with the proposition that the institution of legal proceedings against dead person is of no avail to the concerned litigant. The learned High Court rightly came to the conclusion that the suit of PICIC against deceased Mst. Inayat Begum was incompetent and, therefore, nullity in law."
In order to further appreciate the issue at hand, it would be pertinent to reproduce the relevant provision of section 53 of the Act which reads as under:-
"S.53.--The tax liability of a deceased registered person under the Act shall be the first charge on his estate in the hands of his successors."
A plain reading of the above provision clearly presupposes the existence and identification of the legal heirs or successors in whose hands the estate of the deceased vests. The statute, therefore, creates a charge upon the estate only, and not a personal liability upon the legal heirs. Consequently, unless and until the successors or legal heirs are duly impleaded and brought on record, there exists no lawful person or entity against whom any proceedings can validly be continued or any liability created. It is a settled principle of law that a deceased person ceases to have legal personality upon death; hence, any show-cause notice, adjudication, or recovery proceedings initiated or continued in the name of a deceased taxpayer are null and void ab initio. The expression "in the hands of his successors" further manifests the legislative intent that the department must first identify, implead, and provide due opportunity of hearing to the legal heirs before fastening any tax liability. Without such lawful representation of the estate, no valid charge can arise under section 53, and any proceedings undertaken in contravention thereof are rendered without jurisdiction and of no legal effect. Taking guidance from the preceding rulings of Hon'ble Supreme Court, our perspective is that the proceedings instituted against a sole defendant/respondent who had passed away prior to initiation of recovery proceedings would be considered as void ab initio, non-existent and devoid of legal sanctity.
7. It is evident from the record that the taxpayer had died before any proceedings were initiated under section 11(D) of the Act, the proceedings oughtto have been commenced by issuing a notice to the legal heirs of the deceased but the proceedings could not be started against the deceased person as such the same is a nullity in law and any subsequent proceedings/orders based on such a defective initiation are rendered void and without legal effect. Furthermore, the successors/legal heirs of the deceased taxpayer were not impleaded as respondents in the assessment proceedings conducted by the Deputy Commissioner Inland Revenue and it is both surprising and unfortunate that ex parte proceedings were carried out solely against the deceased person, which is both legally untenable and factually erroneous. It was the bounden duty of the department to bring on record the legal heirs of the deceased, as no proceedings of any nature, including the issuance of a show-cause notice or passing of an adjudication order, can lawfully initiated or continued against a dead person. Reliance is place on (1994 PTD 309), (2003 CLC 1860), (2004 PTD 2217) and (2013 SCMR 1045). The Hon'ble Supreme Court of (AJ&K) in a case of "Collector Central Excise and Sales Tax, Mirpur, (Commissioner Inland Revenue) and another v. Javed Minhas and 13 others" reported as (2018 PTD 2270) while dealing with an identical issue, has held under:--
"S.47-Reference to High Court-Adjudication under S.47 of the Sales Tax Act, 1990-Reference filed against deceased assessee/taxpayer-Non-impleadment of legal heirs of such assessee/taxpayer-Scope-Department impugned order of High Court whereby its reference under S.47 of the Sales Tax Act, 1990 was dismissed on the ground that the same was filed against a deed person-Validity-Perusal of record revealed that when process server reported that taxpayer had died, the Department was directed to file application for impleading his legal heirs, which was not done-Department was duty bound to bring on record the legal heirs of deceased when it was known to Department that the respondent assessee had died and no proceeding could continue against a dead person and a reference under S.47 in such case could not be treated as valid-No illegality existed in the impugned order-The Appeal was dismissed in circumstances."
8. While considering the non-impleadment of necessary party, Hon'ble High Court, Lahore in case titled as "Subeh Sadiq v. Mst. Rajan through legal heirs and others" reported at (PLD 2006 Lah. 585) held that;
"In the petition (C.R.No.1841/2005) filed by Subah Sadiq, Rakhsana Shaheen has not been impleaded as party whereas in the revision petition (C.R.No.2367/2005) filed by legal representatives of Mst. Rajan, Subah Sadiq has not been impleaded as party. This itself being a fatal defect would have entailed dismissal of both the revision petitions. Moreover, another defect noticeable is that before the lower appellate Court even similar position prevailed. The learned counsel for the petitioners in both the petition could not advance any convincing explanation for not impleading necessary parties either in appeal or in revision petitions here. Thus even appeal before the lower appellate Court were not competent in absence of the necessary parties. In Muhammad Suleman v. Abdul Rashid and 13 others (PLD 1987 Lah. 387) such a defect was considered to be fatal for maintenance of appeal/revision."
In such like situation in the case of "Ali Muhammad Jan through Legal Heirs v. Mst. Surriya Begum and 6 others" reported as (2011 YLR 1559), it was held that;
Respondent No. 7 Mst. Laraib Sana is daughter of Islam-ud-Din and equally necessary party like other respondents but she was not impleaded as necessary party after period of limitation which renders the appeal incompetent and is fatal. Reliance is placed on (2001 MLD 1964), (PLD 1988 SC (AJ&K) 156) and (PLD 1982 SC 46). The appeal to the extent of respondent No.7, is not only time barred but have also rendered the appeal incompetent"
9. In order to properly evaluate the contention advanced by the learned counsel for the taxpayer, we have meticulously examined the record produced before this Tribunal and have found that a lease agreement was executed on 6th July, 2024, whereby, subsequent to the demise of the sole proprietor, Mr. Abdul Majeed, on 26th June, 2024, the appellant leased out its weaving factory to M/s. MAG Textile Corporation, Faisalabad bearing STRN 1100119020328 duly incorporated in the electricity bills for tax periods in question, along with the complete installations, inter alia including 100 shuttle-less Sulzer looms, one lathe machine, one generator, AC plants, furniture, fixtures, and electrical fittings, for a period of one year, and consequently closed its own business activities in July-2024, and no taxable supplies were made thereafter. Since no business or taxable activity was carried out by the appellant himself during the tax periods from September-2024 to December, 2024 therefore, he was not legally obligated to file sales tax returns for the said tax periods. Consequently, there was neither any evasion of tax nor any loss caused to the national exchequer, and no tax was payable under the law. At best, the department could have lawfully proceeded to impose a penalty for the non-filing of nil sales tax returns, which constitutes a mere procedural formality, but could not have gone beyond that. In the given facts and circumstances, the question of making any assessment of minimum tax liability does not arise in the instant case.
10. Upon consideration of all the facts and circumstances of the case, as well as the legal position discussed hereinabove, we are of the firm view that the impugned show-cause notice and the consequent orders passed by both the authorities below suffer from factual and legal infirmities and are not sustainable in the eye of law. Accordingly, the same are hereby set aside/annulled.
11. Appeal succeeds in the manners as discussed above.
Appeal allowed.