Introduction
“Assessee” is the foundational identity in Indian direct tax law: the person on whom the Income-tax Act, 1961 (the Act) confers rights and obligations to be assessed, to file returns, to pay tax, and to be proceeded against in assessment, reassessment and recovery proceedings. Accurate identification of the assessee — and of categories such as “deemed assessee”, “representative assessee” and “assessee in default” — determines jurisdiction, procedural propriety, limitation, appeal rights and ancillary liabilities (for example, TDS default). For tax litigation and advisory practice, getting the legal personhood correct is often the first and decisive strategic step.
Core Legal Framework
- Section 2(7), Income-tax Act, 1961 — definition of “assessee”:
- Section 2(7) reads (material part): “‘assessee’ includes — (i) every person by whom any tax or any other sum of money is payable under this Act; (ii) every person in respect of whom any proceeding under this Act has been taken for assessment of his income, or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by any other person in respect of which he is assessable, or of the amount of refund due to him or to any other person in respect of which he is assessable; (iii) every person who is deemed to be an assessee by or under this Act; and (iv) every person who is deemed to be an assessee in default by or under this Act.”
- Section 2(8) — “assessee in default”: defines those treated as assessee where the Act specifically declares default (e.g., persons who fail to deduct and remit tax at source).
- Section 2(31) — definition of “person”: wide definition which informs who may be an assessee (includes individual, HUF, company, firm, co-operative society, local authority, AOP/BOI and every artificial juridical person).
- Key operative provisions that frequently interact with the legal identity of the assessee:
- Section 139 — return of income (who is obliged to file a return).
- Section 142 — enquiries before assessment (powers in relation to the assessee).
- Sections 147–153A — reassessment and notices to the assessee (including notices under Section 148).
- Section 201 — consequences and assessment of persons liable in respect of tax required to be deducted (classic source of “assessee-in-default” liability).
- Sections 246A, 253, 254 — appeal and revision provisions (rights of the assessee to appeal).
- Sections dealing with recovery and refund procedure (e.g., Sections 220, 237) that require a correct assessee record for enforcement or refund.
Practical Application and Nuances
- Categories of assessee — how they arise in practice
- Assessee (primary): the person whose income is assessed or who is liable to pay tax (e.g., a salaried individual, a company). In routine practice, this is the person who files the return and receives notices.
- Deemed assessee: the Act occasionally casts liability on persons who are not the primary earner — e.g., an employer may be a deemed assessee for fringe benefits in certain contexts, or under transfer pricing adjustments a transferee may be treated as a deemed assessee for specific issues. Practitioners must read the specific deeming clause carefully; the deeming provision may create substantive liability or only procedural liability.
- Representative assessee: a person who stands in place of another (examples: executors/administrators for the deceased, guardian in case of a minor, trustee of a trust). Proceedings can be validly initiated against the representative; assessments are in respect of income of the person represented. Practically, ensure the record identifies the representative and the capacity in which they are acted against (e.g., “X, Administrator of Y (deceased)”).
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Assessee-in-default: arises where the Act imposes primary obligation on a person to deduct/collect tax (TDS/TCS) or to deposit tax; failing which the deductor/collector becomes an “assessee in default.” Section 201 is the common trigger: where a payer fails to deduct tax at source, the payer is made “assessee in default” and is assessed for the tax, interest and penalty. In practice, revenue uses section 201 to fasten personal liability on employers, contractors, or banks.
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Common factual situations and the practitioner’s analytical checklist
- Notices issued to the “wrong” person:
- Issue: Revenue sometimes issues assessment or reopening notices to a person who is not the correct assessee (for example, to a director instead of the company, or to a nominee rather than the legal heir).
- Practical approach: File a statutory writ or raise jurisdictional objection at the earliest stage (before compliance) if the notice is vitiated for being issued to a person who is not an assessee for the tax/period in question. Preserve proof of non-service or improper service. Where appropriate, apply for recall/withdrawal or for correction of the party named under Section 127 (or administrative remedy).
- TDS defaults and assessee-in-default proceedings:
- Evidence required (revenue side): proof of withholding obligation (contract, salary record), computation of tax not deducted or not deposited, service of show-cause notice and order under Section 201(1)/(1A). For the assessee-in-default, best defence often is demonstrating absence of obligation to deduct (no employer–employee relationship, payment not chargeable, or exemption) or bona fide belief supported by professional advice (though this may not completely absolve penalties).
- Reassessment and identity of assessee:
- Issue: Reopening under Section 148/147 requires that notice be addressed to the assessee for the relevant assessment year. If the person served is not within Section 2(7) for that matter, jurisdictional attack is viable.
- Practical tip: Scrutinize the wording of the reopening notice: is it addressed to the assessee, the representative, or to “assessee-in-default”? If the notice is generic and ambiguous, raise preliminary objection.
- Joint assessments and multiple assessees:
- In partnership firms, firm and partners can both be assessees under different heads. Revenue often assesses both for the same quantum; practitioner should check double taxation and the account of distributable profits, and ensure that tax is not collected twice.
- Corporate veil and alter ego arguments:
- Corporates are separate legal persons. Revenue sometimes attempts to attribute income to promoters or directors. Respond by highlighting absence of beneficial ownership and by invoking statutory recognitions of separate legal entity, unless revenue can demonstrate fraud, sham or sham transactions sufficient to lift the corporate veil (which is a high evidentiary threshold).
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Death of assessee:
- Death does not extinguish liability; representative assessee steps in. Ensure that proceedings correctly substitute the legal representative; note time-lines for filing returns and appeals in deceased’s cases and preserve succession documents.
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Evidence and proof strategies
- For the assessee (taxpayer):
- Proof of identity/capacity: PAN records, incorporation/partnership deeds, trust deed, succession certificate, power of attorney.
- Contractual documents showing nature of payment (salary/service/contract) to contest TDS obligations.
- Bank records, ledger entries and statutory forms (Form 26AS, TDS certificates) to show tax deducted/credit given.
- Professional advice opinion (if relied upon) and contemporaneous records to show bona fide compliance attempts.
- For revenue:
- Documentary proof of payment, records of deduction, timelines of non-deposit, notices issued and replies. For deeming provisions, show applicability clause.
Landmark Judgment
- McDowell & Co. Ltd. v. Commercial Tax Officer & Ors., (1985) 154 ITR 148 (SC)
- Principle distilled for practising lawyers: while McDowell is a landmark on assessing tax incidence and striking down the revenue’s attempt to tax sham transactions, its broader lesson is pivotal — the substance of a transaction and the true legal character of the party who is taxable cannot be disregarded by statutory labels when they are artificial. For assessee identity disputes this principle works both ways:
- Revenue cannot simply re-label parties or impute liability without demonstrating substantive legal or factual basis under the Act.
- Conversely, taxpayers cannot succeed by relying on a mere formality when the statutory scheme properly attaches liability to the true actor.
- Practical import: pleadings and evidence must address substance (control, beneficiary, receipt of income) and not rely solely on the name or registration details on paper.
Strategic Considerations for Practitioners
- Front-load the identity analysis
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Before engaging substantively, identify and fix the correct assessee on record. Obtain certified copies of the demand/notice and check who it is directed to (assesseee, assessee-in-default, representative). If identity is wrong, take immediate preliminary objection; do not await final order.
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Early procedural objections can win the case
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Points that often decide jurisdiction: person served, manner of service, scope of notice, issuance by competent officer. Raise these as preliminary issues in the pleadings; Indian courts often decide jurisdictional objections at the threshold.
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Use available administrative remedies
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Where a notice is irregular in form or direction, a carefully framed application to the assessing officer or to the higher authorities (including a rectification or revision application) can avert litigation. File stays if tax demand is not insubstantial, with a focussed challenge to the party identity and liability.
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TDS/assesee-in-default — focus on documentary proof
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For deductors charged as assessee-in-default, challenge the existence of withholding obligation (nature of payment), quantum (computation), and statutory limitation. Preserve contract, invoices, approvals and TDS certificates. If an inadvertent omission occurred, remedial deposit with interest before detection often helps in mitigation of penalties.
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Drafting appeals and writs—narrow the contest
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In appeals, limit the contest to issues necessary for determination of whether the appellant is the correct assessee. Avoid conflating merit issues with jurisdictional challenges unless strategically necessary.
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Where representative assessee is involved
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Ensure substitution or impleadment of actual legal representative; attach succession/appointment documents; if someone is being proceeded against for acts prior to taking office, challenge vires of the action unless personal liability is clearly provided.
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Be alert to multi-jurisdictional/ multi-year consequences
- Misidentification of assessee can lead to multiplicity of proceedings across years (e.g., firm vs partners; company vs director). Consider settlement of issues across years (compromise, revised returns) and seek protective relief where necessary.
Common Pitfalls to Avoid
- Failing to preserve capacity-evidence (power of attorney, board resolutions) when acting for a representative.
- Treating procedural notices as mere formalities — many assessees forfeit substantive defenses by not objecting to jurisdiction or service early.
- Accepting revenue’s characterization without an independent statutory analysis of whether a deeming clause actually applies.
- Overlooking secondary liabilities — e.g., directors/officials may be personally liable under provisions for failure to deduct or deposit TDS; identify and advise on director-level exposure.
- Missing limitation calculations: wrong assessee fights often fail because the objection is raised after limitation has lapsed for certain remedies.
Conclusion
Assessee is not a decorative label: it is the linchpin of procedure, jurisdiction and liability under the Income-tax Act. Practically, every successful tax strategy or litigation tactic begins with the clear identification of the assessee and the capacity in which proceedings are launched. Key practitioner tasks are: verify statutory identity under Section 2(7) and related definitions; promptly raise jurisdictional defects; assemble focused evidence on capacity and deduction obligations; and, where necessary, press administrative remedies while preserving judicial options. In short: control the identity issue early, litigate the jurisdictional thresholds precisely, and build the factual matrix to align form with substance.