2014 (12) TMI 180 - HC - Income Tax

Taxability of refund of central excise - non service of notice to the partners propertly - who is liable to pay tax - earlier duty of excise was paid by the partnership firm and claimed as deduction Partnership firm taken over by Company Who would be liable to pay excise duty, either erstwhile partners or the company Held that - The AO could have certainly brought the amount under tax, once it was held that the assessee was not liable to pay excise duty representing that amount - Even if the assessee did not exist, the AO could have proceeded against the partners, duly serving notices upon them - The Tribunal took note of the fact that the issuance of a notice straight away through affixture is not proper - no efforts were made to send the notices to the partners through registered post with acknowledge due and even in the matter of affixture of notices, two defects have crept in viz,affixture was on a totally incorrect premises; and the procedure prescribed for affixture was i.e., taking signature of two persons living in the locality, was not followed - The appellant has no answer for all these defects pointed out by the Tribunal. Bar of limitation Held that - If the Department was under obligation to initiate proceedings within a stipulated time, on expiry of the same, the assessee gets a valuable right, in this behalf - The rigour in this regard may be less, if it is a case of expiry of limitation for filing appeals, particularly where there exists a facility for condonation of delay - The Tribunal discussed the matter at length with reference to the settled principle of law and has arrived at a correct conclusion thus, no substantial question of law arises for consideration Decided against revenue.

Issues:
1. Appeal filed by the Revenue under Section 260-A of the Income Tax Act, 1961 against the order passed by the Income Tax Appellate Tribunal.
2. Exemption claimed by the respondent partnership firm for excise duty as expenditure for a previous assessment year.
3. Transfer of business activity from the respondent to another company and subsequent legal actions taken by the Assessing Officer.
4. Assessment order passed against the respondent partnership firm and subsequent appeals filed by the firm.
5. Dismissal of the appeal by the Commissioner of Income Tax (Appeals) and the subsequent appeal filed by the respondent before the Tribunal.
6. Dispute regarding the service of notice by the Assessing Officer and the validity of the assessment order.
7. Arguments presented by both parties regarding the legality of the actions taken by the Assessing Officer and the subsequent legal proceedings.
8. Analysis of the procedural and legal aspects of the case by the Tribunal.
9. Consideration of the limitation period for initiating proceedings and its impact on the rights of the parties involved.
10. Conclusion of the Tribunal and dismissal of the Income Tax Tribunal Appeal (I.T.T.A) along with the miscellaneous petition.

Detailed Analysis:

1. The appeal was filed by the Revenue under Section 260-A of the Income Tax Act against the order of the Income Tax Appellate Tribunal. The respondent partnership firm claimed exemption for excise duty as expenditure for a previous assessment year. The business activity of the respondent was transferred to another company, leading to legal actions by the Assessing Officer.

2. Following the cessation of the respondent's business activity and its takeover by another company, legal disputes arose regarding the assessment of tax liabilities. The Assessing Officer initiated steps against the company, leading to appeals and challenges by both parties.

3. The Tribunal considered the validity of the assessment order, focusing on the service of notice by the Assessing Officer. Both parties presented arguments regarding the legality of the actions taken by the Assessing Officer and subsequent legal proceedings.

4. The Tribunal analyzed the procedural and legal aspects of the case, emphasizing the importance of adherence to proper procedures and the implications of any defects in the service of notices or orders.

5. The Tribunal delved into the concept of limitation periods for initiating proceedings and highlighted the significance of such time constraints in safeguarding the rights of the parties involved. The impact of expiry of limitation on the rights of the assessee was a key consideration in the judgment.

6. Ultimately, the Tribunal dismissed the Income Tax Tribunal Appeal (I.T.T.A) and disposed of the miscellaneous petition. No costs were awarded in the judgment, indicating a final resolution of the legal dispute between the parties involved.

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