2023 (1) TMI 276 - HC - Income Tax

Reopening of assessment us 147 - petition has been filed in the name of the dissolved partnership firm - petitioner has received an accommodation entry - notice issued u/s 148A(b) indicated that the petitioner firm had been dissolved way back on 21.01.2008, and that this information had been furnished to the respondent/revenue - HELD THAT - There is a flaw in the manner in which the petition has been framed. The petition has been filed in the name of the dissolved partnership firm, whereas it should have been filed by the individuals, who are partners of the dissolved firm. The affidavit appended to the writ petition, however, has been filed by Mr Abhishek Sahai and Mr Ajit Sahai, who claim to be the ex-partners of the petitioner arrayed before us i.e., Empire Trading Company. Given the fact, that the affiants are the former partners of the petitioner, this defect, in our view, can be ignored. In view of what has been observed by us hereinabove, Mr Shailendra Singh cannot but accept, that the material in possession of the concerned assessing officer should have been furnished to the noticee. Thus, having regard to the foregoing, we are inclined to set aside the order passed under Section 148A(d) of the Act, and the notice of even date i.e., 30.07.2022 issued under Section 148 of the Act. The partners of the petitioner i.e., Mr Abhishek Sahai and Mr Ajit Sahai and/or their authorized representatives will appear before the concerned assessing officer on 09.01.2023, at 11 00 AM. The concerned assessing officer will furnish the material in his possession to the aforementioned partners, and afford them an opportunity to have their say placed before him. AO thereafter, will pass a speaking order, as per law.

Issues:
1. Issuance of formal notice in the writ petition.
2. Allegations of receiving accommodation entries.
3. Response to notice under Section 148A(b) of the Income Tax Act, 1961.
4. Flaw in the manner in which the petition has been framed.

Analysis:

1. Issuance of formal notice in the writ petition:
The High Court noted that a formal notice had not been issued in the writ petition. Consequently, the court issued a notice in response to an application seeking interim relief. The respondent accepted the notice on behalf of the petitioner, and it was acknowledged that a counter-affidavit need not be filed.

2. Allegations of receiving accommodation entries:
The central allegation against the petitioner was that he benefited from accommodation entries provided by the "Atul Tyagi Group of Gurugram." The revenue authority alleged that the petitioner received an accommodation entry amounting to Rs.1,51,50,061. In response, the petitioner denied engaging in any transaction or business activity with the mentioned group.

3. Response to notice under Section 148A(b) of the Income Tax Act, 1961:
The petitioner responded to the notice under Section 148A(b) by stating that the petitioner firm had been dissolved in 2008 and had not engaged in any transactions with the Atul Tyagi Group. The petitioner's counsel argued that no material was provided to demonstrate any transactions during the relevant period.

4. Flaw in the manner in which the petition has been framed:
The court observed a flaw in the petition's framing, as it was filed in the name of the dissolved partnership firm instead of the individual partners. However, since the affidavit was filed by the former partners of the petitioner, the court decided to overlook this defect. The court directed the partners to appear before the assessing officer, who would provide them with the material and allow them to present their case. Subsequently, the assessing officer would pass a speaking order based on the presented information.

In conclusion, the High Court set aside the order and notice issued under the Income Tax Act, directing the partners to appear before the assessing officer for further proceedings. The court emphasized that the partners could present all necessary contentions before the assessing officer for a fair evaluation of the case.

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