2023 (6) TMI 821 - HC - Income Tax

Reopening of assessment u/s 147 - impugned order u/s 148A(d) as well as the impugned notice u/s 148 passed and issued in the name of non-extant entity - Constitution of proprietorship firm after Dissolution of Partnership Firm - HELD THAT - Petitioner filed his additional affidavit alongwith the supporting documents. In his said additional affidavit, the petitioner testified the above mentioned facts. Petitioner also placed on record a number of supporting documents including invoices raised by the Chinese exporters on the petitioner. Petitioner also placed on record copies of his Income Tax Returns pertaining to the Assessment Years 2005-06 to 2015-16, filed under his PAN instead of PAN of dissolved firm . The said additional affidavit, supported with a plethora of documents, it does not appear to be a case of deliberate concealment of facts. If the petitioner wanted to defraud revenue, he would not have declared the imports in books of accounts as proprietor of Kapoor Electric Mart. The impugned order u/s 148A(d) and notice u/s148 were passed and issued against a non-extant entity, as such the same cannot be complied with. The impugned order u/s 148A(d) and notice u/s 148 of the Act both dated 31.03.2023 are set aside. The respondents would be at liberty to take further steps in accordance with law.

Summary

Issues involved:
The issues involved in the judgment are the quashing of a notice passed under Section 148 of the Income Tax Act and an order under Section 148A(d) of the Act pertaining to the Assessment Year 2016-17.

Summary of the Judgment:

Issue 1: Notice and Order Validity
The petitioner approached the court seeking to quash a notice and order under the Income Tax Act. The petitioner argued that the notice and order were not sustainable as they were issued in the name of a non-existent entity, the erstwhile partnership firm. The petitioner contended that the mention of the partnership firm's PAN in the bill of entry was a genuine mistake and that the purchases were not concealed in the books of the proprietorship concern. The revenue's counsel acknowledged that an order and notice against a non-entity cannot be enforced.

Issue 2: Compliance and Supporting Documents
During the hearing, the petitioner clarified that income tax returns were being filed in his capacity as the proprietor of the business. The court directed the petitioner to provide relevant income tax returns, balance sheets, profit & loss accounts, and purchase orders and invoices related to imports. The petitioner submitted additional affidavits along with supporting documents, including invoices from Chinese exporters and income tax returns filed under his PAN. The court noted that there was no deliberate concealment of facts and that the imports were properly declared in the books of accounts.

Issue 3: Judgment and Conclusion
The court found that the notice and order were issued against a non-existent entity and therefore could not be complied with. Consequently, the court set aside the order and notice dated 31.03.2023. The respondents were granted the liberty to take further steps in accordance with the law. As a result, the writ petition was allowed, and the pending application was closed.