2023 (10) TMI 1063 - HC - Income Tax

Validity of reopening of assessment u/s 147 - Validity of order u/s 147 r.w.s 144 - Faceless assessment u/s 144B - petitioner claims to be a partner of firm as constituted with two partners namely, petitioner and petitioner's father who died and thus the partnership stood dissolved on the same day by operation of law - HELD THAT - No doubt there is a failure on the part of the petitioner to have complied with the requirements of Section 176 of the Income Tax Act, 1961 after partnership firm purportedly ceased to exist and discontinued with the business. There is also a failure on the part of the petitioner to give in the details of the account Nos. of the partnership firm while responding to the show cause notice issued under Section 147 of the Act, vide reply dated 22.03.2022. However, the impugned order is bereft of details. Before confirming the taxable income and the tax due, it was incumbent for the respondent to have given detailed reasons. It merely states that quantum of Rs. 1,79,56,157/- had escaped assessment for the Assessment Year 2017-18 and find faults with the petitioner for not giving proper details. Considering the above, the impugned order is set aside and the case is remitted back to the first respondent to pass a fresh order on merits as expeditiously as possible. The petitioner shall file additional reply/representation if any and upload the same together with the bank details/documents that have been in use after the petitioner's father's death. Petitioner shall also furnish the details of the assessment and documents filed for assessment of his individual income for the relevant assessment years. This exercise shall be carried out by the petitioner within four weeks from the date of receipt of this order or within such time as may be given or extended by the first respondent.

Summary

Issues:
The judgment involves issues related to income tax assessment, non-filing of returns, best judgment assessment, and penalty proceedings under various sections of the Income Tax Act, 1961.

Income Tax Assessment Issue:
The petitioner, a partner in a dissolved partnership firm, challenged the impugned order for Assessment Year 2017-18. The order alleged that income had escaped assessment due to failure to file returns, investments, cash deposits, and interest income. The petitioner contended that after the death of the partner, the business was carried on individually, and the order invoked incorrect sections for assessment.

Compliance and Response Issue:
The petitioner claimed to have intimated about the partner's death but the order was passed without considering this response. The respondent argued that the petitioner failed to comply with notices under Section 142(1) and Section 176(3) of the Income Tax Act. Lack of details regarding the partnership firm's accounts was also highlighted as a compliance issue.

Reasoning and Decision Issue:
The court found faults in the impugned order for lacking detailed reasons for the assessment. It set aside the order and remitted the case back to the first respondent for a fresh order on merits. The petitioner was directed to provide additional information, bank details, and documents related to individual income assessment within a specified timeline for a fair reconsideration.

Conclusion:
The High Court of Madras directed a fresh assessment order considering the petitioner's submissions and compliance with the Income Tax Act. The case was disposed of with instructions for the petitioner to provide necessary details within a specified period for a fair reconsideration by the tax authorities.