2024 (4) TMI 20 - HC - Income Tax

Reopening proceedings against non-existent entity/partnership firm - HELD THAT - Since the partnership firm-M/s Parikh Sales has merged with the petitioner-M/s Parikh Marketing Pvt. Ltd. with it s all assets and liabilities which were also taken over by the company and therefore M/s Parikh sales became a non-existent partnership firm.The Petitioner had also informed to the Department on 20.04.2009 about this conversion and changing in constitution. In pursuance to Show Cause Notice u/s 148A(b) in the name of partnership firm a detailed joint show cause reply was also filed on behalf of the partnership firms and the petitioner stating all the past facts with evidences that it has been acquired by the company and stated that the amount deposited in Axis Bank was duly considered in the return of the company and there was no escapement and as such the case should not be reopened u/s 147 of the Act and the entire proceedings be dropped. It transpires that the respondent No. 2 without making any further clarification or without giving any opportunity of personal hearing passed final Order u/s 148A(d) giving only one line finding on merits that the case was examined and found that transaction in the above bank account of M/s Parikh Sales has been made and no ITR has been filed for the above AY and concluded that it is fit case for issuance of notice u/s 148 of the Act for the Assessment Year 2019-20 in the case of M/s Parikh Sales. Thus no hesitation in holding that the impugned order passed u/s 148A(d) is without application of mind passed in a casual stereotype manner and is a non-speaking order. It further transpires from record that when the petitioner logged on at the IT Portal under the PAN of the erstwhile dissolved partnership firm M/s Parikh Sales being PAN ID AACFM7615D; an error message was reflected that PAN does not exist . Now it is settled legal proposition that no valid notice can be issued against a dead person Refer Durlabhbhai Kanubhai Rajpara 2019 (4) TMI 784 - GUJARAT HIGH COURT Thus impugned notices could not have been served upon Assessee and same deserves to be quashed. Decided in favour of assessee.

Summary

Issues involved:
The judgment involves issues related to quashing and setting aside of a Show Cause Notice under section 148A of the IT Act, 1961, an Order under the same section, and a Notice under section 148, all for the Assessment year 2019-20. The issues revolve around the jurisdiction of the assessing officer in issuing these notices to a dissolved partnership firm that was acquired by another entity.

Detailed Judgment:

Issue 1: Jurisdiction of Assessing Officer
The petitioner, a Private Limited Company, was involved in a dispute regarding the jurisdiction of the assessing officer who issued notices to a dissolved partnership firm, M/s Parikh Sales, despite the firm being acquired by the petitioner as a going concern. The petitioner contended that the notices were without jurisdiction, non-est, and void ab-initio due to the change in ownership and the informing of the assessing officer about the conversion. The High Court found that the assessing officer's actions were not in line with legal principles and lacked proper application of mind, leading to the quashing of the notices.

Issue 2: Merger and Disclosure
The judgment highlighted the merger of M/s Parikh Sales with the petitioner company and the proper disclosure of the former firm's bank account in the petitioner's returns. Despite the disclosure and acceptance of the account in previous assessments, the assessing officer issued notices to the dissolved firm, causing confusion and legal discrepancies. The court emphasized the importance of accurate information and proper assessment procedures in such cases.

Issue 3: Legal Precedents
The judgment referred to legal precedents, including the decision of the Hon'ble Apex Court in the case of Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Ltd., to support the quashing of the notices issued to the dissolved partnership firm. The court also cited a recent case regarding the issuance of notices in the name of deceased individuals, further reinforcing the principle that legal proceedings must adhere to established legal norms and principles.

Conclusion:
In conclusion, the High Court ruled in favor of the petitioner, quashing the Show Cause Notice, Order, and subsequent Notice issued for the Assessment year 2019-20. The judgment emphasized the importance of jurisdiction, accurate disclosure, and adherence to legal precedents in assessment proceedings. The decision serves as a reminder of the necessity for assessing officers to act in accordance with the law and established legal principles to ensure fair and just outcomes in tax matters.