2024 (8) TMI 505 - HC - Income Tax

Best judgement assessment - argument of petitioner that the petitioner did not receive the notices that preceded the impugned orders for the respective assessment years - Partnership Firm discontinued the business and the business was carried on by the deponent Ramesh Kumar as the Proprietor - HELD THAT - Petitioner has neglected in not intimating the alleged dissolution of the Partnership Firm on 31.03.2007 and that not surrending the PAN obtaining for the Partnership Firm with PAN No. ABHFS6206J. Transactions have been made from the account maintained in the name of the Partnership Firm, which allegedly became a Proprietary concern of the deponent. There are also indications that the Returns filed by the deponent in his individual capacity is from the same address, for which the PAN was obtained in the name of the Partnership Firm. That apart, there appears to be a huge transactions. Since there was no reply to the notices issued by the respondent, the respondent cannot be found faulted in passing the order under Section 144 read with Section 147 of the Income Tax Act, 1961. Since the petitioner is also assessed to tax individually with the PAN No. AKWPR0604F, the matter would require a detail consideration. The Court is inclined to come to the rescue of the petitioner by giving an opportunity to the petitioner to file an appropriate reply to the notices that preceded the respective impugend orders.The impugned orders, which stand quashed, shall be treated as addendum to the show cause notices that preceded the respective impugned orders. The petitioner shall, however, pre-deposit a sum of Rs. 50,00,000/- (Rs. 25,00,000/- each) to the credit of the Income Tax Department within a period of eight weeks from today.

Summary

Issues:
- Dispute over assessment orders for two consecutive years.
- Alleged discontinuation of a Partnership Firm and continuation as a Proprietary concern.
- Failure to inform the Income Tax Department about the change in business structure.
- Arguments regarding receipt of notices and unjust tax liability.
- Huge transactions in bank accounts and implications on tax assessment.
- Disagreement on the applicability of a previous court decision.
- Lack of response to notices leading to best assessment by the tax authorities.
- Court's decision on providing an opportunity to respond and pre-deposit a specific amount.

Analysis:
1. The petitioner challenged assessment orders for two years, claiming to have transitioned from a Partnership Firm to a Proprietary concern. The firm allegedly ceased operations, and the deponent continued the business individually. The petitioner argued that no notice was given to the Income Tax Department about the change, leading to discrepancies in assessment.

2. The petitioner contended that despite being assessed individually with a different PAN, transactions from the old Partnership Firm's account were mistakenly attributed to them. The respondent highlighted substantial transactions involving a third party, questioning the petitioner's tax liability and justifying the assessment orders.

3. Reference was made to a previous court decision regarding the validity of notices sent to outdated email addresses. The petitioner sought an opportunity to clarify the situation, citing unjust tax burden. The respondent emphasized the proper service of notices and the lack of response from the petitioner.

4. The court acknowledged the petitioner's oversight in not informing about the firm's dissolution and retaining the old PAN. Considering the transactions and the need for detailed examination, the court quashed the impugned orders but required a pre-deposit for further proceedings.

5. The court directed the petitioner to respond to notices, pre-deposit a specified amount, and cooperate with the tax authorities for a thorough review. Failure to comply would result in the dismissal of the writ petitions. The court instructed the respondent to finalize the matter promptly within a specified timeframe, ensuring due process and cooperation from both parties.