2024 (9) TMI 1196 - HC - Income Tax

Validity of proceedings for reassessment by issuing notice u/s 148 - transactions with regard to sale consideration is reflected in each of the sale deed executed by the petitioner in the capacity of Power of Attorney holder - income being earned by the petitioner through such transactions which were reflected in the books of accounts of the Partnership Firm - HELD THAT - The petitioner is working as peon in M/s. S.K. Enterprise and M/s. Anushri Enterprise. However, the transactions reported on portal were pertaining to both the partnership firms and the sale deeds were signed by the petitioner in the capacity of the Power of Attorney Holder and therefore, there is no question of any income being earned by the petitioner through such transactions which were reflected in the books of accounts of the Partnership Firm. As undisputed facts, the petitioner could not have been subjected to any proceedings for reassessment by issuing notice u/s 148 of the Act. Petition succeeds and is accordingly allowed.

Summary

Issues:
Challenge to notice under section 148 of the Income Tax Act, 1961 for the assessment year 2020-21.

Analysis:
The petitioner, a peon working for two partnership firms, received a notice under section 148A to provide information regarding transactions where he acted as a Power of Attorney holder for the firms. The petitioner contended that he was not the beneficiary of the transactions as he acted on behalf of the firms. Despite filing detailed replies explaining his role, the respondent rejected his objections and issued a notice under section 148 for reassessment. The petitioner challenged this decision through a petition under Article 226 of the Constitution of India.

The petitioner argued that the respondent mechanically rejected his objections without considering that the transactions were carried out by the partnership firms, not by him personally. He emphasized that he signed the documents only as a Power of Attorney holder, not as the owner, and that the income from these transactions belonged to the firms, not to him individually. The petitioner presented evidence, including sale deeds and bank account transactions, to support his claim that he was not the beneficiary of the transactions in question.

The respondent, represented by the Senior Standing Counsel, did not dispute the petitioner's role as a Power of Attorney holder for the partnership firms. The Assessing Officer acknowledged that the petitioner was a peon in the firms and that the transactions in question were related to the firms, not to the petitioner personally. Based on these facts, the court found that there was no income earned by the petitioner through these transactions, as they were reflected in the books of accounts of the partnership firms. Therefore, the court held that the petitioner should not have been subjected to reassessment proceedings under section 148 of the Act.

Consequently, the court allowed the petition, quashed the impugned order dated 28.03.2024 passed under section 148A (d) of the Act, and set aside the notice issued under section 148 of the Act. The court ruled in favor of the petitioner, stating that there was no income that had escaped assessment in the hands of the petitioner, and no costs were awarded in this matter.