2023 (11) TMI 199 - HC - Income Tax

Undisclosed income (from equity transactions) - unexplained investment (by way of cash deposit) u/s 69 r/w Section 115 BBE - huge amount of money was transacted using the Firm's PAN number - Assessment against deceased partner - despite providing ample opportunities, the petitioner choose to remain silent and failed to answer to the notice issued u/s 142(1) - HELD THAT - The retirement and dissolution deed filed along with the typed set of papers indicates that the petitioner has resigned from the partnership firm and therefore, the partnership firm was no longer in existence. After the dissolution deed was signed, no steps were taken by the petitioner's husband (late) Sripal Kumar Jain to make changes in the Bank Accounts maintained by the partnership firm to state that the firm continued to exist and that the business of the firm was being carried on by him as the sole proprietor. Also petitioner's Late husband died on 07.09.2021. The proceedings came to be initiated only after the death of assessee with the issuance of notice u/s 148 of the Income Tax Act, 1961. A portion of the notice issued u/s142(1) thus remains unanswered although they were posted in their web portal in accordance with the provisions of the Income Tax Act, 1961 read with Income Tax Rules, 1962. While passing the order, the respondent ought to have compared the income that was proposed to be added pursuant to notice dated 31.03.2022 with the income declared by the petitioner's deceased husband (late) while finalizing the assessment. There is no comparison. Court is inclined to set aside the impugned order and remits the case back to the respondent to pass a fresh order on merits and in accordance with law within a period of eight (8) weeks from the date of receipt of a copy of this order. Petitioner is directed to file all the documents that were called for in pursuant to the notice issued under Section 142(1) and give a proper reply to the various show cause notices issued to the petitioner. Petitioner is directed to co-operate with the respondent.

Summary

Issues:
The judgment involves a challenge to an impugned order for the Assessment Year 2015-2016, demand notice, and notice of penalty issued by the respondent.

Details of the Judgment:

1. The petitioner, who was in a partnership concern with her late husband, claimed to have retired from the partnership firm in 2011. The petitioner's late husband continued the business as a proprietor after her retirement, using the PAN number of the dissolved firm, which was a mistake.

2. The petitioner stated that she did not receive several notices for re-opening the assessment and only received one notice under Section 142(1) of the Income Tax Act, 1961. The notices were uploaded on the web portal, but the petitioner was unaware of them.

3. After receiving the notice, the petitioner replied, explaining that the partnership firm had stopped operating in 2011, and her husband was carrying on the business separately. The petitioner, as the legal representative of her late husband, sought to quash the impugned order.

4. The respondent argued that a significant amount of money was transacted using the firm's PAN number, and the petitioner did not provide a proper explanation. Despite opportunities, the petitioner remained silent and did not respond adequately to the notices.

5. The respondent passed an order adding undisclosed income and unexplained investments under relevant sections of the Income Tax Act, 1961, totaling to Rs. 9.41 crores and Rs. 6.4 crores, respectively.

6. The Court observed that the petitioner had resigned from the partnership firm in 2011, and steps were not taken to update the bank accounts after dissolution. The proceedings were initiated after the death of the petitioner's husband, and some notices remained unanswered.

7. The Court set aside the impugned order and remitted the case back to the respondent for a fresh order within eight weeks. The petitioner was directed to submit all requested documents and cooperate with the respondent for a fair assessment.

8. The petitioner was instructed to provide a proper reply to show cause notices and the respondent was directed to scrutinize all documents before passing a new order. The petitioner would have the opportunity to be heard before the final decision.

9. The Writ Petition was disposed of with the above directions, and connected Miscellaneous Petitions were closed without any costs.