2024 (1) TMI 263 - AT - Income Tax

Validity of reopening of assessment - notices in the name of non-existing/dissolved entity - dissolution of partnership firm and discontinuation of business - HELD THAT - Hon'ble Gujarat High Court in the case of Adani Estate Management (P) Ltd 2023 (6) TMI 1039 - GUJARAT HIGH COURT held that where an assessee company was amalgamated and same was intimated to the Assessing Officer, reopening notice issued in the name of erstwhile company which was amalgamated with assessee company was to be quashed. Hon'ble Supreme Court in the case of PCIT Vs Maruti Suzuki India Ltd 2019 (7) TMI 1449 - SUPREME COURT also held that where an assessee company was amalgamated with another company and thereby loss its existence, the assessment order passed subsequently in the name of same non-existent entity would without jurisdiction and was to be set aside. Keeping in view the fact that the assessee has intimated the AO at the earliest possible opportunity about the dissolution of assessee firm, the AO still issued notices in the name of non-existing entity and passed the order against such entity, therefore, assessment order is without jurisdiction and liable to be set aside and quash the same. Decided in favour of asseessee.

Summary

Issues Involved:
The issues involved in this judgment are the validity of reopening the case under section 147 and the addition of alleged unexplained cash credit.

Validity of Reopening:
The assessee challenged the validity of reopening, asserting that the firm was dissolved before the notice under Section 148 was issued. The Assessing Officer did not take corrective measures for assessing the partner of the dissolved firm, rendering the assessment against a non-existing entity a nullity. The assessee cited legal precedents to support this argument. The AR contended that the reasons recorded for reopening were not valid, as they were based on third-party information without the Assessing Officer's own satisfaction, amounting to a reopening on borrowed satisfaction. The AR argued that the reopening and notice under Section 148 were legally flawed and void ab initio.

Addition of Alleged Unexplained Cash Credit:
Regarding the addition of Rs. 3,24,340 on account of alleged unexplained cash credit, the AR argued that the Assessing Officer made the addition based on alleged bogus purchases from a specific group, without disputing the sales or rejecting the books of account. The AR highlighted that the addition was made solely on third-party information without proper assessment of the evidence provided by the assessee. The AR contended that since the sales were not disputed and there was a one-to-one correlation of purchases with sales, the addition on purchase expenses should not have been disallowed. The AR asserted that the assessee should succeed on all three counts.

Judgment:
The Tribunal found that the Assessing Officer issued notices in the name of a non-existing entity despite being informed of the firm's dissolution. Citing legal precedents, the Tribunal held that such assessment orders against non-existent entities are without jurisdiction and liable to be set aside. As the assessee succeeded on the primary submission, the Tribunal did not delve into the other submissions on the validity of reopening and the merit of the case. Consequently, the appeal of the assessee was allowed, and the assessment order was quashed.