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TMI Blog2024 (8) TMI 557X X X X Extracts X X X X X X X X Extracts X X X X ..... oss account for the year ended on 31.03.2007 filed of the typed set of papers indicates that the petitioner partnership firm had rental income and the amounts were used for maintenance of buildings of the petitioner partnership firm. Therefore, no infirmity in the impugned order rejecting the petition filed by the petitioner under Section 264 before the respondent in the remand proceedings. Objections, that has been raised for the first time, as far as the non-issuance of the Notice u/s 143(2) of the Income Tax Act, 1961 within the period of 6 months - It cannot be countenanced, as this was not the ground taken by the petitioner before the respondent before the impugned order was passed. Section 292BB of the Income Tax Act, 1961 makes it clear that if an assessee had participated in the proceedings, the notice issued would be deemed to be valid even if there were infractions by way of legal fiction. This is what the Hon'ble Supreme Court has clarified in its decision in Commissioner of Income Tax Vs. Laxman Das Khandelwal [ 2019 (8) TMI 660 - SUPREME COURT ] Only if no notice was issued, the defects cannot be cured. That apart, Explanatory Note to the provisions of the Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed Power of Attorney. The Authorized Representative was asked to produce books of accounts, documents and other relevant details /evidences based on which the return of income was prepared and filed. The case was posted for hearing from time to time. Summon u/s 131 dated 20.12.2010 was served to the partners and statement were recorded. Based on the facts and details, the assessment u/s 143(3) r.w.s.147 was passed for A.Y. 2007-08 on 30.12.2010 by making addition towards unexplained investment u/s 69, unexplained capital expenditure u/s 69C and unexplained credit u/s 68. Thus, the total income was assessed as Rs. 2,01,85,040/-. The assessee firm's claim that the notice under section 143(2) has not been served to the assessee in time, is not acceptable as the assessee has appeared in the reassessment proceedings and co-operated in conduct of the assessment and has not raised the above issue during the assessment proceedings. Hence as per section 292BB of the Act the assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was not served upon him in time . 4.1 This issue was not a matter before the Hon'ble High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is raised in the name of the firm and since firm can register the property in the partners name and since individual partners returns are not showing any such fund flow for purchase of property, I hold that the property belongs to the firm since the rental income is also admitted in the hands of the firm. 4.3 The next contention of the assessee is about the addition of Rs. 90 lakhs appearing as sundry creditor under the caption loan from friends and relatives as on 31.03.2007. When questioned about this, it is explained to assessing officer that the same is from Shri K. Paramasivam father of the partners. However, in the sworn statement Shri K. Paramasivam denied to have any transaction with the assessee or the partners who are his natural children. The partners were also summoned and where asked to explain the sources which they could not. The assessee now pleads that since the statement of father was not furnished to the partners, the addition could not be made for lack of natural justice. The moot issue here is that in the return the credit was never in the name of the father. It was the claim of the partners that it belongs to their father which he denied. The onus of provin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s disposed of accordingly . 3. This is the second round of litigation before this Court. The petitioner, a partnership firm, consists of 5 brothers who are partners of the petitioner under a Partnership Deed dated 27.03.2006. 4. The records that are available before this Court seem to indicate that 5 brothers/5 partners namely, K.P.Alagarsamy, K.P.Gopalakrishnan, K.P.Ramachandran, K.P.Isaki Muthu Kumar and K.P.Srinivasan along with their father K.Paramasiva Konar, had lent a sum of Rs. 1,01,00,000/- to one V.Muthukrishnan. As a security, for the aforesaid loan, the said V.Muthukrishnan had executed a Mortgage Deed dated 31.08.2005 in favour of the 5 partners of the petitioner partnership firm in their individual capacities and their father K.Paramasiva Konar. It appears that the said borrower V.Muthukrishnan was however unable to repay the said amount and therefore executed a registered Sale Deed dated 03.04.2006 in favour of the 5 brothers who are incidentally partners of the petitioner firm. 5. After business commenced during Financial Year 2006-2007, the petitioner partnership firm had failed to file regular return under Section 139 of the Income Tax Act, 1961. Under these circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the petitioner firm, (3) the addition of Rs. 21,98,650/- being unexplained capital expenditure, (4) pre-sale mortgage of the property mentioned in Sl.No.1 above by Shri V. Muthukrishnan for Rs. 1,01,00,000/- to all the five partners of the petitioner. 3. I could also notice a very important fact, that the petitioner did not produce books of accounts to the Assessing Officer in respect of the Asst. Year in question. Before me also the petitioner failed to produce the books of accounts. It is the duty of any assessee when called for to produce books of accounts, documents, bills, vouchers, documents, journal entries with vouchers, evidences, other relevant details, etc., for verifying the correctness and accuracy of the information furnished in the return of Income; Whereas the petitioner has totally failed in this regard. The petitioner expects the authorities to be satisfied with the Balance sheet and Profit Loss account alone. This cannot be permitted in the absence of relevant books of accounts. Balance sheet is only a summary, the correctness of which could not be established in the absence of connected books of accounts, bills, vouchers, etc. Hence, the averments and argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings before me with the support of books of accounts and returns of income of all concerned, I do not have any other go but to agree with the findings of the Assessing Officer. Regarding the bank loan of Rs. 100 lacs, I observe that the loan was availed by the petitioner on 04.08.2006; whereas the property in question has been purchased on 03.04.2006 i.e., much before the loan was sanctioned. In this juncture it has not been explained why the bank gave loan for a property which was already purchased much earlier. I also find that the bank loan amount had not been credited to the account of the seller of the property. Further the loan has been repaid hurriedly during the same Financial Year to the extent of Rs. 91,31,077/-. The source for the repayment of the said bank loan is said to have been given by Shri K. Paramasivam father of all the partners through a loan of Rs. 90,00,000/-. This also did not reflect through bonafide accounting channels of all concerned, supported by books of accounts, vouchers, etc. Moreover, I also found a statement in Tamil given by Shri K. Paramasivam before the Assessing Officer on 24.12.2010 wherein he has beyond doubt clarified that neither the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 30.12.2010. I, therefore, order that the revision petition dated 12.04.2011 preferred before me is rejected. 8. Aggrieved by the same, the petitioner filed W.P.(MD ) No.4208 of 2013 which came to be disposed of on 18.06.2019 by setting aside the aforesaid order dated 22.02.2012 passed by the first respondent under Section 264 of the Income Tax Act, 1961. Paragraph 8 of the order dated 18.06.2019 in W.P.(MD) No.4208 of 2013 reads as under:- 8. The impugned order is thus set aside and the matter is remanded to the file of the Commissioner of Income Tax, who will hear the petitioner de novo and pass a speaking order. This Writ Petition is disposed of, in the aforesaid terms. Seeing as the matter relates to an order of assessment of the year 2011-12, this exercise shall be completed within six weeks from the date of receipt of a copy of this order. No costs. Consequently, connected miscellaneous petition is closed. 9. The above conclusion was based on the observations contained in paragraphs 6 7 of the order which read as under:- 6. I am of the view that the issue of ownership of the property has not been appreciated by the respondent in proper perspective. The Commissioner him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d counsel for the petitioner would submit that the notice that was issued under Section 143(2) of the Income Tax Act, 1961 was barred by limitation in terms of proviso to Section 143(2) of the Act with effect from 08.11.2010. 14. It is submitted that such notice would have been issued within six months from the end of the Financial Year, for which, the Return was furnished. The learned counsel for the petitioner would submit that after the Notice under Section 148 of the Income Tax Act, 1961 was issued on 23.03.2010 , the petitioner firm had, promptly, filed a Return on 31.03.2010 and therefore the Notice under Section 143(2) of the Act ought to have been issued to the petitioner on or before 30.09.2010 . Instead, the Notice was issued only on 08.11.2010 . 15. It is further submitted that the reliance on the document, that was subsequently furnished by the petitioner, cannot be placed. The reliance that was placed on the documents filed by the petitioner, could not have been relied upon by the Assessing Officer, while passing the Assessment Order on 30.12.2010 . 16. In this connection, the learned counsel for the petitioner has placed reliance on the following decisions of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has appeared in any proceeding or cooperated in any inquiry related to an assessment or reassessment, it shall be deemed that any notice under any provision of this Act has been duly served upon him in time and in accordance with the relevant provision of the Act. Further, such assessee shall be precluded from taking any objection in any proceeding or inquiry under this Act that the notice was: (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner. 42.5. However, the provision of this section shall not apply where the assessee has raised such objection before the completion of the assessment or reassessment. Similar amendment has also been carried out in the Wealth-tax Act. 20. That apart, the learned counsel for the petitioner has placed reliance on the Assessment Order passed in the case of one of the partners namely, P.Srinivasan, wherein, it has been accepted that one Muthukrishnan had obtained loan from the partners and their father for a sum of Rs. 1,01,00,000/- which is covered by the Mortgage Deed dated 31.08.2005 and since the amount was not paid, for purchase of the mortgaged property, one of the partners viz., P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that even before the first respondent in the first round, the plea regarding Section 292BB of Income Tax Act, 1961 was not taken. 27. It is submitted that in the first round of litigation before this Court in W.P.(MD) No.4208 of 2013, which was disposed of on 18.06.2019, the petitioner raised for the first time a plea regarding limitation under Section 143(2) of the Income Tax Act, 1961. 28. It is further submitted that there is no merits in the present Writ Petition. That apart, it is submitted that none of the partners were able to produce any records to substantiate that they had huge amount of money to lend to the said Muthukrishnan. 29. That apart, it is submitted that the loan itself was obtained for purchasing the property in the name of the firm and that the income from the property has been shown in the income tax of the firm and therefore, there is no merits in the present Writ Petition. 30. Finally, the learned counsel for the respondent has also placed reliance on the decision of the Punjab and Haryana High Court in Aravali Engineerings Pvt. Ltd. Vs. Commissioner of Income Tax , [2011] 11 taxmann.com 291. A reference was made to para 4, wherein, the decisions of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round taken by the petitioner before the respondent before the impugned order was passed. 38. Section 292BB of the Income Tax Act, 1961 makes it clear that if an assessee had participated in the proceedings, the notice issued would be deemed to be valid even if there were infractions by way of legal fiction. This is what the Hon'ble Supreme Court has clarified in its decision in Commissioner of Income Tax Vs. Laxman Das Khandelwal , [2019] 417 ITR 325 (SC). Only if no notice was issued, the defects cannot be cured. In this connection, a specific reference is drawn to para 9 from the above decision. It reads as under: 9. According to Section 292BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. It is only the infirmiti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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