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TMI Blog2025 (2) TMI 829X X X X Extracts X X X X X X X X Extracts X X X X ..... the time of initiation of proceedings nor such reasons have been spelt out in the re-assessment order. Apparently, the vested right of the assessee to file objection to any unlawful assumption of jurisdiction has been completely done away causing serious prejudice to the assessee and embroiled him in protracted litigation. For assumption of lawful jurisdiction under the Act, all jurisdictional conditions and procedural requirements need to be satisfied. In the absence of copy of reasons made available in spite of specific request, presumption would arise adverse to the Revenue on compliance of pre-requisites of s.147 & 151 of the Act. The re-assessment order framed under s. 147/143(3) is thus, liable to be quashed as rightly contended on behalf of the assessee. Addition u/s 68 - The assessee has actually incurred business losses on the transactions in Banas Finance Ltd., a stock which is otherwise duly listed on the platform of the exchanges and transactions registered have been routed through SEBI registered stock brokers. The loss claimed has actually resulted in an outgo and depletion of funds. Hence the business loss by no stretch of imagination could fall within the expressi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er passed by the learned AO u/s 147 in the name of M/s Marut Nandan & Co. is liable to be quashed/annulled because at that point of time, the said Partnership Firm was not in existence. Note: Vide letter having been filed in his office on 28.09.2012, the learned AO was well informed about the dissolution of Partnership Firm. 7. That the assessment order is liable to be annulled because the principles of natural justice were violated by the learned AO. 8. That the appeal order passed by the learned CIT(A) in an ex-parte manner on 23.11.2023 is liable to be annulled firstly because the notice issued u/s 250 on 27.09.2023 (as referred in para 6.1 on page 8 of the appeal order, through which facts of the case, grounds of appeal, Form 35 with copies of relevant order and other relevant documents & submissions were required) was not served and secondly because the principles of natural justice were violated. 9. That on the facts of the case and in law, the addition of Rs. 63975187/- (alleged to be the bogus loss in the transactions of M/s.Banas Finance Ltd.) which was made by the learned AO u/s 68 and confirmed by the learned CIT(A), is liable to be deleted." 3. As per the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act took cognizance of the intimation by the assessee that partnership firm is no longer in existence for last several years but however, rejected the request for withdrawal of the notices issued under s. 148 and 143(2) of the Act on the ground that the firm was duly in existence in AY 2012-13 for which the case has been re-opened under s. 148 r.w.s. 147 of the Act. The AO observed that the firm becoming non-existent at a later point of time is of no consequence and the partners namely, Shri Dheeraj Bothra & Shri Sandeep Rathi are individually/jointly are severely liable for dues of the Department as per s. 188A of the Act. The AO thus observed that the reopening proceedings have been legally initiated and the assessment as completed for AY 2012-13 in which the firm was in existence. Another communication dated 25.11.2019 was made to the AO to submit that the notice dated 28.03.2019 issued under s. 148 of the Act by the AO in the name of non-existent partnership firm was not a valid notice because as on date of issuance of such notice, the partnership firm had been dissolved (on 31.03.2012) and was not in existence. The assessee further pointed out that s. 188A of the Act has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les and payments made and amount received from the stock brokers were also provided. The assessee also re-iterated that despite specific requests calling upon him to provide the copy of reasons recorded under s. 148(2) alongwith copy of sanction granted under s. 151 of the Act and material in possession of the AO at the time of recording reasons for formation of belief towards alleged escapement of income has not been provided. It was further pointed out that the assessment earlier was carried out under s. 143(3) of the Act. The assessee thus once again requested to the AO to provide the copies of the reasons recorded etc. in continuity with previous requests. The assessee further requested the AO to desist from making any additions/ disallowances without confronting the adverse material behind the back of the assessee. 8. The AO however, eventually passed assessment order dated 28.12.2019 wherein the AO alleged that the assessee has claimed bogus loss of INR 6,39,75,187/- and consequently, made an addition of such amount to the total income of the assessee as income from undisclosed sources taking shelter of s. 68 of the Act. 9. Aggrieved by the additions made, the assessee pref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and take remedial actions available in law against purportedly unjustified and expropriatory re-opening action? (iii) whether it was incumbent upon the AO to provide relevant material coming to the possession of the AO subsequent to the conclusion of the assessment carried out which formed the basis for formation of belief towards alleged escapement of income. (iv) whether the business loss resulting from transactions in alleged penny stock could give rise to undisclosed income from other sources per se and whether outgo/debits in the bank accounts owing to losses from such transactions provide legal foundation for invoking s. 68 of the Act. 13.2. The assessee has inter-alia challenged the legal propriety of issuance of notice on non-existent partnership firm. It is the case of the assessee that the partnership firm stood dissolved and rendered nonest with effect from 01.04.2012. The bank accounts were also closed about the time of dissolution. The intimation to this effect was also provided to the AO vide letter dated 28.09.2012. The Revenue also acknowledges the receipt of such intimation towards closure of business account and dissolution of firm since September, 2012 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability arising to the firm despite discontinuance or dissolution of such firm. However, to ascertain the correct taxable income, the jurisdictional notice must be issued to the subsisting entity or to its legal representative as the case may be. Notice issued on a non-existent entity has no sanctity in the eyes of law. The legal objection raised on behalf of the assessee is thus well-founded. 14. The assessee has also challenged the legal propriety of the re-assessment order framed under s. 147 of the Act in gross non-compliance of the mandatory formalities. Despite specific and repeated requests seeking copy of reasons recorded under s. 148(2), copy of sanction under s. 151 etc., the AO has proceeded on merits without providing such basic documents. The Hon'ble Bombay High Court in the case of KSS Petron P.Ltd. vs ACIT [ITA No.224 of 2014] dated 03.10.2016 has addressed the issue and held that the reassessment order is without jurisdiction where the law laid down by the Apex Court in the GKN Driveshafts (India) Ltd. vs ITO 259 ITR 19 (SC) has not been followed. The Hon'ble Bombay High Court also declined to restore the matter to the AO. The Hon'ble Bombay High Court observed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c request, presumption would arise adverse to the Revenue on compliance of pre-requisites of s.147 & 151 of the Act. The re-assessment order framed under s. 147/143(3) is thus, liable to be quashed as rightly contended on behalf of the assessee. 18. At this juncture, we also however advert to the merits of the addition under s. 68 of the Act. It is pointed out on behalf of the assessee that it has neither claimed any short term capital gains nor claimed any exempt capital gain tax. Thus, the allegation that unaccounted money has been routed using penny stocks is prima facie bereft of any logic. The assessee has actually incurred business losses on the transactions in Banas Finance Ltd., a stock which is otherwise duly listed on the platform of the exchanges and transactions registered have been routed through SEBI registered stock brokers. The loss claimed has actually resulted in an outgo and depletion of funds. Hence the business loss by no stretch of imagination could fall within the expression 'unexplained cash credits'. The outgo/loss has resulted in a debit transaction rather than credit transaction. Hence, the additions made under s. 68 is impermissible in law at the thresh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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