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Facts
The assessee, a firm, was dissolved on 31.03.2013. The Assessing Officer (AO) reopened the assessment for AY 2017-18 based on information regarding cash deposits and withdrawals. Notices were issued to an email ID of a former representative who was no longer associated with the assessee since 2013.
Held
The Tribunal held that the assessment orders were passed without adhering to the principles of natural justice as the assessee did not receive the notices. The Tribunal set aside the orders of the AO and CIT(A) and remitted the issue back to the AO for fresh adjudication.
Key Issues
Whether the assessment proceedings initiated against a dissolved firm and ex-parte orders passed without proper notice are valid.
Sections Cited
148, 147, 144, 144B, 69A, 69C, 115BBE, 234A, 234B, 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI SOUNDARARAJAN K.
ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER
This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 28/08/2024 in respect of the A.Y. 2017-18 and raised the following grounds: “
1. On the facts and in the circumstances of the case, the entity not being in existence the notice under sec 148 against a non entity is invalid and reassessment as made is opposed to law and liable to be cancelled.
2. On the facts and in the circumstances of the case, the entity not being in existence there could be no earning of income which escapes from taxation in the status of the firm and without investigation or enquiry the only basis on the entries in the bank account which was being operated by the Proprietor for his business, the reopening made in the hands of the appellant is invalid and opposed to law and liable to be cancelled.
On the facts the assessment made under sec 147 rws 144 rws 144B of the Act is opposed to law and was an entity not being in existence and consequently the impugned order is liable to be annulled.
On the facts the learned assessing authority having failed to appreciate that for the relevant assessment year the business was carried on by the Proprietor who was regularly filing the return of income wherein all the transactions have been declared and he is being regularly assessed to tax and there being no omission of income from taxation the notice issued on the appellant was opposed to law and invalid and accordingly the assessment as made is liable to be cancelled.
5. The learned Assessing Authority ought to have appreciated that the various notices sent through email could not be responded to on account of the fact that it was sent through the email ID of one of the representative who has ceased connection with the appellant since 2013 and consequently there was no communication to the appellant to respond to the notices.
6. On the facts the learned Assessing Authority ought to have appreciated that the firm having been dissolved with effect from 31.3.2013 there was no income to the said firm from the assessment year 2014-15 and no return of income was filed by the firm. Thus, choosing the assessment year 2017-18 to issue the notice on the firm which is not in existence was opposed to law and the entire proceedings initiated against the firm which was not in existence were invalid and the assessment as made is thus invalid and liable to be cancelled.
7. The learned Assessing Authority ought to have appreciated that the firm had intimated the Commercial Tax Department and also APMC immediately after the dissolution of the firm and the bank account in which the transactions have been located by the assessing authority belonged to the Proprietor who had accounted for the entries made in the bank account in his Proprietary concern and declared the income therefrom in his return of income and thus there being no omission of income or escapement of income from taxation, the proceedings initiated are opposed to law and liable to be cancelled.
8. On the facts the learned Assessing Authority ought to have appreciated that the firm was not in existence and there being no income accrued to the firm, no assessment can be made in the hands of the firm.
9. The learned Assessing Authority ought to have appreciated that the provisions of Sec.69A has no application in that the amount of deposit has been accounted by the Proprietor in his return of income and it was fully explained and the bank account in which the deposit has been made did not belonged to the appellant during the relevant year.
The learned Assessing Authority ought to have appreciated that the firm having not filed any return of income wherein the expenditure for the withdrawal of Rs.5,88,81,000 was claimed, the proposed application under sec 69C rws 115BBE of the Act was without jurisdiction and the impugned addition made as such is opposed to law and accordingly liable to be deleted.
The learned Assessing Authority erred in levying the tax under sec 115BBE along with additional tax.
The learned Assessing Authority erred in charging the interest under sec 234A and 234B of the Act.
For these and other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allowed.”
The brief facts of the case are that the assessee had not filed his return of income and therefore based on the information available in AIMS module of the ITBA, the AO found that the assessee had deposited cash of Rs. 7,10,000/- in the SB account of the assessee firm and also cash was withdrawn from current account for a total value of Rs. 5,88,81,000/-. Therefore the assessment was reopened u/s. 147 and notices were issued for which the assessee had not replied as well as not filed their return of income. Therefore the AO had treated the cash deposits as unexplained money and added the same u/s. 69A of the Act. Similarly, the AO had added the withdrawal of cash as unexplained expenditure u/s. 69C of the Act. As against the said proceedings, the assessee filed an appeal before the Ld.CIT(A) and contended that they had not received any communications on their registered email IDs and therefore the assessee was not able to appear before the AO and prayed to set aside the ex-parte assessment order. The Ld.CIT(A) had also dismissed the appeal for non-prosecution. As against the said ex-parte order, the assessee is in appeal before this Tribunal.
3. At the time of hearing, the Ld.AR submitted that the assessee was previously running a partnership firm and the said firm was dissolved from 31/03/2013. The Ld.AR further submitted that therefore the notices could have sent to the email ID of the representative of the assessee which was not forwarded by him so that the AO had made an assessment u/s. 147 r.w.s. 144 of the Act. Even before the Ld.CIT(A) also, the assessee contended that they had not received the notices and to that extent filed an affidavit stating the reasons for not appearing and prayed to set aside the ex-parte orders of the AO as well as the Ld.CIT(A) and grant one opportunity to present their case.
4. The Ld.DR relied on the orders of the lower authorities and submitted that the assessee had not appeared before the AO as well as before the Ld.CIT(A) and therefore no lenience could be shown on them and prayed to dismiss the appeal.
We have heard the arguments of both sides and perused the materials available on record.
It is the case of the assessee that no notices were received by them either from the AO or from the Ld.CIT(A) and therefore the orders passed by the authorities are against the principles of natural justice. We have also perused the affidavit filed by the assessee in support of their contentions which is extracted as below:
On going through the above said affidavit, we are convinced that the assessee is not able to appear before the authorities since they had not received the notices. The department has also not produced any contra evidences to disregard the claim made by the assessee. Admittedly, the assessment as well as the appellate order was made without hearing the assessee and therefore the issue was not adjudicated on merits by both the authorities.
In these circumstances, we are inclined to set aside the order of the AO as well as the Ld.CIT(A) and remit the issue to the file of the AO to decide the issue afresh on merits after granting a reasonable opportunity of being heard to the assessee.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 29th January, 2025.