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Facts
The assessee, Mahaveera Rice World LLP, is challenging an assessment order for AY 2014-15. The reassessment proceedings were initiated by issuing a notice under section 148 to the firm, which had been dissolved and its business taken over by a private limited company. The assessee contended that the notice was issued to a non-existent entity.
Held
The Tribunal noted that the fact of the partnership firm's dissolution was communicated to the income tax authorities prior to the issuance of the notice. Therefore, the notice under section 148 issued in the name of the dissolved firm was considered bad in law.
Key Issues
Whether reassessment proceedings initiated by issuing a notice under section 148 to a dissolved partnership firm, after the department was aware of its dissolution and business takeover, are valid.
Sections Cited
147, 144, 144B, 148, 250, 69C, 145(3), 133A, 148A, 151, 149
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘A’, NEW DELHI
Before: SHRI MAHAVIR SINGH, HON’BLE & SMT. RENU JAUHRI, HON’BLE
The above captioned appeal is preferred by the assessee against the order dated 24.07.2025, passed by Ld. CIT(A)/NFAC, Delhi u/s 250 of the Income Tax Act, 1961 [hereinafter referred to as, “Act”] for A.Y. 2014-15. Assessment was framed by AO u/s 147 r.w.s 144 r.w.s 144B of the Act., vide order dated 25.05.2023.
The assessee has raised following grounds of appeal: “(i) On the facts and circumstances of the case, the authorities below has erred both on facts and in law in upholding the initiation of the reassessment proceedings and consequent impugned order as the same has been initiated by issue of notice u/s 148 and completed u/s 147/144/144B in the name of 1 | P a g e
6419_DEL_2025_Mahaveera Rice World the non-existing entity ignoring the fact that the information regarding takeover of the erstwhile assessee firm by a private limited company and dissolution of the erstwhile assessee firm was in the knowledge of the department. (ii) The reassessment proceedings and consequent reassessment both are invalid and without jurisdiction as the said assessment has been initiated and completed without complying with legal requirements of the provisions of section 147, 148, 148A, 151, 149 of the Income Tax Act therefore such assessment is void ab initio and liable to be quashed. (iii) The Ld. CIT(A) has erred both in law and on facts in the case in upholding the disallowance of Rs.58,19,782/- u/s 69C treating the same as bogus purchase in terms of provisions of sec 69C of the Act ignoring the fact that the above provision has no applicability as the purchases are duly accounted in books of account and above addition has been made without rejecting books of accounts u/s 145(3) of IT Act. (iv) The CIT(A) has erred both in law and in facts of the case in upholding the aggregate addition of Rs.58,19,782/- allegedly treating the purchases made from M/s Gayatri Maa Enterprises and M/s Parth International as bogus purchases having held the same as unexplained expenditure within meaning of sec 69C of IT Act ignoring the submission of appellant with evidences filed. The above addition is made ignoring the fact that there is no expenditure of this amount which is out of books of account of appellant. In view of above, the above addition is not tenable in law. (v) The appellant craves leave to add, DLEETE, modify amend the above grounds of appeal with the permission of the Hon’ble appellate authority.”
3. Although the assessee has raised several grounds, we first take up the legal ground no. (i) wherein the issue of notice has been challenged on the ground that it has been issued on a non-existing entity.
Brief facts are that the return for A.Y 2014-15 by the assessee firm M/s Mahaveera Rice World, was filed on 07.08.2014, declaring total income of Rs. 15,64,030/-. Original assessment was completed u/s 143(3) by ITO Ward 46(2) Delhi vide order dated 21.12.2016 at assessed income of Rs. 21,54,330/-.
2 | P a g e 6419_DEL_2025_Mahaveera Rice World Subsequently, as the business of the firm was taken over by a private limited company viz., M/s Mahavira Rice World Pvt. Ltd., the firm was dissolved vide dissolution deed dated 31.03.2018. The information regarding closure of business and surrender of PAN was filed before the Ld. AO as well as ITO TDS Ward 75(3). 4.1 A survey action u/s 133A was conducted on 31.11.2018 in the case of Sh. Ashok Kumar Gupta and others who were found to be engaged in providing accommodation entries for non-genuine purchases and sales to various parties. It was noted that M/s Mahaveer Rice World was also one of the beneficiaries. Accordingly, a notice u/s 148 was issued to the assessee firm on 28.07.2022 requiring it to submit the return for reassessment proceedings. The assessee filed its objections, however, Ld. AO rejected the assessee’s contention that proceedings could not be initiated on a non-existent entity, on the ground that the firm was existing at the relevant time when the transactions undertaken in F.Y. 2013-14. 4.2 Thereafter, the assessment was completed at an income of Rs. 73,83,812/- vide order u/s 147 r.w.s 144 r.w.s 144B dated 25.05.2023. Aggrieved, the assessee preferred an appeal before Ld. CIT(A). Before him, the assessee reiterated his submissions regarding proceedings being invalid on account of the fact that these were initiated on a non-existent entity. However, Ld. CIT(A) dismissed the assessee’s appeal vide order dated 24.07.2025. Further aggrieved, the assessee is in appeal before the Tribunal.
Before us, Ld. AR has submitted that the assessee has been raising the issue regarding validity of proceedings on a non-existent entity before the lower authorities and has filed requisite documentary evidences also before them. Ld. AR has filed a paper book containing the following documents: i. Copy of dissolution dated 01.04.2018.
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6419_DEL_2025_Mahaveera Rice World ii. Copy of intimation to the then ITO regarding dissolution of partnership firm dated 03.04.2018 iii. Copy of application of surrender of PAN and closure of business to the ITO dated 11.09.2018 iv. Copy of intimation to ITO (TDS) dated 24.08.2018.
5.1 Ld. AR has argued that in view of repeated intimations to the department regarding dissolution of the firm and takeover of its business by the company, M/s Mahavira Rice World Pvt. Ltd, the assumption of jurisdiction by issuing notice u/s 148 is not valid in law. 5.2 Ld. AR has filed written submissions wherein he has placed reliance on several decisions including those of the Hon’ble Supreme Court and Hon’ble jurisdictional High Court in support of his contention. He had submitted that in PCIT vs Maruti Suzuki India Ltd., [TS-429-SC-2019], the Hon’ble Apex Court has held that when the AO was informed of the amalgamating company having ceased to exist, the basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Further, in the case of Spice Entertainment vs. CST [TS-475-HC-2011 (Del)], the Hon’ble jurisdictional High Court has held that it was incumbent upon the income tax authorities to substitute the successor in place of the said person when the same was brought to the knowledge of AO during assessment proceedings. In view of the above judicial pronouncements, Ld. AR has argued that the entire proceedings are liable to be quashed. 5.3 On the other hand, Ld. DR has strongly relied on the orders of the lower authorities.
We have heard the rival submissions and perused the material on record. We note that the fact of dissolution of the partnership firm was brought to the 4 | P a g e
6419_DEL_2025_Mahaveera Rice World notice of the income tax authorities vide written communications which were duly received by the concerned officers as is evident form the documents placed before us. In view of these facts, there was no justification for the Ld. AO for issuing notice u/s 148 in the name of the dissolved firm in 2021. Moreover, this fact was again brought to the notice of Ld. AO during 148A proceedings and reiterated before the Ld. CIT(A). 6.1 Under these facts and circumstances, we are of the considered view that the notice u/s 148 issued in the name of the dissolved partnership firm was bad in law. Hence, respectfully following the judicial pronouncements of the Hon’ble Apex Court as well as the jurisdictional High Court, we hereby quash the proceedings u/s 148 of the Act.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on 13-02-2026.
Sd/- Sd/- (MAHAVIR SINGH) (RENU JAUHRI) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 13.02.2026 Pooja Mittal Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi
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