PATEL BRASS WORKS,RAJKOT vs. DCIT, CIR 1(1), RAJKOT

PDF · subscribers
ITA 413/RJT/2024Status: DisposedITAT Rajkot06 November 2025AY 2015-164 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal noted that the issue was squarely covered by a previous decision of a co-ordinate bench in the assessee's own case. In that prior order, the Tribunal had observed that if the entity does not exist in the eyes of law, then penalty proceedings under Sections 271(1)(b) and 271F of the Act do not survive, and the initial action of the revenue, if not in consonance with law, leads to subsequent proceedings falling through. Applying the legal maxim 'Sublato fundamento cadit opus' (foundation being removed, structure falls), the Tribunal held that the penalty imposed on account of non-compliance with notices was unsustainable. Consequently, all grounds of appeal were restored back to the file of the Assessing Officer for fresh adjudication after verifying whether the assessee existed at the relevant time. If the assessee was found to be non-existent, appropriate relief was to be granted. The present appeals were allowed for statistical purposes on the same terms.

What were the facts?

The appeals were filed by Patel Brass Works (the assessee) against orders of the National Faceless Appeal Centre (NFAC), Delhi, for Assessment Years 2015-16 and 2016-17. These orders arose from assessment orders passed by the Assessing Officer under Section 147 read with Section 144 of the Income Tax Act, 1961. The assessee contended that the partnership firm had converted into a private limited company on October 1, 2010. However, the notices were issued by the Assessing Officer on March 29, 2022, in the name of the partnership firm, which the assessee argued was not in existence at that time. The Revenue relied on the findings of the lower authorities.

What were the issues?

1. Whether the assessment proceedings initiated under Section 147 read with Section 144 of the Income Tax Act, 1961, are valid when the notices were issued in the name of a partnership firm that had allegedly ceased to exist due to conversion into a private limited company on October 1, 2010. Assessee's Contention: The assessee argued that since the partnership firm was converted into a private limited company on October 1, 2010, it was non-existent when the notices were issued on March 29, 2022. Therefore, the proceedings were invalid. The assessee relied on a previous order of the ITAT, Rajkot Bench, in its own case (ITA Nos. 414, 415, 417, 418/Rjt/2024) dated December 30, 2024, which restored similar appeals to the Assessing Officer for fresh verification. Revenue's Contention: The Revenue relied on the findings of the Authorities Below.

Which sections of the Income-tax Act were involved?

Section 147,Section 144,Section 142(1),Section 271(1)(b),Section 271F

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT

Before: DR. ARJUN LAL SAINI & SHRI DINESH MOHAN SINHA

For Appellant: Shri G. R. Sanghavi, Ld. AR
For Respondent: Shri Vijay Kumar Singh, Ld. CIT(DR)

Appellant by : Shri G. R. Sanghavi, Ld. AR Respondent by : Shri Vijay Kumar Singh, Ld. CIT(DR) Date of Hearing : 03/11/2025 : 06/11/2025 Date of Pronouncement ORDER Per, Dr. Arjun Lal Saini, AM: These two appeals have been filed by the same Assessee, against the separate orders passed by the National Faceless Appeal, Centre (NFAC), Delhi [hereinafter referred to as “NFAC”] both dated 03.05.2024 arising in the matter of separate assessment orders passed u/s. 147 r.w.s. 144 of the Income Tax Act, 1961 (here-in- after referred to as “the Act”) relevant to the different Assessment Year 2015-16 & 2016-17.

2.

When these appeals were called out for hearing, the Learned Counsel for the assessee invited our attention to the order dated 30.12.2024 passed by the Hon’ble & 416/Rjt/2024 Patel Brass Works v. DCIT ITAT, Rajkot Tribunal in the assessee’s own case in for Assessment Year 2015-16 and 2016-17, vide order dated 30.12.2024, wherein the issue and the ground raised by the assessee that the assessee firm was converted from Partnership firm to a Privet Limited Company on 1st October 2010, however, notice was issued by the assessing officer on 29.03.2022 in the name of the Partnership firm which was not in existence w.e.f. 1st October 2010, therefore, the assessee appeals were restored back to the file of the assessing officer for deciding the issue afresh after verifying the facts that the assessee was existed or non-existed at that point of time. If the assessee does not exist at the relevant time, then appropriate relief may be granted to the assessee, therefore, issue was adjudicated in favour of the assessee and appeal was restored back to the file of assessing officer. The Learned Counsel for the assessee therefore submitted that the present these two appeals are squarely covered by the aforesaid order of the Tribunal, a copy of which was also placed before the Bench.

3.

On the other hand, the Learned Department Representative relied on the finding of the Authorities Below.

4 We see no reasons to take any other view of the matter then the view so taken by the Division Bench of this Tribunal in assessee’s own case(supra), vide ordered date 30.12.2024. In this order the Tribunal has inter-alia observed as follows; “5. I have heard the submissions of both the parties and have also gone through the orders of the lower authorities carefully. I find that since the assessee does not exist, therefore, there is no question to attend the proceedings, before the Assessing Officer, therefore, the penalty imposed by the Assessing Officer, on account of non-compliance of notice, and on account of no response provided by the assessee, in response of several notices issued by the Assessing Officer, under Section 142(1) of the Act, does not survive. Since the entity does not exist in the eyes of law, hence penalty under Section 271(1)(b) of the Act, does not survive and should be deleted. I Find that once the foundation fails, the superstructure also fails i.e the addition on account of penalty is to be deleted. In this regard, I place reliance on the legal maxim “Sublato fundamento cadit opus” (meaning thereby that foundation Page 2 of 4 & 416/Rjt/2024 Patel Brass Works v. DCIT being removed, structure /work falls). Hence the initial action of the revenue itself is not in consonance with law, then all the subsequent and consequential proceedings would fall through for the reason that illegality strikes at the root of the order. I find that since the entity does not exist in the eyes of law, hence penalty under Sections 271(1)(b) and 271F of the Act do not survive. Considering the overall facts and circumstances of the case, all the grounds of appeal raised by the assessee, in all these four appeals are restored back to the file of Assessing Officer for deciding the issue afresh, after verifying the fact that the assessee is existed or non-existed at that point of time. If the assessee does not exist at the relevant time, then appropriate relief may be granted to the assessee. In the results, grounds of appeals in all these four appeals raised by the assessee are allowed for statistical purposes.”

5.

As the issue is squarely covered in favour of the assessee by the decision of the Co-ordinate Bench in assessee’s own case, and there is no change in facts and laws and the revenue is unable to produce any material to controvert the above findings of the Co-ordinate Bench(supra). Therefore, these two appeals of the assessee are restored back to the file of the assessing officer for deciding issue afresh after verifying the facts that the assessee was exited or non-existed at that point of time. If the assessee does not exist at the relevant time, then appropriate relief may be granted to the assessee. Therefore, grounds of appeal raised by the assessee in these two appeals are allowed for statistical purposes.

6.

In the combined result, these two appeals of the assessee are allowed, for statistical purposes, in above terms.

Order is pronounced in the open court on 06/11/2025.

More judgments on Section 147

All 49,210 judgments and leading authorities on Section 147 →

Recent GST High Court judgments

Search GST case law →