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Income Tax Appellate Tribunal, Kolkata Bench, KOLKATA
Before: SRI ABY T.VARKEYAND SHRI WASEEM AHMED
These are appeals preferred by the assessee against the order of the CIT- XXIV, dt. 29.07.2013, for assessment year 2003-04. is against the quantum addition and I.T.A. No. 2552 is against the penalty confirmed by the CIT(A). 2. Grounds of appeal raised by the assessee is as follows :- (1). That the order of the Ld. Commissioner of Income Tax (Appeal)-XXIV, Kolkata dated 29.07.2013 dismissing the appeal filed on the ground that the appeal was not signed by a person authorized to sign the return of income under section 140 of the Income Tax Act, 1961 is arbitrary is as much as Smt. Aparna Phumra being the Partner of the 2. ITA No.2551 & 2552/Kol/2013 M/s B. K. Agencies A.Yr.2003-04 erstwhile firm was very much authorised by Section 140 to file the return. (2). That the LD. CIT(A) erred in having dismissed the appeal holding the assessment order was served by a fixation on 30.12.2010 whereas the same should have been served on the partner of the firm pursuant to the dissolution of the firm and the order having been received by erstwhile partner on 20.11.2012, the appeal was very much in time. (3). That the order of the Ld. CIT(A) should accordingly be quashed and your appellant be given such relief(s) as prayed for. (4). That further ground(s) of appeal may be submitted on or before the date of hearing.
Assessee has also filed additional grounds of appeal which are as follows:
(5). That the Ld. AO erred in initiating proceedings in the name of B.K. Agencies which having been dissolved on 1st of April, 2004 had no existence on date of issuance of notice u/s 148 of the Income Tax Act, 1961. (6). That in any case, impugned notice having been not served in the name of the partner of B.K. Agencies, the impugned notice cannot be treated to have been validly served, making the impugned proceedings bad in law. (7). That in any case, the impugned notice having validly not served on partner of the firm, whose address was on record of the Department, there was denial of opportunity of hearing to the partner and thus violation of the principles of natural justice.
The additional grounds of appeal no. 5,6 & 7 are questions of law. The same is being admitted relying on the judgment of a Bench of three Judges of the Supreme Court in National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383.
3 & 2552/Kol/2013 M/s B. K. Agencies A.Yr.2003-04 3. Brief facts of the case is that the assessee M/s. B. K. Agencies is a partnership firm. The original assessment u/s 143(3) was completed determining the total income of Rs. 2,09,320/- on 21.01.2006. Thereafter, the AO notes in the assessment order subsequently passed on 24.12.2010 invoking Section 148 of the Act (after re-opening the assessment) on the ground that he detected that the assessee showed closing stock of Rs. 11,88,339/- whereas the closing stock furnished towards the bank was Rs. 42,28,999/- which according to the AO was not accounted for by the assessee in the P/L Act. So, according to the AO there was an under assessment of income to the tune of Rs. 31,10,660/- on which tax has escaped assessment. According to the AO, on the aforesaid reason, notice u/s 148 of the Act was served upon the assessee by affixture on 16.04.2009. Thereafter, the AO simply notes that since the case is going to be time barred on 31.03.2010 he had no other alternative but to invoke Section 144 of the Act (Best Judgment Assessment) and he added Rs. 31,10,660/- to the total income of the assessee. Aggrieved by the aforesaid order of the AO, Smt. Aparna Phumra, being the partner of the erstwhile firm for the period of assessment i.e. A.Y. 2003-04, preferred an appeal before the Ld. CIT(A), who was pleased to dismiss the same. Aggrieved by the aforesaid order of the Ld. CIT(A) Smt. Aparna Phumra is before us.
We have heard both the parties and perused the records carefully. We note that the assessee M/s B.K. Agencies is a partnership firm, whose assessment was completed u/s 143(3) and an original assessment order was passed determining the total income at Rs. 2,09,320/-. Later on assessment was re-opened because the AO found that there was difference in the valuation of the closing stock to the tune of Rs.31,10,660/- from the books of the assessee and that which the firm had furnished before the bank for availing loan facility. On the basis of this reason the AO invoked Section 147 & 148 of the Act to re-open the assessment. We take note that in respect of serving the notice u/s 148 the AO has simply stated that “notice u/s 148 was served upon the assessee by affixture on 16.04.2009”. Thereafter, completed the assessment 3 4 & 2552/Kol/2013 M/s B. K. Agencies A.Yr.2003-04 by Best Judgment making an addition of Rs. 31,10,660/-. The appeal by Smt. Aparna Phumra before the Ld. CIT(A) was dismissed by him on the ground that she is not authorized to sign the return income u/s 140 of the Act, therefore, the Ld. CIT(A) dismissed the appeal at the admission stage itself. Second reason was that he did not condone the delay noting that the impugned order of the AO was dt. 24.12.2010 and that the AO had conveyed to him (CIT(A)) that he has served the same by affixture on 30.12.2010, since, the registered post to the address of the firm was returned unserved with postal remarks “not known”. So, according to the Ld. CIT(A) it was established that the order of the AO and the demand notice was duly served on Smt. Aparna Phumra on 30.12.2010 itself and, therefore, according to the Ld. CIT(A) the assessee misled the department by showing the receipt date of demand notice and order on or about 20.12.2012. So, since the appeal is delayed by 701 days, and there was no sufficient cause for filing the appeal in time, the delay was not condoned and he was of the opinion that the appeal is not maintainable and he dismissed the appeal.
The Ld. AR for the assessee Shri S.K. Tulsiyan, who was appearing as the pro- bono counsel let us knew that Smt. Aparna Phumra was the partner along with her husband Sri Basant Phumra, who was managing partner of the firm M/s. B.K. Agencies in the A.Y.- 2003-04 and due to marital dispute between Smt. Aparna Phumra and Shri Basant Phumra, she retired from the assessee firm of M/s B.K. Agencies on 1st April, 2004 and because of her retiring from the firm by operation of law the firm M/s. B.K. Agencies was dissolved in the eyes of law because the Partnership Act stipulates minimum two persons to form a firm and when she retired the sole member of the Firm was her husband only and so in the eyes of law the assessee firm stands dissolved on 1st April, 2004. The Ld. Counsel took our attention to Page 1-6 of the paper book which is the deed of dissolution of partnership made on 01.04.2004 between Shri Basant Phumra (husband) and Smt. Aparna Phumra (wife) of the assessee firm M/s. B.K. Agencies. From the perusal of the contents of the deed we find that Smt. Aparna Phumra has retired and has nothing to do thereafter with the 4 5 & 2552/Kol/2013 M/s B. K. Agencies A.Yr.2003-04 business even if continued by her husband Shri Basant Phumra as a proprietary concern. We also note that their marriage has been dissolved by a decree of divorce ordered by the 1st Court of Additional District Judge at Alipore in Matrimonial Suit No. 126 of 2008 dt. 11.12.2008 and took our attention to page 7 & 8 of the paper book. These facts were brought to our notice in order to show that Smt. Aparna Phumra has nothing to do with the assessee firm from 01.04.2004 onwards. We note that the AO in the 147/144 order dt. 24.12.2010 has only stated that the 148 notice was served upon the assessee firm(M/s B.K. Agencies) by affixture on 15.04.2009. It is well settled that notice u/s 148 has to be issued to the assessee before usurping the jurisdiction to re-open and re-assesss the assessment completed u/s 143(3). Here we find that 148 notice has been said to have been affixed by the AO on 16.04.2009. However, before the affixture of notice is resorted to, the AO has to clearly bring out the facts as to whether notices sent earlier before affixture to the assessee has been sent to the assessee, the mode of service and what was the fate of it as to whether the assessee has refused to accept the notice then only recourse can be made to notice by affixture. It should be remembered that in the case of affixture by notice by the department it is duty bound to give the details as to when the notices were sent by ordinary, registered/acknowledgement post and the fact that the assessee refused to accept the notice and then only recourse to notice by other means can be resorted i.e. in this case notice by affixture. Even in the case of affixture by notice the signature of the notice server as well as the signature of the person who is staying nearby the place of the assessee and who identified the address of the assessee needs to be taken by the department for successfully completing the notice by affixture. Here in this case, we find that the AO has just made a passing remark that the 148 notice has been affixed on 16.04.2009 which does not satisfy the requirement of law, and for failure of proper serving of notice, the usurpation of the jurisdiction itself of the AO is fragile in the eyes of law. Not only on this ground but on another ground also the issuance of notice u/s148 against the firm M/s B.K. Agencies is illegal because of the simple fact that the firm was dissolved on 01.04.2014 itself. It is a matter of record 5 6 & 2552/Kol/2013 M/s B. K. Agencies A.Yr.2003-04 and paper book page no. 1-6 factually reflects that the partnership firm M/s B.K. Agencies got dissolved on 01.04.2004 because there were only two partners in the firm and Smt. Aparna Phumra one of the partners has retired from the partnership, so, therefore, in the eyes of law the assessee partnership firm stands dissolved. Therefore, the service of notice itself to an assessee who is no more partnership firm and the assessment framed thereafter is null in the eyes of law. So, in the peculiar circumstance of the case, on both these counts aforestated the order impugned is void in the eyes of law and, therefore, we quash the impugned order dt. 24.12.2010. I.T.A. No. 2552 is against penalty imposed consequent to passing of the impugned order dt. 24.12.2010 and taking note of the quantum added against the assessee. Since the re-opening u/s 147/48 itself stands quashed, the penalty also does not survive and so is also quashed.
In the result, both of the appeals of the assessee are allowed.
Order pronounced in the Court on 31.01.2017.