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Facts
The assessee, a partnership firm, was dissolved on March 31, 2012, and its business was taken over by a successor private limited company. The AO was informed of this dissolution and succession. Despite this, a notice under Section 147/148 of the Income Tax Act was issued to the dissolved firm for AY 2013-14.
Held
The Tribunal held that issuing a notice under Section 147/148 to a dissolved firm, when the AO was duly informed of its dissolution and the succession by a new entity, vitiated the assessment proceedings. The assessment was initiated and concluded in the name of a non-existing entity.
Key Issues
Whether assessment proceedings initiated against a dissolved firm, after the AO was informed of its dissolution and succession, are valid?
Sections Cited
147, 144, 144B, 148
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Income Tax Appellate Tribunal, DELHI BENCHES: E : NEW DELHI
Before: SHRI ANUBHAV SHARMA
ORDER
PER ANUBHAV SHARMA, JM:
This appeal is preferred by the assessee against the order dated 24.03.2025 of the Commissioner of Income-tax (Appeals), NFAC, Delhi (hereinafter referred to as the ld. First Appellate Authority or ‘the Ld. FAA’ for short) in Appeal No.NFAC/2012-13/10150852 arising out of the appeal before it against the order dated 31.03.2022 passed u/s 147 r.w.s. 144 r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the AO, National Faceless Assessment Centre, Delhi (hereinafter referred to as the Ld. AO).
On hearing both the sides, we find that primarily the assessee has raised grounds No.1 to 3 whereby the impugned assessment order has been challenged for being passed on a non-existing entity. Although the ld. DR has opposed the contentions, but, could not dispute the fact coming up from the record that Advance Computer Shoppe was a partnership firm incorporated on 01.01.2003 and by dissolution deed, copy of which is on record at pages 5-7 of the paper book, the partnership was dissolved on 31st March, 2012. Thus, from 01.04.2012, Advance Computer Shoppe firm was no more in existence and it was succeeded by M/s Advance Info Distributors Pvt. Ltd. which had taken over the business of the firm on a going concern basis and this agreement is on record in paper book from pages 8 to 11.
An intimation of dissolution of the firm was given to the AO on 25.06.2012 along with the certificate of incorporation of the new entity coupled with the dissolution deed and succession agreements and the copy of the same is on record at page 12 of the paper book. As a matter of fact, we find that there is a seal of the Office of the Income-tax Officer, Ward 27(4), New Delhi dated 25th June, 2012. The content of the intimation letter mentions of all these aforesaid facts. The letter mentions of all the relevant information including the details of directors and shareholders of M/s Advance Info Distributors Pvt. Ltd. that were provided to the AO on 25.06.2012. Further, the erstwhile firm had not filed any return for AY 2013-14 and, instead, the return was filed by the successor company and the copy of the acknowledgement of the return is on record as page 13 of the paper book.
However, the notice u/s 148 of the Act was issued to the erstwhile firm which was no more in existence and of which the AO was well informed that the erstwhile firm stood dissolved and assets and liabilities were taken over of M/s Advance Computer Shoppe. Still the impugned assessment order was passed on the basis of reopening notice dated 30.03.2021 which was in the name of erstwhile firm only.
It also came up during the hearing from the ld. AR that whatever disputed additions have been made were accounted in the return filed by M/s Advance Info Distributors Pvt. Ltd.
The only contention of the ld. DR is that the PAN was not changed but does not help the Revenue as the existence of an assessee is a legal status and facts mentioned in PAN do not determine the status. The PAN may still be of the entities of the nature of firm but when the AO was duly informed about the dissolution of the firm and the new entity coming into existence on a going concern basis, then, the AO was supposed to take cognizance of the facts and issue notice on the new entity. Thus, issuance of notice upon a dissolved firm which is foundation of assumption of jurisdiction u/s 147/148 of the Act stood vitiated and the ld. CIT(A) has failed to appreciate the same. The law in this regard is crystalised that no assessment can be initiated and concluded in the name of a non- existing company especially when facts are duly acknowledged and notified to the 3