PARIKH MARKETING PRIVATE LIMITED THROUGH ITS ONE OF THE DIRECTORS MR AMIT DESAI V. PRINCIPAL COMMISSIONER OF INCOME TAX

WPC/2592/2023

AI Insights

The case involves Parikh Marketing Private Limited, which sought to quash notices issued by the Income Tax Department under sections 148A and 148 of the IT Act, 1961, concerning the Assessment Year 2019-20. The notices were issued in the name of M/s Parikh Sales, a partnership firm that had ceased to exist since its assets and liabilities were acquired by Parikh Marketing Pvt. Ltd. on April 1, 2009. The petitioner argued that the notices were issued without jurisdiction as the firm was non-existent at the time the notices were issued. The respondents contended that the assessing officer had valid reasons to believe that income had escaped assessment, based on transactions in the bank account of the erstwhile partnership firm. However, the court found that the notices were issued in a casual and non-speaking manner, without proper consideration of the legal status of M/s Parikh Sales post-acquisition.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 747686 (HC-JHARKHAND)
• Appeal Type: Others
• Pronouncement Date: 06-02-2024
• Assessment Year: misc
• Other Referred Cases: Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Ltd., Sandeep Chopra vs PCIT, Dhanbad and others, Durlabhbhai Kanubhai Rajpara v. Income-tax Officer, Savita Kapila v. Assistant Commissioner of Income Tax, Circle 4(1)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: R N SAHAY; ANURAG VIJAY
• Assessee Lawyers: MAHENDRA CHOUDHARY; AMRITA SINHA; PARIJAT SAURAV
• Keywords: Assessment Year 2019-20; Income Tax; Jurisdiction; Non-existent partnership firm; Show cause notice
• Section: 147; 143(3); 148A; 151(i)

Judgement Text

"1 IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P.(T) No. 2592 of 2023 Parikh Marketing Private Limited ..… Petitioner Versus 1. Principal Commissioner of Income Tax, Dhanbad, having its office at Aayakar Bhawan, Luby Circular Road, Town Dhanbad, P.O. & P.S. Dhanbad, Dhanbad, 826001. 2. Deputy Commissioner of Income Tax, Circle-1, having its office at Aayakar Bhawan, Luby Circular Road, Town Dhanbad, P.O. & P.S. Dhanbad, Dhanbad, 826001. .....Respondents --------- CORAM: Hon’ble Mr. Justice Rongon Mukhopadhyay Hon’ble Mr. Justice Deepak Roshan --------- For the Petitioner : Mr. Mahendra Kr. Choudhary, Adv. Ms. Amrita Sinha, Adv. Mr. Parijat Saurav, Adv. For the Res. Resp. : Mr. R.N.Sahay, Sr.S.C. Mr. Anurag Vijay, Adv. --------- CAV on :-23.11.2023 Pronounced on:06/02/2024 Per Deepak Roshan, J. The instant application has been preferred for the following reliefs:- For quashing and setting aside the Show Cause Notice issued under clause (b) section 148A of the IT Act, 1961 dated 03.03.2023 (Annexure-5), Order under clause (d) of section 148A of the IT act, 1961 passed on 31.03.2023 (Annexure-7) and Notice u/s 148 dated 31.03.2023 (Annexure-8), all for the Assessment year 2019-20 issued by the jurisdictional assessing officer i.e. by the Deputy Commissioner of Income Tax, Circle-1, Dhanbad (Respondent No.2), in the name of erstwhile dissolved / non-existent partnership firm M/s Parikh Sales, which ceased to exist since it was acquired and taken over by M/s Parikh Marketing Private Limited w.e.f. 01.4.2009, as a going concern with it’s all assets and liabilities, despite the fact that the assessing officer was duly informed by petition dated 01.04.2009 filed on 20.04.2009 (Annexure-3) and by the petition filed on 16.03.2023 (Annexure-6) filed in reply to the aforesaid Show Cause notice u/s 148A(b) dated 03.03.2023 (Annexure-5), and therefore the same are wholly without jurisdiction, non-est and void ab-initio. 2 2. The brief facts of the case as disclosed in the instant writ application is that the petitioner is a Private Limited Company duly incorporated on 31.03.2008. Its main business is of wholesale and retail trading of electronic appliances etc. Up to AY 2009-10 the business was carried on by a partnership firm known as M/s Parikh Sales under its PAN AACFM7651D and it has filed its last income tax return for the Assessment year 2009-10 on 30.09.2009. With effect from 01.04.2009, the aforesaid business carried on by the aforesaid partnership firm M/s Parikh Sales was acquired and taken over by the petitioner Private Limited Company, with its all assets, liabilities as a going concern, in pursuance of a Board resolution of the company passed on 01.04.2009. On 20.04.2009, the aforesaid partnership firm M/s Parikh Sales has filed a Petition dated April 1, 2009, before it’s assessing officer, informing him regarding the change in constitution of the firm and conversion of the partnership business into Private Limited Company M/s Parikh Marketing Private Limited w.e.f. 01.04.2009 as a going concern. For the AY 2014-15, the case of the Petitioner company was taken up for complete scrutiny and Assessment Order u/s 143(3) of the Income Tax Act, 1961 (hereinafter to be referred as the Act), was passed on 07.12.2016. 3 The case of the petitioner is that the alleged Axis Bank account No. 1720102000001076 standing in the name of aforesaid partnership firm M/s Parish Sales, was duly disclosed by the Petitioner company in its return filed and was accepted by the jurisdictional assessing officer, as if it was of the Petitioner company, since no adverse inference in this respect was made. The petitioner Company filed its income tax return for the instant AY 2019-20 on 31.10.2019 by e-filing, wherein the said Axis Bank account No. 1720102000001076 standing in the name of aforesaid partnership firm M/s Parikh Sales was duly disclosed by the Petitioner company as its Bank account, as was being done in past also, after its acquisition / take over w.e.f. 01.04.2009. On 03.03.2023, a Show Cause Notice u/s 148A(b) of the Act was issued by the Respondent No.2 in the name of erstwhile dissolved /non-existent partnership firm M/s Parikh Sales PAN: AACFM7651D regarding cash deposit in aforesaid Axis Bank Limited Account amounting to Rs. 2,48,68,510/- and to show cause why its case for the Assessment Year 2019-20 should not be reopened under section 147 of the IT Act, 1961. On 16.03.2023, a reply was filed by the Petitioner before the Respondent No.2, requesting him to drop the proceedings stating the aforesaid facts of acquisition and 4 take over and the disclosure of the aforesaid Axis Bank account in the return of the Petitioner company. On 31.03.2023, without any further clarification or without giving any opportunity of personal hearing, the Respondent No. 2 passed final Order u/s 148A(d) of the Act in the name of non-existing partnership firm M/s Parikh Sales, by giving finding on merits that “the case was examined and found that transaction in the above bank account of M/s Parikh Sales has been made and no ITR has been filed for the above AY” and concluded that it is fit case for issuance of notice u/s 148 of the IT Act, 1961 for the Assessment Year 2019- 20 in the case of M/s Parikh Sales. Subsequently, a notice u/s 148 of the Act was also issued by the Respondent No. 2 on 31.03.2023 requiring the erstwhile nonexistent / dissolved / acquired partnership firm M/s Parikh Sales to file its return. On 25.04.2023, the petitioner logged on at the IT Portal under the PAN of the erstwhile dissolved partnership firm M/s Parikh Sales being PAN ID AACFM7615D. However, an error message was reflected that “PAN does not exist” 3. Learned counsel for the petitioner submits that a reply was filed by the petitioner before the respondent No.2 on 16.03.2023, requesting him to drop the proceedings stating that notice u/s 148A(b) was issued by the Respondent No.2 in the name of erstwhile dissolved /non-existent 5 partnership firm M/s Parikh Sales PAN: AACFM7651D regarding cash deposit in aforesaid Axis Bank Limited Account. However, without any further clarification or without giving any opportunity of personal hearing, the respondent No. 2 passed final Order u/s 148A(d) of the Act in the name of non-existing partnership firm M/s Parikh Sales, without application of mind, passed a casual stereotype, non-speaking order on merits, giving no finding on merits and concluded that it is fit case for issuance of notice u/s 148 of the Act for the Assessment Year 2019-20 in the case of M/s Parikh Sales. Learned counsel further submits that a notice u/s 148 of the Act was also issued by the Respondent No. 2 on 31.03.2023 requiring the erstwhile non-existent / dissolve/ acquired partnership firm M/s Parikh Sales to file its return and on 25.04.2023, the petitioner logged on at the IT Portal under the PAN of the erstwhile dissolved partnership firm M/s Parikh Sales being PAN ID AACFM7615D. However, an error message was reflected that “PAN does not exist”. Learned counsel lastly submits that the Show Cause Notice u/s 148A(b) dated 03.03.2023 and consequent Order u/s 148A(d) dated 31.03.2023 and notice u/s 148 of the Act dated 31.03.2023 for AY 2019-20 are liable to be quashed since the same were issued on dissolved / nonexistent partnership firm M/s Parikh Sales, which was 6 taken over as a going concern by M/s Parikh Marketing Pvt. Ltd. w.e.f. 01.04.2009 as the same are wholly without jurisdiction, non-est and void in view of the decision of Hon'ble Apex Court in the case of Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Ltd. reported in (2020) 18 SCC 331 : [2019] 416 ITR 613 (SC) and other decisions of this High Court. 4. Learned counsel for the respondents submits that the Assessing Officer is in possession of information by the Insight Portal and non- filing of ITR for the AY 2010-11 and onwards suggests that the income chargeable to tax has escaped assessment relating to entire deposit of Rs.2,48,68,510/- in the Axis Bank A/c no. 1720102000001076 and the said information is duly flagged in accordance with the risk management strategy of the CBDT. However, in reply dated 16.03.2023 the Petitioner contended that the said transactions made through its Axis bank is already disclosed in its books of accounts for running of the business smoothly, operation in one bank account in the name of erstwhile M/s Parikh Sales was continued. A reasoned order u/s 148A(d) of the Act has been passed after obtaining prior approval of PCIT, as provided u/s 151(i) of the Act. The PAN of the firm had not been surrendered and the said bank A/c still being used to execute huge financial transactions. The aforesaid 7 issue is a subject matter of the assessment proceeding u/s 143(3)/147 of the Income Tax Act. 5. Having heard learned counsel for the parties and after going through the averments made in the respective affidavits and the documents annexed therein, it transpires that since 01.04.2009 the partnership firm-M/s Parikh Sales has merged with the petitioner-M/s Parikh Marketing Pvt. Ltd. with it’s all assets and liabilities which were also taken over by the company and therefore, M/s Parikh sales became a non-existent partnership firm. The Petitioner had also informed to the Department on 20.04.2009 about this conversion and changing in constitution. The erstwhile M/s Parikh Sales had a bank account (Axis Bank A/c no. 1720102000001076) in the name of M/s Parikh Sales which was also taken over by the company and was duly disclosed by the petitioner in its return, as if it was its own a/c and it also stood accepted by the AO in AY 2014-15 and no adverse inference in this connection was made in scrutiny Assessment Order u/s 143(3) of the Act. In pursuance to Show Cause Notice u/s 148A(b) dated 03.03.2023 in the name of partnership firm, a detailed joint show cause reply was also filed on behalf of the partnership firms and the petitioner on 16.03.2023, stating all the past facts with evidences that it has been acquired 8 by the company and stated that the aforesaid amount to Rs. 2,48,68,510/- deposited in Axis Bank was duly considered in the return of the company and there was no escapement and as such the case should not be reopened u/s 147 of the Act and the entire proceedings be dropped. It transpires that the respondent No. 2, without making any further clarification or without giving any opportunity of personal hearing, passed final Order u/s 148A(d), giving only one line finding on merits that “the case was examined and found that transaction in the above bank account of M/s Parikh Sales has been made and no ITR has been filed for the above AY” and concluded that it is fit case for issuance of notice u/s 148 of the Act, for the Assessment Year 2019-20 in the case of M/s Parikh Sales. In the aforesaid background, we are having no hesitation in holding that the impugned order passed u/s 148A(d) of the Act is without application of mind, passed in a casual stereotype manner and is a non-speaking order. 6. It further transpires from record that when the petitioner logged on at the IT Portal under the PAN of the erstwhile dissolved partnership firm M/s Parikh Sales being PAN ID AACFM7615D; an error message was reflected that “PAN does not exist”. In the similar facts and circumstances, i.e. in the case of Principal Commissioner of Income Tax, New 9 Delhi v. Maruti Suzuki India Ltd. (2020) 18 SCC 331 : [2019] 416 ITR 613 (SC) the Hon’ble Apex Court at para 36 has held as under:- “36. In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. 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. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a coordinate Bench of two learned Judges which dismissed the appeal the of Revenue in Spice Enfotainment” 7. Recently, in the case of Sandeep Chopra, vs PCIT, Dhanbad and others [W.P.(T) No. 2972 of 2022 Dt. of decision 09.02.2023 (Jh HC)] this Court at para 11 has held as under:- “11. Having regard to the discussions made hereinabove, notice issued under Section 148 for initiation of reassessment proceeding in the name of the deceased assessee (Bhim Sen Chopra) on his PAN and not in the name of his legal representative is held to be illegal and bad in law. Consequently, since the notice itself has been declared to be null and void, the order passed pursuant to the said notice is also null and void. As a result, the notice dated 18.3.2020 issued under Section 148 of the Act and all consequential orders, passed pursuant to the notice, is non est and void ab initio and accordingly quashed and set aside.” 8. As a matter of fact, now the law is no more res integra that no notice could be issued to a dead person. [Refer 10 Durlabhbhai Kanubhai Rajpara v. Income-tax Officer1(3)(4) reported in [2020] 114 taxman.com 481 (Gujarat)]. 9. Before parting it is also profitable to indicate that though in the instant case the petitioner had also informed to the Department on 20.04.2009 about this conversion and changing in constitution; however it has been held by Delhi High Court that in absence of a statutory provision, a duty cannot be cast upon legal representatives to intimate factum of death of Assessee to department and therefore, question as to whether PAN record was updated or not or whether department was made aware by legal representatives or not is irrelevant. [Refer Savita Kapila v. Assistant Commissioner of Income Tax, Circle 4(1) [2020] 118 taxmann.com 46 (Delhi)] 10. Having regard to the aforesaid discussion and said legal position, impugned notices could not have been served upon Assessee, and same deserves to be quashed. Accordingly, the Show Cause Notice issued under clause (b) of section 148A dated 03.03.2023 (Annexure-5), order under clause (d) of section 148A of the IT act, 1961 passed on 31.03.2023 (Annexure-7) and Notice u/s 148 dated 31.03.2023 (Annexure-8), all for the Assessment year 2019-20, are hereby, quashed and set aside. 11. As a result, the instant writ application stands allowed and pending I.A., if any, is also closed. (Rongon Mukhopadhyay, J.) (Deepak Roshan, J.) Fahim/- AFR- "