SANJAY ENTERPRISES,KOPPAL V. INCOME TAX OFFICER, WARD-2, KOPPAL

ITA 2026/BANG/2024

AI Insights

The case involves M/s. Sanjay Enterprises, which appealed against the order of the NFAC, Delhi concerning the assessment year 2017-18. The primary contention was that the notices issued under section 148 of the Income Tax Act were invalid as the entity was not in existence at the time of the notice. The firm had been dissolved on 31/03/2013, and the notices were issued in 2017. The assessee argued that the reassessment was based solely on bank entries related to the proprietor's business, without any investigation or inquiry into the alleged income that escaped taxation. The Tribunal found that the assessee had not received proper communication regarding the notices, which led to the assessment being made without hearing the assessee, thus violating the principles of natural justice.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471049 (ITAT-BANGALORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBRAMANIAN
• Assessee Lawyers: VEERABASANA GAUDA
• Keywords: Set aside; Unexplained expenditure; Principle of natural justice
• Section: 147; 148; 69C; 69A; 234B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH : BANGALORE BEFORE SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER ITA No. 2026/Bang/2024 Assessment Year : 2017-18 M/s. Sanjay Enterprises, 6 3 17 8 M S Sanjay Enterprises, APMC First Gate, APMC Yard R G Road, Karatagi Tq. Gangavathi, Dist. Koppal, Karnataka – 583 229. PAN: ABVFS6082J Vs. The Income Tax Officer, Ward – 2, Raichur. APPELLANT RESPONDENT Assessee by : Shri Veerabasana Gauda, CA Revenue by : Shri Subramanian, JCIT-DR Date of Hearing : 28-11-2024 Date of Pronouncement : 29-01-2025 ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 28/08/2024 in respect of the A.Y. 2017-18 and raised the following grounds: “1. On the facts and in the circumstances of the case, the entity not being in existence the notice under sec 148 against a non entity is invalid and reassessment as made is opposed to law and liable to be cancelled. 2. On the facts and in the circumstances of the case, the entity not being in existence there could be no earning of income which escapes from taxation in the status of the Page 2 of 7 ITA No. 2026/Bang/2024 firm and without investigation or enquiry the only basis on the entries in the bank account which was being operated by the Proprietor for his business, the reopening made in the hands of the appellant is invalid and opposed to law and liable to be cancelled. 3. On the facts the assessment made under sec 147 rws 144 rws 144B of the Act is opposed to law and was an entity not being in existence and consequently the impugned order is liable to be annulled. 4. On the facts the learned assessing authority having failed to appreciate that for the relevant assessment year the business was carried on by the Proprietor who was regularly filing the return of income wherein all the transactions have been declared and he is being regularly assessed to tax and there being no omission of income from taxation the notice issued on the appellant was opposed to law and invalid and accordingly the assessment as made is liable to be cancelled. 5. The learned Assessing Authority ought to have appreciated that the various notices sent through email could not be responded to on account of the fact that it was sent through the email ID of one of the representative who has ceased connection with the appellant since 2013 and consequently there was no communication to the appellant to respond to the notices. 6. On the facts the learned Assessing Authority ought to have appreciated that the firm having been dissolved with effect from 31.3.2013 there was no income to the said firm from the assessment year 2014-15 and no return of income was filed by the firm. Thus, choosing the assessment year 2017-18 to issue the notice on the firm which is not in existence was opposed to law and the entire proceedings initiated against the firm which was not in existence were invalid and the assessment as made is thus invalid and liable to be cancelled. 7. The learned Assessing Authority ought to have appreciated that the firm had intimated the Commercial Tax Department and also APMC immediately after the dissolution of the firm and the bank account in which the transactions have been located by the assessing authority belonged to the Proprietor who had accounted for the entries made in the bank account in his Proprietary concern and declared the income therefrom in his return of Page 3 of 7 ITA No. 2026/Bang/2024 income and thus there being no omission of income or escapement of income from taxation, the proceedings initiated are opposed to law and liable to be cancelled. 8. On the facts the learned Assessing Authority ought to have appreciated that the firm was not in existence and there being no income accrued to the firm, no assessment can be made in the hands of the firm. 9. The learned Assessing Authority ought to have appreciated that the provisions of Sec.69A has no application in that the amount of deposit has been accounted by the Proprietor in his return of income and it was fully explained and the bank account in which the deposit has been made did not belonged to the appellant during the relevant year. 10. The learned Assessing Authority ought to have appreciated that the firm having not filed any return of income wherein the expenditure for the withdrawal of Rs.5,88,81,000 was claimed, the proposed application under sec 69C rws 115BBE of the Act was without jurisdiction and the impugned addition made as such is opposed to law and accordingly liable to be deleted. 11. The learned Assessing Authority erred in levying the tax under sec 115BBE along with additional tax. 12. The learned Assessing Authority erred in charging the interest under sec 234A and 234B of the Act. 13. For these and other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allowed.” 2. The brief facts of the case are that the assessee had not filed his return of income and therefore based on the information available in AIMS module of the ITBA, the AO found that the assessee had deposited cash of Rs. 7,10,000/- in the SB account of the assessee firm and also cash was withdrawn from current account for a total value of Rs. 5,88,81,000/-. Therefore the assessment was reopened u/s. 147 and notices were issued for which the assessee had not replied as well as not filed their return of income. Therefore the AO had treated the cash deposits as unexplained money and added the same u/s. 69A of the Act. Similarly, the AO had Page 4 of 7 ITA No. 2026/Bang/2024 added the withdrawal of cash as unexplained expenditure u/s. 69C of the Act. As against the said proceedings, the assessee filed an appeal before the Ld.CIT(A) and contended that they had not received any communications on their registered email IDs and therefore the assessee was not able to appear before the AO and prayed to set aside the ex-parte assessment order. The Ld.CIT(A) had also dismissed the appeal for non-prosecution. As against the said ex-parte order, the assessee is in appeal before this Tribunal. 3. At the time of hearing, the Ld.AR submitted that the assessee was previously running a partnership firm and the said firm was dissolved from 31/03/2013. The Ld.AR further submitted that therefore the notices could have sent to the email ID of the representative of the assessee which was not forwarded by him so that the AO had made an assessment u/s. 147 r.w.s. 144 of the Act. Even before the Ld.CIT(A) also, the assessee contended that they had not received the notices and to that extent filed an affidavit stating the reasons for not appearing and prayed to set aside the ex-parte orders of the AO as well as the Ld.CIT(A) and grant one opportunity to present their case. 4. The Ld.DR relied on the orders of the lower authorities and submitted that the assessee had not appeared before the AO as well as before the Ld.CIT(A) and therefore no lenience could be shown on them and prayed to dismiss the appeal. 5. We have heard the arguments of both sides and perused the materials available on record. 6. It is the case of the assessee that no notices were received by them either from the AO or from the Ld.CIT(A) and therefore the orders passed by the authorities are against the principles of natural justice. We have also perused the affidavit filed by the assessee in support of their contentions which is extracted as below: Page 5 of 7 ITA No. 2026/Bang/2024 Page 6 of 7 ITA No. 2026/Bang/2024 7. On going through the above said affidavit, we are convinced that the assessee is not able to appear before the authorities since they had not received the notices. The department has also not produced any contra evidences to disregard the claim made by the assessee. Admittedly, the assessment as well as the appellate order was made without hearing the assessee and therefore the issue was not adjudicated on merits by both the authorities. 8. In these circumstances, we are inclined to set aside the order of the AO as well as the Ld.CIT(A) and remit the issue to the file of the AO to decide the issue afresh on merits after granting a reasonable opportunity of being heard to the assessee. Page 7 of 7 ITA No. 2026/Bang/2024 9. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 29th January, 2025. Sd/- Sd/- (LAXMI PRASAD SAHU) (SOUNDARARAJAN K.) Accountant Member Judicial Member Bangalore, Dated, the 29th January, 2025. /MS / Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file 6. CIT(A) By order Assistant Registrar, ITAT, Bangalore "