Visakha Gas Agency V. Income Tax Department

WP/16242/2022

AI Insights

The case involves Visakha Gas Agency, represented by its managing partner, I. Venkata Subba Rao, challenging the legality of a series of notices and an order issued by the Income Tax Department under various sections of the Income Tax Act, 1961, for the Assessment Year 2015-16. The petitioner argued that the notices were issued to a firm that had been dissolved in 2001, and thus, were invalid. The respondents countered that the firm was still operational under the old PAN, evidenced by substantial cash deposits. The court found that the petitioner had not adequately updated the department about the dissolution and continued to operate the bank account, which justified the issuance of the notices.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 675529 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 12-09-2022
• Assessment Year: misc
• Other Referred Cases: PCIT, Mumbai vs. I-Ven Interactive Limited, Mumbai
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Keywords: Assessment Year 2015-16; Dissolved firm; Income Tax; Show cause notice; Writ of Mandamus
• Section: 148; 148A(d); 148(A)(b)

Judgement Text

"THE HON’BLE SRI JUSTICE C.PRAVEEN KUMAR AND THE HON’BLE SRI JUSTICE B. SYAMSUNDER Writ Petition No.16242 of 2022 ORDER:- (per the Hon’ble Sri Justice C. Praveen Kumar) The present writ petition came to be filed, by one Visakha Gas Agency represented by its Managing Partner/I. Venkata Subba Rao, seeking issuance of writ of Mandamus to declare (a) the Show Cause Notice issued by the first respondent under Section 148-A(b) of Income Tax Act, 1961 [for short, “IT Act”] dated 21.03.2022, (b) the Order passed by the first respondent under Section 148A(d) of I.T.Act dated 01.04.2022 and (c) the Notice issued by the first respondent under Section 148 of I.T. Act dated 04.04.2022 for the Assessment Year 2015-16, as illegal, arbitrary and bad in law. 2. The averments made in the affidavit filed, in support of the writ petition, would show that though the name of the Assessee firm, mentioned in the notice and order, and that of the petitioner herein being same, but the PAN CPK, J & BSS,J W.P.No.16242 of 2022 2 Number, address and constitution of the Assessee firm are different from those of the petitioner herein, and as such, the impugned notices issued, in spite of bringing to the notice of the authorities that the petitioner firm was dissolved in the year 2001 itself upon the death of one of its partners, is bad in law. (a) Initially, a partnership firm in the name of ‘Visakha Gas Agency’ was constituted on 15.10.1998 by two partners i.e. the deponent herein and one M. Ramachandra Sastry. The PAN number of the same was AACFV4149H. One of the partners by name M. Ramachandra Sastry expired on 12.12.2001, as such, the partnership firm was dissolved and thereafter it ceased to exist. Subsequent to dissolution of Visakha Gas Agency, the deponent herein operated the Visakha Gas Agency, as a Proprietary concern and filed Income Tax Returns as Proprietor of Visakha Gas Agency with PAN Number AAFPI4915D, from the Assessment Year 2002-03 till Assessment Year 2013-14. CPK, J & BSS,J W.P.No.16242 of 2022 3 (b) On 01.04.2013, a new partnership firm was constituted in the same name of two partners i.e. deponent herein and one Malladi Gopalakrishna vide partnership dated 01.04.2013. This new firm was at a different place with PAN Number AAMFV0980C. The firm has been filing its returns regularly from the Assessment Year 2015-16. While things stood thus, the petitioner received an e-mail on 12.04.2022, in the name of the firm from the first respondent, which contains three documents (i) Show Cause Notice under Section 148A(b) of the I.T. Act dated 21.03.2022, (ii) an order under Section 148A(d) of I.T. Act dated 01.04.2022 and (iii) a notice under Section 148 of I.T. Act dated 04.04.2022. (c) On verification of the above documents by the deponent, it was found that these notices pertains to Assessment Year 2015-16 and the details sought for in the said notices relates to a firm which was dissolved long back, meaning thereby the details related to a firm with PAN Number AACFV4149H. Since, the above notices and order under Section 148A(d) of the I.T. Act came to be CPK, J & BSS,J W.P.No.16242 of 2022 4 passed in respect of a firm which was dissolved in the year 2001 itself, in spite of intimating the same to the authorities vide number of letters, the present writ petition is filed. 3. A counter came to be filed by the first and second respondents, disputing the averments made in the affidavit filed in support of the writ petition. In Paragraph 2 of the counter, it is stated that as per the information available on NMS Module of Insight Portal, it was found that the assessee has not filed Income Tax Returns for the Assessment Year 2015-16 in spite of having substantial cash deposits in the bank account. Hence, a notice under Section 148 of the I.T. Act was issued. (a) It is further stated in the counter that prior to issuance of such notice, a Show Cause Notice under Clause (b) of Section 148A of the I.T. Act dated 21.03.2022 was issued, calling upon the petitioner to submit his explanation with regard to deposits made in the bank account and as to why a notice under Section 148 of the I.T. Act should not be issued on the basis of the CPK, J & BSS,J W.P.No.16242 of 2022 5 information available with the department. The petitioner was asked to reply on or before 28.03.2022. (b) In so far as, service of notice under Clause (b) of Section 148A of the I.T. Act is concerned, it is categorically stated in the counter that the same could not be served on the assessee by mail, as the e-mail has not been updated by the assessee, which he should have done. It is further stated that a second attempt was made to serve the Show Cause Notice dated 21.03.2022 by Registered Post, but the same was returned with an endorsement that the ‘addressee left’. It is stated that the notice was sent to the address available with the department. It is further stated that since the assessee has not responded to the Show Cause Notice under Clause (b) of Section 148A of the I.T. Act dated 21.03.2022 and since time barring actions are involved as per SOP issued by the CBDT, an order under Clause (d) of Section 148A of the I.T. Act was passed on 01.04.2022. (c) It is further stated in the counter that notice under Section 148 of the I.T. Act dated 04.04.2022 was CPK, J & BSS,J W.P.No.16242 of 2022 6 also issued, but the same could not be served due to non- availability of e-mail address and after ascertaining the e-mail of the assessee, the order under Clause (d) of Section 148A and Section 148 of the I.T. Act was sent by e-mail on 12.04.2022. In Paragraph 6 of the counter, it has been specifically stated that the claim of the petitioner that the Visakha Gas Agency came to be dissolved due to death of one of its partners cannot be accepted for the reason that the PAN Number of the alleged dissolved firm is still being made use and running bank account which has a balance of Rs.Ten Crores. Therefore, the argument of the assesse/petitioner that the authorities erred in issuing/initiating proceedings under Section 148 of the I.T. Act cannot be accepted. In other words, the old PAN is still active as per ITBA records. 4. Sri A. Prabhakara Sarma, learned counsel for the petitioner strenuously contends that no order can be passed against the firm, which is not in existence/dissolved, more so, when intimation about the same was given to the respondents. He further submits CPK, J & BSS,J W.P.No.16242 of 2022 7 that the procedure as required for issuance of notices and order under Section 148A(d) of I.T. Act are not in accordance with law. He further submits to set aside the above mentioned three documents mainly on the ground that the three documents were not received by the petitioner firm and that the address mentioned in the Show Cause Notice relates to old firm and that the same were not sent to the correct address of the petitioner. He further submits that the order under Section 148A(d) of the I.T. Act does not indicate the date of receipt of the Show Cause Notice by the petitioner, which also shows that the alleged Registered Post never reached the petitioner and the order impugned came to be passed without providing an opportunity to the petitioner. 5. Ms. M. Kiranmayee, learned Standing Counsel for the Income Tax, appearing for the respondents would submit that if the partnership firm is dissolved, as contended by the petitioner, proper course for the firm should have been to surrender PAN Number to the concerned authorities, as well, in terms of the judgment of the Hon’ble apex Court in CPK, J & BSS,J W.P.No.16242 of 2022 8 PCIT, Mumbai vs. I-Ven Interactive Limited, Mumbai1. For the aforesaid reasons, it is pleaded that the request of the petitioner cannot be accepted. 6. A perusal of the Show Cause Notice dated 21.03.2022 would show that notice under Clause (b) of Section 148A of the I.T. Act came to be issued as the income chargeable to tax for the Assessment Year 2015-16 has escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961, and as such, the petitioner was asked to Show Cause Notice as to why a notice under Section 148 of the Income Tax Act, 1961 should not be issued. A perusal of the Annexure to the Show Cause Notice dated 21.03.2022 would reveal that in spite of having cash deposits in State Bank of Hyderabad, Murali Nagar Branch and in spite of TDS being deducted under Section 194C of the I.T. Act, the petitioner failed to file Returns of the Income for the year under consideration. 7. Further, the petitioner was given an opportunity of hearing by issuing a Show Cause Notice under Section 1 Civil Appeal No.8132 of 2019 CPK, J & BSS,J W.P.No.16242 of 2022 9 148A(b) of the I.T. Act, requesting the Assessee to submit necessary evidence in support of his claim. It was further stated that if the petitioner fails to submit his explanation, the authority will be constrained to proceed with the proceedings under Section 148(d) of the I.T. Act on the basis of the documents available. It is to be noted here that the said Show Cause Notice was issued in respect of PAN Number AACFV4149H, which according to the petitioner was dissolved in the year 2001 itself and intimated to the authorities itself. (no proof of the same). 8. The document dated 01.04.2022 which relates to order passed under Clause (d) of Section 148A of the Income Tax Act, 1961, discloses transactions made by the petitioner during the Assessment Year. The said order also reveals about the petitioner not submitting any reply to the Show Cause Notice issued. But, as seen from the record, the said account is still in operation and an amount of Rs.Ten Crores is lying in the said account and TDS was also deducted and interest also earned on the said amount. Therefore, it cannot be said that the authorities have CPK, J & BSS,J W.P.No.16242 of 2022 10 proceeded with an account which has been closed long back and that this matter requires adjudication. Having regard to the above, the authorities felt that it is a fit case to issue notice under Section 148 of the I.T. Act to the petitioner. 9. On 04.04.2022, a notice under Section 148 of the I.T. Act came to be issued directing the petitioner to submit his explanation within thirty (30) days from the service of the notice, in a written prescribed form for the Assessment Year 2015-16. As stated earlier, the same came to be challenged mainly on the ground that the authorities could not have issued a notice to a firm, which was dissolved in the year 2001 itself and secondly that before issuing notice, an opportunity should have been given to the petitioner to submit its explanation. 10. In so far as the first plea namely that the notice against a dissolved firm could not have been issued for the assessment year 2015-16, we are not in agreement with the same for the reason that the bank account with old PAN Number AACFV4149H is being operated in State Bank CPK, J & BSS,J W.P.No.16242 of 2022 11 of Hyderabad, Murali Nagar Branch, which relates to alleged dissolved firm. The amount laying in the bank account was said to be around Rs.Ten Crores, in respect of which, TDS was also deducted under Section 194C. That being the position, it is not be proper to say that the authorities erred in issuing the notice. Further, if really the firm was dissolved and the account was not in operation, the deponent ought to have surrendered his PAN Number, which is mandatory. Hence, the first relief sought by the petitioner, is hereby rejected. 11. Coming to the second issue, which relates to service of notice to the petitioner. A perusal of paragraph 3 of the counter affidavit, would show that Show Cause Notice under Clause (b) of Section 148A of the I.T. Act dated 21.03.2022 could not be served on the assessee by e-mail as the latest e-mail of the petitioner was not updated. Similarly, a second attempt was made to serve the Show Cause Notice dated 21.03.2022 by Registered Post, but could not also be served on the petitioner, as it was returned as unserved by the Postal authorities with an CPK, J & BSS,J W.P.No.16242 of 2022 12 endorsement ‘addressee left’. The address in the Show Cause Notice was mentioned as 37-1-3, near I.T.I. Junction, Visakhapatnam, which appears to have been the address mentioned by the petitioner himself in all his earlier communications. 12. In paragraph 4 of the counter affidavit, it is also specifically admitted that a notice under Section 148 of the I.T. Act dated 04.04.2022 also could not be served on the petitioner because of non-availability of e-mail, but however, upon ascertaining the e-mail of the assessee, the order under Clause (d) of Section 148A of the I.T. Act, a notice under Section 148 of the I.T. Act was also sent to the e-mail address of the assessee on 12.04.2022 and the same has been received, which is admitted by the petitioner. 13. From the above averments in the counter, coupled with the provisions of the Act, it is very clear that the petitioner is having an opportunity of explaining his stand, in the proceeding initiated pursuant to the notice under CPK, J & BSS,J W.P.No.16242 of 2022 13 Section 148 of the I.T. Act. In fact no prejudice is caused to the petitioner by the acts of the respondents, if any. 14. Having regard to the above, the petitioner can explain his stand to the authorities by making an application, if not already made, within a period of four (4) weeks from today, more particularly, with regard to the substantial amount lying in the account, with the PAN number AACFV4149H. Accordingly, the writ petition is disposed of. There shall be no order as to costs. Miscellaneous petitions pending, if any, shall stand closed. _______________________________ JUSTICE C.PRAVEEN KUMAR ____________________________ JUSTICE B. SYAMSUNDER Date:12.09.2022 MS CPK, J & BSS,J W.P.No.16242 of 2022 14 THE HON’BLE SRI JUSTICE C.PRAVEEN KUMAR AND THE HON’BLE SRI JUSTICE B. SYAMSUNDER Writ Petition No.16242 of 2022 (per the Hon’ble Sri Justice C. Praveen Kumar) Date:12.09.2022 MS "