2019 (2) TMI 2073 - AT - Income Tax

Tribunal rules in favor of LLP in lack of notice case under Income-tax Act

M/s. Brolly Dealcom LLP (formerly M/s. Brolly Dealcom Pvt. Ltd.) Versus Income-tax Officer, Wd-5 (4), Kolkata

The Tribunal found a violation of natural justice as the LLP, the successor-in-interest, was not given an opportunity to be heard before the order under ... Revision u/s 263 - assessee's status converted from a private Limited Company to LLP - notice to [dissolved company] - whether there is violation of the principles of natural justice qua the LLP which is the Successor-in-Interest of the M/s. Brolly Dealcom Pvt. Ltd. before the Ld. Pr. CIT passed the order u/s. 263 of the Act - whether service was made in the manner as provided under the Code of Civil Procedure, 1908 - whether the LLP was served with a notice of sec. 263 proceedings or made aware of the said proceedings or is it feigning ignorance of the said proceedings before the Pr. CIT. This is what we have to find out as directed by the Hon'ble High Court - HELD THAT:- The scribbling on the Photostat with the incomplete address, wherein the Room No. 24, 3rd floor was not mentioned in the address of Princep Street and the fact that there was no tear off acknowledgment slip for the delivery if any of the notice at Princep address cumulatively goes on to show that no notice was delivered to the proper address at prince street; And we note that the first tear off acknowledgement is blank except seal and dated 20.03.2013 with no name or signature or address and second tear off is only at the most evidences collection of the impugned order after passing of the said order and not before that; and likewise Power of Attorney to Chartered Accountants were after the passing of the impugned order and thus and both the tear off acknowledgement slips and Power of Attorney to Chartered Accountants shown to us from the file of Pr. CIT in no way advance the case of the revenue to show that notice of the proceedings u/s. 263 of the Act is conveyed to the successor-in- interest the LLP at the proper address of the dissolved company/LLP at prince street. Thus no notice of the sec. 263 proceeding has been brought to the knowledge of the assessee [dissolved company] at its last proper address of the dissolved company at prince street thereby it could have been said that successor-in-interest LLP had knowledge about the proceedings going on before the ld Pr CIT u/s 263 of the Act or before the impugned order was passed by the Ld. Pr. CIT u/s. 263. Despite department knowing the last proper address of dissolved company at Princep street no notice was issued to its proper address or successor-in-interest LLP and, therefore, no opportunity of hearing was given to the assessee before passing the order u/s. 263 - So since there was denial of reasonable opportunity of hearing to assessee there is a violation of natural justice and, therefore, the impugned order of the Ld. CIT u/s. 263 of the Act is held to be fragile for violation of natural justice as held in CIT vs Amitabh Bachan [2016 (5) TMI 493 - SUPREME COURT] - Appeal of assessee is allowed. Issues Involved:1. Whether the order passed under Section 263 of the Income-tax Act, 1961, violated the principles of natural justice due to lack of proper notice to the successor-in-interest LLP.Detailed Analysis:Issue 1: Violation of Natural Justice Due to Lack of Proper NoticeBackground and Procedural History:- The appeal was against the order passed by the Ld. CIT-II, Kolkata under Section 263 of the Income-tax Act, 1961 for AY 2008-09.- This was the second round of litigation. Initially, the Tribunal dismissed the appeal without addressing the specific ground raised by the assessee, an LLP which succeeded the dissolved Private Limited Company.- The assessee contended that it was not given an opportunity to be heard by the Ld. Pr. CIT during the proceedings under Section 263, thus violating the principles of natural justice.- The Hon'ble High Court remanded the matter back to the Tribunal to specifically decide whether there was a violation of natural justice.Findings:- The Tribunal noted that the first show cause notice was issued to the erstwhile Private Limited Company’s address, not to the LLP’s address at Princep Street.- The LLP had informed the AO about the change in status and address on 16.04.2012, but the notice for Section 263 proceedings was not sent to the updated address.- The Tribunal examined the Commissioner’s file and found that the notices were sent to the old addresses and not to the LLP’s address at Princep Street.Evidence Analysis:- The Tribunal scrutinized the 'tear off acknowledgment slips' presented by the Revenue. The first slip was blank except for a seal and date, and the second slip evidenced collection of the impugned order after it was passed, not before.- Affidavits from the ex-director of the dissolved company and a partner of the LLP stated that no notice was served to the LLP at its Princep Street address.- The Tribunal found that the Revenue did not controvert the statements made in the affidavits.Legal Provisions and Case Laws:- Section 282 of the Income-tax Act and Order 29 Rule 2 of the Code of Civil Procedure require proper service of notice.- The Tribunal cited several case laws emphasizing the necessity of proper notice and opportunity of hearing, including:- Sona Builders vs Union of India (251 ITR 197)- Ramendra Nath Ghosh vs CIT (66 ITR 414)- Kiran Machines vs ITO (203 CTR)- CIT vs Dr. Ajay Prakash (226 Taxman 71)- Green Power Realtors Pvt. Ltd. vs DCIT (216 Taxman 169)- CIT vs Rajesh Kumar Sharma (311 Taxman 235)- Prahalad Moharana vs ACIT (69 taxmann.com 354)- Shri Chetan Gupta vs ACIT (144 ITD 344)- Banwarilal Bhartiya vs ITO (4 SOT 311)- Rajan Chopra vs DDIT (165 ITD 361)Conclusion:- The Tribunal concluded that there was a clear violation of the principles of natural justice as the LLP was not given an opportunity to be heard before the order under Section 263 was passed.- The order dated March 28, 2013, passed under Section 263 was held to be bad in law due to the lack of proper notice and opportunity of hearing to the successor-in-interest LLP.- The appeal of the assessee was allowed.Result:- The appeal of the assessee was allowed, and the impugned order under Section 263 was set aside due to the violation of natural justice.