2016 (10) TMI 847 - AT - Income Tax

Partnership Firm Dissolved: Notice u/s 153A Invalid

ACIT Cent. Circle 15, New Delhi Versus Balaji Perfumes

The Tribunal dismissed the appeals, upholding the CIT(A)'s decision that no valid notice u/s 153A of the Income Tax Act, 1961 was issued. The Tribunal ... Validity of assessment u/s 153A - follow of procedures - Held that:- Assessing Officer has not followed the procedure while following the incorrect provisions of law under Section 153A of the Act which is not applicable in the assessee’s case as the assessee was not in existence at the relevant time. As per Section 153A of the Act, assessment u/s 153A of the Act can be completed only in the case of such person where the warrant u/s 132 of the Act has been executed as held by Hon’ble Punjab and Haryana High Court in case of CIT vs. Ram Singh (2013 (3) TMI 177 - PUNJAB & HARYANA HIGH COURT). The Hon’ble High Court held that An illegal is no search and as necessary corollary in such a case, Chapter XIV-B would have no application. As regards the mention of the individual in the notice cannot be taken as mistake and the mistake is not curable u/s 292BB or 292B as Section 292BB of the Act is applicable from A.Y. 2008-09. The participation in the assessment will not be treated as estoppel against the law established. As held in case of CIT Vs. Spice Infotainment Ltd. (2011 (8) TMI 544 - DELHI HIGH COURT ) consent cannot confer jurisdiction. It is pertinent to note that CIT(A) has taken into account all the aspects about the proceedings conducted u/s 153A of the Act. Then he has also given the finding in respect of how the proceedings were conducted in assessee’s case. The CIT(A) allowed all the five grounds of the assessee company while holding that no valid notice u/s 153A of the Act was issued. Thus, the CIT(A) is right in allowing the appeals of the assessee. Issues:Validity of notice u/s 153A of the Income Tax Act, 1961.Analysis:The appeals were filed by the Revenue challenging the order passed by CIT(A)-II New Delhi. The main ground in all the appeals was regarding the validity of the notice issued u/s 153A of the Income Tax Act, 1961. A search & seizure action was conducted at the business premises of a group involved in manufacturing and trading of Gutka. The group was managed by three brothers through different firms. The Assessing Officer issued a notice u/s 153A on 12/11/2007, and the assessee submitted a photocopy of the return of income. However, the validity of the 153A proceedings was questioned only during the appellate proceedings.Before the CIT(A), the assessee contended that the proceedings under 153A were not valid in their case. The CIT(A) held that the proceedings initiated by the Assessing Officer for passing an order u/s 143(3) read with Section 153A were not valid and allowed the appeal of the assessee. The Revenue argued that the dissolution of the firm was not communicated, and until the authorities were informed, they would proceed as usual. The assessee, on the other hand, pointed out that the individual had already been given notice, and the same wording was used in the notice issued to the firm.The Tribunal analyzed the situation and found that the partnership firm in question was dissolved, making it a non-existent entity. It emphasized that a search warrant cannot be executed on a person who does not exist. Referring to legal precedents, the Tribunal concluded that the Assessing Officer did not follow the correct procedure under Section 153A of the Act, which was not applicable in the assessee's case as they were not in existence at the relevant time. The Tribunal also highlighted that the mention of the individual in the notice could not be considered a mistake, and participation in the assessment would not create an estoppel against established law.In conclusion, the Tribunal dismissed the appeals, upholding the CIT(A)'s decision that no valid notice u/s 153A of the Act was issued. The judgment was delivered on 19th October 2016 by the ITAT Delhi Bench, comprising Vice President Shri G. D. Agrawal and Judicial Member Smt Suchitra Kamble.