TaxTMI 
TaxTMI 
2024 (10) TMI 1826
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....the proceedings 263 cannot be initiated against an intimation/order u/s 143(1a) of the Act." 3. The facts of the case are that the assessee is a Limited Liability Partnership Firm (in short, 'LLP'). The date of incorporation of LLP was 22.06.2016. The LLP agreement was entered into by three partners namely, Mr. Pratapsingh Ranjitsing Rajput, Mr. Shailendrasingh Pratapsingh Rajput and Mrs. Shwetasingh S. Rajput. M/s Shree Nilkanth Quaryy Works (partnership firm) was converted into LLP on 04.07.2016. The firm had filed its return of income for AY.2015-16 on 30.09.2015 declaring total income of Rs.57,43,190/-. Subsequently, information was received by the AO from the ADIT (Inv.), Unit-1(2), Ahmedabad that the above firm had transactions of Rs.1,55,55,450/- with M/s Maruti Enterprises, which was providing accommodation entries during the year under consideration. As the partnership firm was converted into LLP with the same name with all assets and liabilities of the erstwhile firm with a new PAN, proceeding u/s 147 of the Act was initiated against the assessee LLP with prior approval of the competent authority u/s 151 of the Act. In response thereto, the assessee submitted t....
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.... was received by assessee from the bank account of M/s Maruti Enterprises. However, the AO has not called for the bank account of assessee and has also not issued notice u/s 133(6) of the Act to the bank and obtained various details along with KYC. The AO has simply accepted the contention of assessee that LLP was not in existence during the relevant time and it had not received any accommodation entry. The acceptance of the submission of assessee by AO without proper enquiry has rendered the order erroneous as well as prejudicial to the interests of revenue. Thereafter, the Ld. PCIT has extracted provisions of section 263 and relied on various decisions of Hon'ble Courts and held that the order passed u/s 144 r.w.s. 147 of the Act was erroneous insofar as prejudicial to the interests of revenue. He set aside the assessment order and directed to AO to call for the bank account of the assessee and verify the alleged accommodation entry taken by assessee. He also directed AO to obtain bank account of M/s Maruti Enterprises and verify when the accommodation entry of Rs.1,55,55,450/- was given to the assessee. The Ld. PCIT accordingly set aside the assessment order with a direction....
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....e Ld. AR further submitted that invalid assessment cannot be revised u/s 263 of the Act. He stated that no notice u/s 143(2) was issued by AO. There was neither any show cause notice nor draft assessment order, which is mandatory requirement u/s 144B of the Act. Since no assessment order was there, the same cannot be revised [Enviro Control Pvt. Ltd. vs. NeAC, CA No.7370 of 2021, dated 29.03.2022 (Guj. HC)]. 4.2 The Ld. AR further submitted that even if the order is valid for any reason, the AO has taken a possible view because manual assessment was not permissible in view of newly introduced section 144B(2) r.w.s. 144B(8) of the Act. He submitted that even though the assessment order passed is worded as passed u/s 144 r.w.s. 147, in fact there is no assessment order. 4.3 The Ld. AR further submitted that before holding the order of AO as erroneous and prejudicial to revenue, the Ld. PCIT should have conducted minimum enquiry because the AO did not undertake any enquiry. If the Ld. PCIT does not conduct the basic exercise, then he is not justified in setting aside the order of AO (Shree Narayan Tatu vs. ITO, in ITA No.2690/Mum/2016, dated 06.05.2016). The Ld. AR also submitte....
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....t revision u/s 263 is invalid because reopening of assessment as well as subsequent assessment order are unsustainable in law. Since jurisdictional issue has been raised, it would be proper to discuss and decide the same before proceeding to decide the issue on merit. The Ld. AR submitted that proceedings u/s 263 of the Act is invalid because reopening and completion of assessment u/s 147 r.w.s. 144 & 144B of the Act are not valid. He submitted that original assessment order passed by AO is invalid and void ab initio as it was passed upon a non-existing entity. The assessee LLP came into existence w.e.f 22.06.2016, which was after AY.2015-16. Therefore, revisionary jurisdiction u/s 263 cannot be exercised against such an order. The Ld. AR further submitted that no approval u/s 151 was obtained to issue notice u/s 148. The assessment is also not valid because no notice u/s 143(2) was issued. 7.1 It would be proper to discussed briefly the background of the case before deciding the jurisdictional issue. The assessee LLP, Shree Nilkanth Quarry Works LLP (PAN - AADFS1455J) was incorporated on 22.06.2016. Hence, it could not have filed return of income for AY.2015-16. However, Shree ....
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....e LLP. Any order or judgment either in favour or against the firm may also be enforced against the LLP. All existing contracts and agreements in which the firm was a party shall continue to be enforced with the LLP as the party. Every existing appointment of the firm or authority conferred on the firm shall be as if it were conferred upon the LLP. 7.3 It is clear from the scheme of the things in respect of conversion of partnership firm into LLP that in effect and substance, the partnership firm ceases to exist after conversion of the firm into LLP. All liabilities which otherwise would have been discharged by the erstwhile firm would have to be discharged by the newly incorporated LLP. Since the partnership firm lost its existence upon its conversion into LLP, the AO could not have issued any notice in the name of the non-existing firm, which no longer was a "person u/s 2(31) of the Act. Therefore, the AO has rightly issued notice u/s 148 on the LLP because all assets and liabilities were taken over by the LLP. The Hon'ble Supreme Court in case of PCIT vs. Maruti Suzuki India Ltd., 416 ITR 613 (SC) has held that where assessee company was amalgamated with another company an....
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....IU-IND in case of Chiragkumar B. Patel and Ors., in STR No.10265868, was also received by AO. The factum of transactions of Rs.1,55,55,450/- with Maruti Enterprises was mentioned in the said report. M/s Maruti Enterprise was providing accommodation entries during the year under consideration. Hence, the AO had credible information regarding escapement of income which necessitated action u/s 147 of the Act. It has been held in a number of cases that there should be prima facie reason at the initial stage of reopening. The sufficiency or correctness of the reason cannot be examined at the threshold. The conclusion or conclusive establishment of escaped income is not required while drawing satisfaction regarding reopening of the assessment. Useful reference may be made to the decision of the Hon'ble Supreme Court in case of Raymond Woollen Mills Ltd. vs Income-Tax Officer and Ors., 236 ITR 34 (SC), wherein it was held as under: "3. In this case, we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not. We have only to see whether there was prima facie some material on the basis of which the Department could reopen....
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....e applicable to the facts of the present appeal. We have gone through the reasons recorded by the Assessing Officer and having gone through the entire gamut of facts and circumstances, we are of considered opinion that not only there existed new information with the Assessing Officer from the credible sources, but also that he has applied his mind that what was disclosed in the return of income was not true. We have only to see whether there was prima facie same material on the basis of which Assessing Officer could reopen the case. Such condition is eminently visible in the present case, as the assessee had transactions worth Rs.1,55,55,450/- with an established accommodation entry provider, namely, M/s Maruti Enterprise. Therefore, argument of Ld.AR that reassessment proceeding was not valid is not acceptable. There was prima facie some material based on which AO reopened the assessment. The decision of Hon'ble Supreme Court in case of Raymond Woollen Mills Ltd. (supra) and Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra) supported the action of the AO. Hence, the argument of the Ld. AR is not tenable and the same is rejected. 10. The next issue raised by the Ld. AR is that ....
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.... The requirement of notice u/s 143(2) cannot be dispensed with. The Hon'ble Patna High Court in case of CIT vs. Nagendra Prasad, (2023) 156 taxmann.com 19 (Pat.) held that where notice was issued by AO u/s 148 requiring assessee to file a return within thirty days but return was filed after eight and a half months, since return was filed by assessee in response to said notice through delayed, there should have been a notice issued u/s 143(2) as requirement to issue notice could not be dispenses with. The appeal of the revenue was dismissed. Following the above decisions, we hold that the reassessment order u/s 147 of the Act is null and void in absence notice u/s 143(2) of the Act. 12. Since the impugned order of the AO has been held to be invalid, the question that arises is whether the action of the Ld. PCIT u/s 263 of the Act could be sustained. The Ld. AR has argued that proceedings u/s 263 of the Act is invalid because reopening u/s 147 as well as subsequent assessment order is unsustainable in law. We have upheld validity of the reopening but held that the order passed u/s 147 r.w.s. 144 & 144B of the Act is unsustainable. Since the order u/s 147 of the Act itself, is ....