Notice Issued U/S 148A(B) Of Income Tax Act Against Dissolved Firm Is Not Valid: Gujarat High Court
The Gujarat High Court stated that notice issued under section 148A(b) of the Income Tax Act, 19861 against dissolved firm is not valid. The Division Bench of Justices Bhargav D. Karia and Mauna M. Bhatt was dealing with a case where the Assessing Officer/respondent issued an impugned notice under Section 148A(b) of the Income Tax Act, 1961, in the name of the partnership firm and...
The Gujarat High Court stated that notice issued under section 148A(b) of the Income Tax Act, 19861 against dissolved firm is not valid.
The Division Bench of Justices Bhargav D. Karia and Mauna M. Bhatt was dealing with a case where the Assessing Officer/respondent issued an impugned notice under Section 148A(b) of the Income Tax Act, 1961, in the name of the partnership firm and also passed an order under Section 148A(d) of the Income Tax Act against the same firm, which had already been dissolved.
Section 148A(b) of the Income Tax Act, 1961, provides that the assessing officer must issue a notice to the taxpayer, providing information and adverse material suggesting that income has escaped assessment.
Section 148A(d) of the Income Tax Act, 1961, requires the assessing officer to decide, based on the available material and the taxpayer's response, whether to issue a notice under Section 148.
The assessee submitted that the department could not have passed the order deeming it fit to reopen the assessment, as the entire proceedings were against a dissolved partnership firm. It was further argued that, on the merits, the cash withdrawn was to make payments to farmers by the assessee and could not lead to the escapement of income.
The department submitted that the assessee had not informed them about the dissolution of the partnership firm. Additionally, the assessee failed to respond to the notice issued under Section 148A(a) of the Income Tax Act. Therefore, the department should be permitted to initiate proceedings against the assessee in accordance with the law.
The bench stated that “…….in view of the undisputed fact about the dissolution of firm and the issuance of notice in name of the dissolved firm, the impugned notice and the order would not be tenable more particularly, when the assessee has in reply to the notice issued under Section 148A(b) of the Act has drawn the attention of the Assessing Officer about such fact…….”
In view of the above, the bench allowed the petition and quashed the notice and order.
Counsel for Petitioner/ Assessee: Rushin Patel
Counsel for Respondent/ Department: Kalpana K Raval
Case Title: Nathalal Hemabhai Patel (Proprietor Of M/S Patel Govindbhai Somabhai And Co.) v. Income Tax Officer, Ward 1, Mehsana
Case Number: R/SPECIAL CIVIL APPLICATION NO. 11214 of 2023