Section 148A(B) Notice against dissolved firm was not valid: Gujarat HC

Nathalal Hemabhai Patel Vs ITO (Gujarat High Court)

Conclusion: AO had issued the impugned notice under Section 148A(b) in the name of the partnership firm as well as passed the order under Section 148A(d) against the said firm which had already been dissolved, the impugned notice and the order would not be tenable more particularly, when assessee had in reply to the notice issued under Section 148A(b) had drawn the attention of AO about such fact.

Held: Assessee received a notice under Section 148A(a) in name of M/s.Patel Govindbhai Somabhai and Company-a partnership firm having PAN No.AAFFP3449M for Assessment Year 2019-20. Assessee was one of the partner of the said firm till 2016 and thereafter, the partnership firm was converted into proprietorship firm of  assessee. Assessee thereafter issued the notice under Section 148A(b) on the ground that the said firm had withdrawn the cash amount of Rs.2 crore 80 lakhs from the Bank of Baroda on the basis of the annual information received by the insight portal under the category “NMS cases” as per RMS CYCLE-2. Assessee contended that the partnership firm had been dissolved with effect from 31^st March, 2016 and was not in operation from 1^st April, 2016. The Bank of Baroda had committed a mistake by writing wrong PAN as assessee was the sole proprietor of the firm having PAN No.AORPP8404L after dissolution of the partnership firm. It was also pointed out that the Bank mistakenly furnished the information of the firm for the financial year 2018-19 in old PAN No.AAFFP3449M instead of newly updated PAN No. of assessee being proprietor of the firm. Respondent, however, without considering the contention of assessee that the notice under Section 148 was issued on a dissolved firm, passed an order dated 19^th March, 2023 under Section 148A(d) on the ground that income of Rs.2 crore 8 lakhs had escaped assessment. It was held that AO had issued the impugned notice under Section 148A(b) in the name of the partnership firm having PAN No.AAFFP3449M as well as passed the order under Section 148A(d) against the said firm which had already been resolved with effect from 31^st March, 2016. 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 assessee had in reply to the notice issued under Section 148A(b) had drawn the attention of AO about such fact. In view of the settled legal position in case of Maruti Suzuki Limited reported in Commissioner of Income Tax, New Delhi Versus Maruti Suzuki India Limited reported in [2019] 107 taxmann.com 375 (SC), the impugned notice and the order were required to be quashed and set aside.