The Income Tax Appellate Tribunal (ITAT), Bangalore bench, deleted the assessment order passed under Section 153A of the Income Tax Act, 1961, against a non-existent partnership firm.
The assessee, Trishul Buildtech Infrastructure Pvt. Ltd., was initially a partnership firm. A search and seizure operation under section 132 of the Income-tax Act, 1961, uncovered diaries in the possession of the assessee’s partner’s companies, marked as A/UB/2 of the seized material, detailing cash and cheque transactions.
The Assessing Officer noted that many transactions in the diaries were in cash and not accounted for in the regular books of account. Consequently, the AO framed an assessment under Section 153A of the Income Tax Act. The assessee appealed the decision to the CIT(A), who dismissed it. Subsequently, the assessee filed a second appeal before the Tribunal.
During the proceedings, the assessee’s representative, A. Shankar, argued that the business of the erstwhile partnership firm was taken over by the assessee, M/s. Trishul Buildtech Infrastructure Pvt. Ltd., on 01.02.2010, with all assets and liabilities transferred. The representative contended that the notice and assessment order issued in the name of the non-existent partnership firm were legally flawed and should be quashed.
Dr. G. Manoj Kumar, Counsel for Revenue, argued that, as per Section 170(1) of the Act, if there is a succession in the business of the assessee, the predecessor must be assessed up to the date of succession.
It was observed by the tribunal that assessment orders are framed by the ld. AO against the non-existing entity despite having knowledge of the fact that the partnership firm is fully taken over by M/s. Trishul Buildtech Infrastructure Pvt. Ltd.
Therefore complete failure by the AO to bring on record the successor in interest, so as to pass assessment orders in the name of new entity i.e. Trishul Buildtech Infrastructure Pvt. Ltd.
The two-member bench, consisting of Chandra Poojari (Accountant Member) and Madhumita Roy (Judicial Member), reviewed the facts and records and deleted the assessment order against the non-existent partnership firm under Section 153A of the Income Tax Act, 1961, thereby allowing the appeal of the assessee.
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