By TIOL News Service

AHEMDABAD, SEPT 25, 2017: THE ISSUE BEFORE THIS COURT IS - Whether AO can issue reopening notice to a dissolved firm on ground of non-filing of return, if sizable cash loan transactions as evident from its ledger account, showed existence of such firm during relevant period. YES is the verdict.

Facts of the case:

The present petition had been preferred by one Shri Naresh K. Desai, posing himself to be the ex-partner of one M/s. Vinay Printing Press, a partnership firm. He had challenged a notice issued by the ACIT for reopening the assessment of the partnership firm for A.Y 2010-11. Under such notice, the firm was called upon to file a return within 30 days of the date of receipt of the notice. The Assessee did not comply with this requirement on the ground that Vinay Printing Press had already been dissolved long back and the business of the firm has been taken over by one of the erstwhile partner viz. Shri Nareshbhai Desai. Since the Assessee did not file the return, the department did not supply the reasons recorded for issuing the notice. At this stage, the Assessee approached this Court.

High Court held that,

++ the petition is pressed on a single ground viz. that the partnership firm having been dissolved, the notice for reopening of the assessment is issued to a wrong person. According to the Assessee, the firm was a registered partnership firm and it was dissolved in August, 2007. The counsel for Assessee submitted that this information was already supplied to the department earlier, ignoring which, the AO has issued the impugned notice to a wrong person;

++ at this stage, where the assessment is yet to be carried out, we are not inclined to enter into the disputed questions of facts in a writ petition. The department was not oblivion of the stand of the firm that it was already dissolved and that therefore no longer engages in the same business. This would be clear from the reasons recorded by the AO. Despite which, the AO on the basis of materials on record, noted that TDS was deducted by the payee on the amounts paid or credited in favour of M/s. Vinay Printing Press which would suggest that the said firm was in existence during the period relevant to A.Y 2010-11. He also noted that the ledger account in case of Narayan Sai and Aasaram Bapu showed sizable cash loan transactions with the firm. Such account showed credit and debit of several cash loan transactions running into crores of rupees. Admittedly, since the firm had not filed the return for the said A.Y, the AO issued the impugned notice.

(See 2017-TIOL-1992-HC-AHM-IT)