Assessment orders issued against non-existent entities are void ab initio, and authorities must respect the legal status of the entities involved.

JUDGMENT :

BHARGAV D. KARIA, J.

1. Heard learned advocate Mr. Mohit R. Balani for the petitioner and learned Senior Standing Counsel Ms. Maithili Mehta for the respondents.

2. Having regard to the controversy arising in the petition which is in narrow compass, with the consent of the learned advocates for the respective parties, the matter is taken up for hearing.

3. Rule returnable forthwith. Learned Senior Standing Counsel Ms. Maithili Mehta waives service of notice of rule on behalf of the respondents.

4. The petitioner M/s. Jay Prabhu Industries LLP, which was formerly a partnership firm known as ‘M/s. Jay Prabhu Cotton Industries’ has challenged the legality of the assessment order dated 28.03.2022 passed under Section 147 read with Section 144B of the INCOME TAX ACT , 1961 (For Short “the Act”) for the Assessment Year 2016-17 in the name of erstwhile partnership firm along with notice issued under Section 148 of the Act dated 27.03.2021 in name of the partnership firm.

5. The brief facts of the case are as under :-

5.1. The petitioner M/s. Jay Prabhu Cotton Industries, LLP was formed on 23.04.2014 on conversion from M/s. Jay Prabhu Cotton Industries a partnership firm as per the provisions of Limited Liability Partnership Act, 2008. The petitioner firm filed the Return of Income for the Assessment Year 2015-16 which was assessed and the assessment order was passed on 08.12.2017 under Section 143(3) of the Act. The petitioner firm received a notice dated 27.03.2021 under Section 148 of the Act issued in the name of erstwhile partnership firm to reopen the assessment for Assessment Year 2016-17.

5.1. The petitioner was provided with the reasons recorded along with the notice dated 28.06.2021 under Section 143(2) of the Act which reveals that the notice for reopening was issued on the ground that the erstwhile partnership firm did not file the Return of Income for the Assessment Year 2016-17 and as per the information available on ITBA/e-filing/ insight portal, it was seen that the transaction made in the bank account of the erstwhile partnership firm does not commensurate with the income profile of the assessee and, therefore, there is an escapement of income of Rs.2,54,53,209/- as the source and nature of import transactions were not disclosed by the erstwhile partnership firm.

5.2. The petitioner filed reply to such notice on 05.07.2021, after receipt of reasons for reopening of the assessment of the erstwhile partnership firm for the Assessment Year 2016-17 informing the respondent Assessing Officer that since 23.04.2014 the petitioner firm is registered under the Limited Liability Partnership Act, 2008 and certificate of registration on conversion was also issued by the Registrar of Companies in Form-19 under Rule 32(1) of the LLP Rules, 2009. The petitioner also provided the copy of certificate along with the reply. The petitioner also disclosed in the reply that the petitioner had filed all the Returns of Income for the new PAN issued to the petitioner LLP firm and for Assessment Year 2016-17 and the Return of Income was filed on 21.09.2016. The petitioner also submitted all the details of the Trading Account, Profit and Loss Account, Capital Account, Balance Sheet for the Assessment Year 2016- 17 along with the copies of all Bank Accounts and bills of entries filed during the year.

5.3. It was also pointed out that the petitioner had mentioned the PAN of LLP firm in all bills of entries and same are correctly reported in books of accounts. The petitioner therefore, requested that no assessment can be made in the hands of erstwhile partners which has ceased to exist with effect from 23.04.2014. The petitioner also contended that the petitioner has disclosed all the transactions in the books of accounts of LLP firm and, therefore, there cannot be any addition of income and the petitioner has filed Return of Income disclosing all the transactions. The petitioner also requested for opportunity of hearing through video conferenc