VITRAAG TRADING,RAJKOT vs. DCIT, CIRCLE-2(1), RAJKOT, RAJKOT

आयकर अपीलीय अिधकरण, राजकोट �यायपीठ, राजकोट। In The Income Tax Appellate Tribunal, Rajkot Bench, Rajkot Before Dr. BRR Kumar, Vice President And Shri Sonjoy Sarma, Judicial Member

आयकर अपील सं./ITA No. 190/RJT/2025 [ �नधा�रण वष�/Assessment Year: 2013-14 ] Vitraag Trading (Dissolved) The DCIT, Circle-2(1), Rajkot Opp. Shalin Chambers, Soni Bazar, Aayakar Bhavan, Race Course Ring Vs. Rajkot-360001, Gujarat Road, Rajkot-360001, Gujarat �थायीलेखासं./जीआइआरसं./PAN/GIR No.: AAIFV6422H (अपीलाथ�/Appellant) (��यथ�/Respondent) Appellant by : Shri Mehul Ranpura, Ld. AR Respondent by : Shri Ram Tiwari, Ld. CIT(DR) Date of Hearing : 29/07/2026 Date of Pronouncement : 07/08/2026

:: ORDER ::

Per, Shri Sonjoy Sarma, JM: Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2013-14, is directed against the order under section 250 of the Income-tax Act, 1961 [hereinafter referred to as ‘the Act’] passed by the National Faceless Appeal Centre [hereinafter referred to as ‘NFAC’], dated 17.01.2025, which in turn arises out of an order passed by assessing officer u/s. 147 read with section 144 of the Act, dated 18.03.2022.

ITA No. 190/RJT/2025 Vitraag Trading (Resolved) received information that the assessee had effected transactions/turnover aggregating to Rs.1,11,37,76,800/- during the Financial Year 2013-14 relevant to the Assessment Year 2014-15. Based on such information, the Assessing Officer formed a belief that income chargeable to tax had escaped assessment and issued a notice under section 148 of the Income-tax Act, 1961 on 27.03.2021. Thereafter, notices were issued calling upon the assessee to furnish the return of income and other details. As there was no compliance, the Assessing Officer completed the assessment ex parte under section 144 read with section 147 of the Act vide order dated 18.03.2022 by estimating the business income at 8% of the alleged turnover of Rs.1,11,37,76,800/- under section 44AD of the Act and assessed the total income at Rs.8,91,02,144/-.

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ITA No. 190/RJT/2025 Vitraag Trading (Resolved) two distinct transactions, but substantially related to the same bank accounts maintained with HDFC Bank by Shri Vishal Bharatbhai Vasa in his capacity as proprietor of M/s. Vitrag Trading. It was further submitted that all such transactions were duly recorded in the books of account and reflected in the audited financial statements of the sole proprietorship concern and that the Assessing Officer proceeded without proper verification of the underlying facts. The assessee also submitted that despite furnishing the deed of dissolution and other explanations during the assessment proceedings, the Assessing Officer disregarded the same and completed the assessment by estimating the profit at 8% of the alleged turnover under section 44AD, resulting in an addition of Rs.8,91,02,144/-. Accordingly, the assessee challenged both the validity of the reassessment proceedings as well as the addition made by the Assessing Officer. However Ld. CIT Appeal dismissed the appeal of the assessee by sustaining the order of the AO.

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ITA No. 190/RJT/2025 Vitraag Trading (Resolved) assessment year for which the partnership firm was liable to file its return of income was A.Y. 2012-13, covering the period from 01.04.2011 to 30.09.2011. Thereafter, with effect from 01.10.2011, the business was carried on by the proprietorship concern of Shri Vishal Bharatbhai Vasa, and the entire income from such date onwards was duly accounted for and offered to tax in the hands of the proprietor. A copy of the Retirement Deed evidencing the conversion was also furnished before the Assessing Officer. The Ld. AR further submitted that the change in the constitution of the firm had already been intimated to the Income-tax Department vide letter dated 11.11.2014, which was duly acknowledged by the jurisdictional Assessing Officer. He further pointed out that, pursuant to summons issued under section 131 dated 26.03.2017 in respect of cash deposits of ₹1,60,50,000 in the Axis Bank account, the assessee, vide reply dated 30.03.2017, specifically informed the Department that the said bank account belonged to the proprietorship concern with effect from 01.10.2011 and that all transactions therein had been duly recorded in the books of account of the proprietor and offered to tax. The Ld. AR further submitted that, upon receipt of the notice issued under section 148 dated 27.03.2021, the assessee again filed a reply on 30.03.2021, categorically stating that the partnership firm was not in existence during the previous year relevant to A.Y. 2013- 14 and, therefore, was not liable to be assessed in the status of a partnership firm. Likewise, in response to the notice issued under section 142(1) dated 26.11.2021, the assessee filed a detailed reply on 13.12.2021, reiterating that the partnership firm had ceased to exist with effect from 01.10.2011 and, therefore, no income was assessable in its hands for the year under consideration. The Ld. AR also submitted that the assessee subsequently filed a further reply dated 23.02.2022, explaining that the Income-tax portal of the erstwhile partnership firm had been activated only for the limited purpose of replying to the notices issued by the Department and that such activation did not imply that the partnership firm continued to exist or was under any

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ITA No. 190/RJT/2025 Vitraag Trading (Resolved) statutory obligation to file a return of income for A.Y. 2013-14. It was also clarified that all banks had been duly informed about the conversion of the partnership firm into a proprietorship concern and that there were no cash deposits made by the partnership firm during the year under consideration, as all banking transactions after 01.10.2011 pertained exclusively to the proprietorship concern. The Ld. AR further drew our attention to the assessment order passed under section 143(3) of the Act for Assessment Year 2012-13 dated 12.11.2014 in the case of present assessee. He submitted that paragraph 4 at page 2 of the said assessment order itself records that the assessee was engaged in the business of trading in gold and silver bullion. It has been categorically mentioned therein that the partnership firm came into existence with effect from 01.04.2011 and continued only up to 30.09.2011, thereafter, with effect from 01.10.2011, the firm stood dissolved and was converted into a proprietorship concern. The Assessing Officer, while completing the assessment for A.Y. 2012-13, had accepted this factual position and framed the assessment only for the period from 01.04.2011 to 30.09.2011, treating it as the last assessment of the partnership firm. The Ld. AR submitted that once the Department itself had accepted, in the assessment order for A.Y. 2012-13, that the partnership firm had ceased to exist with effect from 01.10.2011, the assessee was under no obligation to repeatedly establish the same fact while responding to the proceedings for A.Y. 2013-14. According to him, the Department, having already acknowledged the dissolution of the partnership firm and its conversion into a proprietorship concern, could not subsequently contend that the partnership firm continued to exist for A.Y. 2013-14. The Ld. AR further submitted that after the conversion of the partnership firm, the business was carried on by Shri Vishal Bharatbhai Vasa, Proprietor of Vitraag Trading, who filed his return of income for A.Y. 2013-14 declaring total income of Rs.2,18,340/-. Subsequently, reassessment proceedings in his individual case were also completed under section 147 read with section 144B of the Act vide

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ITA No. 190/RJT/2025 Vitraag Trading (Resolved) order dated 31.03.2022, wherein the total income was assessed at Rs.69,67,99,600/- He pointed out that the Assessing Officer in the proprietor’s case had examined the transactions in HDFC Bank Account Nos. 1018640000089 and 3788630000098, wherein aggregate transactions amounting to Rs.5,57,35,23,400/- were reflected. Thus, all the bank transactions pertaining to the business after 01.10.2011 were duly disclosed by the proprietor and were subjected to assessment in his hands. The Ld. AR further contended that the reasons recorded for reopening merely referred to specified financial transactions and cash deposits without identifying the particular bank account, branch, or the undisclosed transaction allegedly attributable to the partnership firm. The notice under section 148 of the Act merely referred to specified financial transactions aggregating to certain amounts without disclosing the precise material forming the basis of the belief that income had escaped assessment. According to him, such vague reasons do not satisfy the statutory requirement for assumption of jurisdiction under section 147 of the Act, rendering the reopening itself invalid in law. It was further submitted that once the entire business, bank accounts and transactions had already been disclosed by and assessed in the hands of the proprietor, namely Shri Vishal Bharatbhai Vasa, the same transactions could not again be brought to tax in the hands of the erstwhile partnership firm, which had admittedly ceased to exist. He further in order to substantiate his argument placed reliance on the decision of Jurisdictional High Court of Gujarat in the case of Anokhi Realty (P.) Ltd. v. ITO [2023] 153 taxmann.com 275 (Gujarat), where Hon’ble High Court held that where succession to a business takes place otherwise than on death, any notice issued in the name of non-existent entity is void ab initio on the consequential assessment is liable to be quashed. The Ld. AR, therefore, prayed that the addition sustained by the Ld. CIT(A) deserved to be deleted.

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ITA No. 190/RJT/2025 Vitraag Trading (Resolved) 08. We have heard the rival submissions and perused the material available on record. We find considerable merit in the submissions advanced on behalf of the assessee. The assessment for A.Y. 2013-14 has admittedly been framed in the name of the partnership firm. However, the records clearly establish that the partnership firm had ceased to exist on 30.09.2011 and stood converted into a proprietorship concern with effect from 01.10.2011.More importantly, the assessment order passed under section 143(3) for A.Y. 2012-13 dated 12.11.2014, which forms part of the record, categorically records that the partnership firm existed only for the period from 01.04.2011 to 30.09.2011, and that the business thereafter was carried on as a proprietorship concern. Thus, the Department itself had accepted that A.Y. 2012-13 was the last assessment year of the partnership firm. Apart from this, the assessee had also informed the Department vide letter dated 11.11.2014 regarding the conversion of the partnership firm into a proprietorship concern, which was duly acknowledged by the Department. These factual assertions have not been controverted by the Revenue. It is also an undisputed fact that after the conversion, Shri Vishal Bharatbhai Vasa, as proprietor, filed his return of income for A.Y. 2013- 14 disclosing the business transactions, including the bank accounts in question, and the reassessment in his case was completed determining the total income at Rs.69,97,99,600/-. Therefore, the transactions sought to be taxed in the hands of the erstwhile partnership firm already stood disclosed and assessed in the hands of the proprietor. In these circumstances, the Department cannot assess the very same income once again in the hands of a non-existent partnership firm. Such a course would amount to impermissible double taxation. Moreover, the reasons recorded for reopening do not specify the particular bank account or the precise transaction alleged to have escaped assessment in the hands of the partnership firm. The reasons are vague and fail to disclose the foundational material necessary for assuming jurisdiction under section 147 of the Act. Considering the totality of the facts and

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ITA No. 190/RJT/2025 Vitraag Trading (Resolved) circumstances, we hold that the reassessment proceedings initiated against a non- existent entity are unsustainable in law. We respectfully rely on the Jurisdictional High Court’s decision, as in the case of Anokhi Realty (P.) Ltd. v. ITO (supra), holding that a notice issued on a non-existent entity after business succession is void, rendering the consequential assessment unsustainable in law. Consequently, the assessment order passed by the Assessing Officer and sustained by the Ld. CIT(A) cannot be upheld. We, therefore, set aside the order of the Ld. CIT(A) and direct the Assessing Officer to delete the addition.

Order pronounced in the open court on this 7th day of August, 2026.

Sd/- Sd/- [ Dr. BRR Kumar] [ Shri Sonjoy Sarma ] Vice President Judicial Member राजकोट/Rajkot िदनांक/ Date: 07/08/2026 Copy of the order forwarded to : 1. The assessee 2. The Respondent 3. CIT 4. The CIT(A) 5. DR, ITAT, Rajkot 6. Guard File By order //True Copy// Sr. Private Secretary ITAT, Rajkot

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