SHREE DEOT SIDH ENTERPRISES,MANDI GOBINDGARH vs. INCOME TAX OFFICER, WARD-1, GOBINDGARH , GOBINDGARH

That the Ld. Commissioner of Income Tax (Appeals) has erred in holding that the appeal is not maintainable which is wholly erroneous, perverse, and contrary to the settled law, as the C1T(A) failed to appreciate the undisputed dissolution of the firm on 31.03.2013 and wrongly presumed that the continued existence of a bank account under the old PAN conferred legal existence on the firm; the appeal from an assessment framed on a non- existent entity is fully maintainable and as such the order passed is arbitrary and unjustified

The impugned assessment order dated 18.12.2019 passed under section 144 in the name of Shree Deot Sidh Enterprises is void ab initio, unlawful and liable to be quashed, as the partnership firm had already stood dissolved on 31.03.2013 and no assessment can be framed on a non-existent assessee the appeal is being signed and filed by the erstwhile partner competent to do so.

The assessment proceedings are further invalid as no statutory notices under section 142(1) OR show-cause notices were ever served upon the appellant OR upon any surviving erstwhile partner after dissolution, rendering the ex-parte assessment contrary to law and in violation of natural justice.

The authorities below erred in treating cash deposits of Rs. 13,60,000 as unexplained money under section 69A and in subjecting the same to tax under section 115BBE, ignoring the fact that the bank account continued to be used post-dissolution by the erstwhile partner in the course of the proprietary business and the transactions stand fully recorded in the books.

The estimation of income at the rate of 2 percent amounting to Rs. 1,04,228/- on bank credits totalling Rs.52,11,385/- is arbitrary and devoid of any material establishing that such credits represent unrecorded turnover OR undisclosed business activity of the dissolved firm,

The Ld. Commissioner of Income Tax (Appeals) erred in upholding the assessment without appreciating that the return of income for Assessment Year 2017-18 had already been filed on J9.03.2018 under the PAN of the proprietor (post-dissolution), wherein the same bank account and entries were duly reflected, and hence the impugned additions lack factual OR legal foundation.

The authorities below failed to appreciate that continuation of the old PAN In the bank account owing to inadvertence cannot empower the Department lo assess a non-existent entity, nor can such clerical omission justify juri ictional defects in the assessment.

Briefly stated, the facts of the case are that the assessee concern was subjected to assessment proceedings on the ITA-1815/CHD/2025 A.Y. 2017-18 3 basis of information available with the department that substantial cash deposits amounting to Rs.11,10,000/- were made during the demonetization period and further cash deposits of Rs.2,50,000/- were made during pre and post demonetization period in bank account maintained with HDFC Bank. The Assessing Officer further noticed credit entries through RTGS/NEFT aggregating to Rs.52,11,385/- in the same bank account. Since no return of income was filed by the assessee firm for the year under consideration, notice u/s 142(1) was issued requiring the assessee to file return of income and explain the nature and source of the aforesaid transactions. However, according to the Assessing Officer, there was no compliance on the part of the assessee and therefore proceedings u/s 144 were initiated. The AO also obtained bank statement by invoking provisions of section 133(6) of the Act.

The Assessing Officer observed that despite the issuance of show cause notices and the opportunity provided to explain the source of cash deposits and bank credits, the assessee failed to furnish any explanation or supporting evidence. Accordingly, the AO treated cash deposits of Rs.13,60,000/- as unexplained money u/s 69A read with section 115BBE of the Act. The AO further held that credit

Aggrieved against the assessment order, the assessee preferred appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee submitted that originally the concern was a partnership firm constituted by two partners namely Shri Sachin Singla and Ms. Mansi and subsequently on retirement of one partner on 31.03.2013, the concern became proprietary concern of Shri Sachin Singla. It was contended that after change in constitution, returns were being filed in the PAN of proprietor Shri Sachin Singla and not in the PAN of the erstwhile partnership firm. It was further contended that notices issued by the AO were never properly served upon the assessee because the partnership concern had ceased to exist. The assessee also contended that the return of income for the year under consideration had already been filed in the individual PAN of Shri Sachin Singla and all transactions including cash deposits stood duly recorded in the books of account.

The Ld. CIT(A), however, was not convinced with the ITA-1815/CHD/2025 A.Y. 2017-18 5 submissions of the assessee. The Ld. CIT(A) observed that the bank account continued to remain in the name and PAN of the partnership firm and no evidence was produced to establish that the PAN of the firm was ever surrendered or that the juri ictional Assessing Officer was informed regarding dissolution of the firm. The Ld. CIT(A) further observed that the assessee had continued to operate the bank account in the PAN of the firm even several years after the alleged dissolution and therefore the claim that the transactions belonged to proprietary concern of Shri Sachin Singla was not substantiated. The Ld. CIT(A), therefore, upheld the additions made by the AO and dismissed the appeal of the assessee.

Feeling aggrieved by the order passed by the ld. CIT(Appeals), the assessee is in appeal before us on the grounds stated hereinabove.

During the course of hearing before us, the Ld. AR reiterated the submissions made before the lower authorities and submitted that the assessment was completed ex parte without affording a proper opportunity to the assessee. It was submitted that the assessee concern had undergone a change in constitution, and the business was thereafter carried on as a proprietary concern of Shri Sachin Singla. The Ld. AR

Per contra, the Ld. DR strongly relied upon the orders of the lower authorities and submitted that, despite repeated opportunities, the assessee failed to appear before the Assessing Officer and failed to furnish any explanation regarding the cash deposits and bank credits. It was submitted that even before the Ld. CIT(A), no cogent documentary evidence was produced to establish that the transactions pertained to Shri Sachin Singla individually and not to the assessee firm. The Ld. DR accordingly supported the orders passed by the authorities below.

We have heard the rival submissions and perused the material available on record. It is an admitted position that the assessment in the present case has been framed ex parte

We further notice that the additions made by the Assessing Officer are primarily on account of cash deposits during demonetization period and credit entries appearing in the bank account. The assessee has now contended before us that the complete books of account, cash book, bank statements and return of income of Shri Sachin Singla are available and can substantiate the source and nature of the impugned transactions. In our considered opinion, the issue requires proper factual verification by the Assessing Officer. The principles of natural justice require that one effective opportunity be granted to the assessee to place complete evidences on record.

Considering the entirety of facts and circumstances of the case, in the interest of substantial justice, we deem it ITA-1815/CHD/2025 A.Y. 2017-18 8 appropriate to set aside the impugned order of the Ld. CIT(A) and restore the matter back to the file of the Assessing Officer for denovo adjudication. The assessee is directed to furnish complete books of account, bank statements, return of income of Shri Sachin Singla, dissolution/retirement deed, reconciliation of bank transactions and all supporting evidences explaining the cash deposits and credit entries. The Assessing Officer shall examine the same and decide the issue afresh in accordance with law after affording adequate opportunity of being heard to the assessee.

The assessee is also directed to fully cooperate in the remand proceedings and shall not seek unnecessary adjournments. In case the assessee fails to comply with notices or fails to furnish requisite evidences, the Assessing Officer shall be at liberty to decide the matter on the basis of material available on record. However, such restoration is made subject to the condition that the assessee shall either deposit a cost of Rs.5,000/- in the Poor Patients Welfare Fund of PGIMER, Chandigarh or alternatively undertake plantation of 50 saplings/trees through the local Forest Department/Municipal Authority and furnish compliance thereof before the Assessing Officer. The assessee shall fully cooperate in the remand proceedings and shall not ITA-1815/CHD/2025 A.Y. 2017-18 9 seek unnecessary adjournments, failing which the Assessing Officer shall be at liberty to decide the matter on the basis of material available on record. Accordingly, the appeal of the assessee is allowed for statistical purposes..

In the result, the appeal of the assessee is allowed for statistical purposes.

CHANDIGARH गाड" फाईल/ Guard File 5.