AGRA SHINE FOOTWEAR,AGRA vs. ITO, WARD-2(1)(1), AGRA

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA (DB) BENCH, AGRA BEFORE : SHRI M BALAGANESH, ACCOUNTANT MEMBER AND SHRI SUNIL KUMAR SINGH, JUDICIAL MEMBER ITA No. 260 & 261/Agr/2026 Assessment Year: 2017-18 Agra Shine Footwear, D-56, Vs. ITO, Ward-2(1)(1), Aayakar Ansal Twon, Shamshabad Road, Bhawan, Agra-282002 Agra-282001 PAN : AAYFA1190M (Appellant) (Respondent) Assessee by Shri Anurag Sinha, Adv Department by Shri Anil Kumar, Sr (DR) Date of hearing 19.05.2026 Date of pronouncement 05.06.2026 ORDER PER: SUNIL KUMAR SINGH, J.M.

The facts and issues involved in both these appeals are almost identical, hence, for the sake of convenience and brevity, these appeals are being decided by this common order. The facts of ITA No. 260/Agr/2026 are only being narrated hereunder:- ITA No. 260/Agr/2026 2. This appeal is directed against the impugned order dated 13.01.2026 passed in appeal No NFAC/2016-17/10386788 by the ld. Commissioner of Income Tax (NFAC), Delhi (hereinafter referred to as the “CIT(A) u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2017-18, wherein ld CIT(A) has dismissed assessee’s first appeal.

ITA No.260&261/Agr/2026 3. The brief facts state that the assessee as partnership firm (according to the assessing officer) did not file return of income for A.Y. 2017-18. There was an information available with the revenue that the assessee had entered into transaction of cash deposit of Rs. 1,51,01,510/- in the bank account no. 31590200000490 maintained with the Bank of Baroda, Agra. Statutory notice u/s 142(1) of the Act was issued during the assessment proceedings with the observation that the assessee was a partnership firm and the source of the said cash deposit was unexplained. The assessee remained totally non compliant during the assessment proceedings. The assessment was, thus, completed u/s 147 r.w.s 144 r.w.s. 144B of the Act, vide assessment order dated 29.03.2022, making an addition of the aforesaid amount in the total income of the assessee u/s 69A of the Act. Penalty proceedings u/s 271AAC(1) of the Act, were also initiated separately. 4. Aggrieved, assessee preferred an appeal before ld CIT(A), who dismissed assessee’s appeal and sustained the assessment order. 5. Assessee has raised following grounds under this second appeal: “1. BECAUSE the purported "reasons to believe" are no reasons in the eyes of law, being vague, mechanical and devoid of any intelligible nexus between the alleged transactions and the income chargeable to tax said to have escaped assessment. 2. BECAUSE the very foundation of the reopening is factually erroneous inasmuch as the alleged escapement has been premised on cash deposits of Rs. 1,51,01,510/- in Bank Account No. 31590200000490 maintained with Bank of Baroda, whereas in fact no such cash deposits to that extent were made and the transactions were purely bank transfers, thereby clearly evidencing complete

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ITA No.260&261/Agr/2026 non-application of mind by the authority recording the reasons, rendering the impugned reassessment proceedings under Section 148 liable to be quashed. 3. BECAUSE, the sanction as was mandatorily required to be accorded by the Pr. Commissioner of Income Tax under section 151 of the Act before issuing Notice under section 148 of the Act was though accorded by the Pr. Commissioner of Income Tax but without application of mind in a mechanical manner, leading the Notice issued under section 148 of the Act to be held without jurisdiction and consequent assessment order passed in pursuance of such an invalid Notice to be held as void-ab-intio. WITHOUT PREJUDICE TO THE ABOVE 4. BECAUSE, the authorities below were highly unjustified in making and sustaining addition of Rs.1,51,01,510/- ignoring the facts and circumstances of the case and material evidences. 5. BECAUSE, the Ld. CIT(A) has erred both in law and on facts in holding that the appellant failed to furnish evidence regarding dissolution of the partnership firm, without properly appreciating the documentary evidences placed on record during appellate proceedings, including the Trading & Profit & Loss Account of the Firm up to the date of dissolution, and the subsequent financial statements of Shri Amit Shrivastava reflecting continuation of the same business in proprietary capacity. 6. BECAUSE, the Ld. CIT(A) erred in not appreciating that the Partnership Firm was dissolved on 20.08.2015 and the business as a whole was taken over by Partner Shri Amit Srivastava (PAN: CDNPS4448C) including Bank account No. 31590200000490 under question maintained with Bank of Baroda, Fatehabad Road, Agra. 7. BECAUSE, all the transactions in Bank Account have been regularly accounted by Shri Amit Srivastava in his Audited Books of Accounts and he had declared this bank account and transactions therein in his Income Tax Return for A.Y. 2017-18. 8. BECAUSE, the Ld. CIT(A) has further erred in disregarding relevant supporting documents such as bank correspondence for change of PAN, cheque issued in the name of the proprietor and bank statements, which collectively establish that the business along with the bank account was taken over by Shri Amit Srivastava upon dissolution of the Firm. 9. BECAUSE, the provisions of section 115BBE of the Act cannot be invoked in view of the judgement of Hon'ble Madras High Court in the case of S.M.I.L.E. Microfinance Ltd. Vs. ACIT, 2024 (11) TMI 1444 Madras High Court as followed by the Hon'ble ITAT, Agra Bench in the case of Sh. Pankaj Kumar Vs. ITO in ITA No. 219/Agra/2023 dated 04.02.2025. 10. BECAUSE, order of the Ld. CIT(A) is bad in law, against facts, and liable to be quashed.

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ITA No.260&261/Agr/2026 The appellant craves leave to add, amend, alter or withdraw any ground of appeal at or before the time of hearing.” 6. Perused the records. Heard ld representative for the appellant assessee and ld Sr (DR) for the respondent revenue. 7. At the very outset, Ld AR has submitted that in the instant case, the assessment proceedings were initiated against a ‘non existent entity’ by treating the assessee as partnership firm, which was dissolved on 20.08.2015 and the business was taken over by partner Shri. Amit Srivastava (PAN: CDNPS4448C) including bank account no. 31590200000490 maintained with Bank of Baroda, as a sole proprietory firm. Ld AR, thus, pressed to decide this legal issue first. We acceed to the request of ld AR and proceed to determine as to whether the notice u/s 148 of the Act was issued against the non-existing entity, if yes, whether assessment order passed in consequence thereof is bad in law? 8. Ld AR has submitted that the reopening of the assessment in the name of M/s Agra Shine Footwear (partnership firm having PAN- AAYFA1190M) is void ab initio as the said firm had already been dissolved on 20.08.2015 during F.Y. 2015-16 pertaining to A.Y. 2016-17 and thus ceased to exist in the eye of law, much prior to the issuance of notice u/s 148 of the Act, dated 22.03.2021. The entire assessment proceeding and the ex-parte assessment order passed u/s 144 of the Act, against the ‘non existent entity vitiates, being void ab initio. Ld AR has referred PCIT v. Maruti Suzuki (India) Ltd. (2019) 416 ITR 613 (SC)/ AIR ONLINE 2019 SC 4 | P a g e

ITA No.260&261/Agr/2026 714 and Rajinder Nath Kapoor vs. ITO [2023 (6) TMI 821] (Del H.C.), in support of his arguments. 9. Ld Sr DR for the respondent revenue has submitted that the assessee did not make representation during the assessment proceedings at all. Ld Sr DR further submits that the assessee also failed to file any documentary evidence before ld CIT(A), in respect of the said dissolution of the partnership firm, thus, supports the impugned order. 10. We notice that the assessment proceedings were completed ex-parte as best judgement assessment u/s 144 of the Act. The perusal of impugned order shows that the assessee submitted before ld CIT(A), that the appellant firm was a partnership firm, which was dissolved on 20.08.2015 and its last income tax return for A.Y. 2016-17 was filed on 16.10.2016 vide acknowledgement no. 505042371161016, thus the same was not in existence during the F.Y. 2016-17 pertaining to the A.Y. 2017-18. It was further submitted that after dissolution of the partnership firm, the business as a whole was taken over by one partner Mr. Amit Srivastava along with the existing bank account. The above said fact is evident by the ITR filed on behalf of the partnership firm on 16.10.2016, which is at page 45 of assessee’s paper book. The acknowledgement of the ITR for the remaining F.Y. 2015-16 for A.Y. 2016-17 filed on behalf of Mr. Amit Srivastava (sole proprietor) depicting his own PAN- CDNPS4448C, is also evident at page 48 of assessee’s paper book. 5 | P a g e

ITA No.260&261/Agr/2026 11. Assessee’s letter dated 21.08.2015 addressed to the manager, Bank of Baroda, Fatehabad Road, Agra, with endorsed bank receipt, is part of assessee’s paper book at page 82. According to this letter, the bank was informed to change the Pan of “Agra Shine Footwear”, the erstwhile partnership firm (PAN- AAYFA1190M) to assessee’s proprietorship firm (PAN- CDNPS4448C). We, further, notice that the cheque no 000915 dated 29.04.2016 at page 82 of assessee’s paper book is issued on behalf of ‘Agra Shine Footwear’, through proprietor only. It, thus, becomes clear that the partnership firm existed in the name and style of “M/s Agra Shine Footwear”, existed only till 20.08.2015 i.e. till the date of its dissolution. The observation made by ld CIT(A), that the assessee failed to submit the proof regarding the dissolution of the said firm and the return of the said firm is against the facts on record. From an academic and legal standpoint, no documentary evidence is strictly mandatory to prove the dissolution of a partnership firm. Even absence of dissolution deed does not prevent dissolution of partnership firm. The law primarily focuses on the act and intent of the partners. Had there been any degree of doubt in the mind of ld CIT(A) in respect of the dissolution of the partnership firm on 20.08.2015, he could have verified this fact, in accordance with law from the other partner Mr. Ashutosh Tiwari, whose description is found in para 6.3 of the impugned order. The ld CIT(A) has, thus, committed an error of both facts

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ITA No.260&261/Agr/2026 and law. Let’s now examine the effect of issuance of notice against a non existent entity. 12. In Maruti Suzuki (India) Ltd (supra), hon’ble Supreme Court has held as under: “…… 33. In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a co-ordinate Bench of two learned judges which dismissed the appeal of the Revenue in Spice Enfotainment on 2 November 2017. The decision in Spice Enfotainment has been followed in the case of the respondent while dismissing the Special Leave Petition for AY 2011-2012. In doing so, this Court has relied on the decision in Spice Enfotainment. 34. We find no reason to take a different view. There is a value which the court must abide by in promoting the interest of certainty in tax litigation. The view which has been taken by this Court in relation to the respondent for AY 2011-12 must, in our view be adopted in respect of the present appeal which relates to AY 2012-13. Not doing so will only result in uncertainty and displacement of settled expectations. There is a significant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable. 35. For the above reasons, we find no merit in the appeal. The appeal is accordingly dismissed. There shall be no order as to costs.” 13. In Rajinder Nath Kapoor (supra), hon’ble Delhi High Court has held as under: “….. 3. On behalf of petitioner, it was argued that the impugned order under Section 148A(d) as well as the impugned notice under Section 148 of the Act are not sustainable in the eyes of law as the same were passed and issued in the name of non-extant entity, insofar as the same were issued to M/s Kapoor Electric Mart with PAN AAAFK4540P, the partnership firm which is no more in existence. Learned counsel for petitioner contended that petitioner had been admittedly filing returns of income as sole proprietor of Kapoor Electric Mart and that mention of PAN of the partnership firm in the bill of entry was a bonafide mistake insofar as petitioner had not concealed the purchases (imports) in the books of the proprietorship concern. 7 | P a g e

ITA No.260&261/Agr/2026

ITA No.260&261/Agr/2026 passed against the non existing entity, are set aside. Since the notice u/s 148 and the consequential assessment order have been set aside, the other legal and factual grounds remain merely academic in nature, hence, not required to be adjudicated and are left open. The appeal is liable to be allowed. ITA No. 261/Agr/2026 15. This appeal is directed against the impugned order dated 13.01.2026 passed in appeal No NFAC/2016-17/10386742 by the ld. Commissioner of Income Tax/NFAC (Delhi) for the A.Y. 2017-18, wherein ld CIT(A) has confirmed the penalty of Rs. 11,66,591/- levied u/s 271AAC(1) of the Act, vide penalty order dated 26.09.2022. This appeal is consequential to the quantum appeal ITA No. 260/Agr/2026 and since the assessee’s quantum appeal has been allowed and quantum assessment has been set aside, the penalty does not survive. This appeal is thus, liable to be allowed. 16. In the result, both the assessee’s appeals viz ITA Nos. 260 & 261/Agr 2026 are allowed. Order pronounced on - 05.06.2026

Sd/- Sd/- (M BALAGANESH) (SUNIL KUMAR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 05.06.2026

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ITA No.260&261/Agr/2026 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, Agra

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