SHAKTI ENTERPRISE,AHMEDABAD vs. INCOME-TAX OFFICER, WARD 3(3)(1), AHMEDABAD, AHMEDABAD

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ITA 943/AHD/2026Status: DisposedITAT Ahmedabad12 October 2026AY 2017-187 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the partnership firm, M/s. Shakti Enterprise, was dissolved on 19.06.2015, and its assets and liabilities were taken over by Chirag Barot, who continued the business in his individual capacity. The bank account in question, although retaining its old number, was operated by Chirag Barot in his individual capacity, as evidenced by the bank's certificate linking his individual PAN (AOXPB5994H) to the account. Chirag Barot had also disclosed these transactions in his individual return for AY 2017-18. The AO had verified these facts in the remand report. Therefore, the additions made by the AO in the hands of the firm were not sustainable and were ordered to be deleted. Regarding the penalty under Section 271F, the Tribunal noted that the firm stood dissolved and had no assessable income for the year, thus not being obligated to file a return. Consequently, the penalty was also not sustainable and ordered to be deleted. The Tribunal allowed both appeals.

What were the facts?

The assessee, Shakti Enterprise, is appealing two orders dated 29.09.2025 passed by the CIT(A), NFAC, Delhi, for Assessment Year 2017-18. The first appeal (ITA No. 942/Ahd/2026) challenges the confirmation of additions amounting to Rs. 28,18,300/- made by the Assessing Officer (AO). The second appeal (ITA No. 943/Ahd/2026) contests the confirmation of a penalty of Rs. 5,000/- levied under Section 271F for non-filing of the return of income. The partnership firm was dissolved on 19.06.2015, with its assets and liabilities taken over by ex-partner Chirag Barot. The AO made additions based on cash deposits and other credits in a bank account, alleging non-compliance by the assessee. The CIT(A) dismissed the appeal, holding that the assessee failed to produce evidence during assessment and did not admit additional evidence during appeal.

What were the issues?

1. Whether the Ld. CIT(A)-NFAC erred in dismissing the appeal without properly appreciating the submissions and remand report, thereby upholding additions made by the AO? (Question of law and fact, concerning appreciation of evidence and procedural fairness). 2. Whether the Ld. CIT(A)-NFAC erred in upholding the addition of Rs. 11,65,000/- under Section 69A read with Section 115BBE, concerning cash deposits in a Punjab National Bank account, despite evidence that the account was linked to Chirag Barot's PAN and did not contain the alleged deposits? (Question of law and fact, concerning the applicability of Section 69A and Section 115BBE). 3. Whether the Ld. CIT(A)-NFAC erred in upholding the addition of Rs. 16,53,300/- under Section 69A, concerning other credits in the same bank account, despite evidence that the account was linked to Chirag Barot's PAN and did not contain the alleged credits? (Question of law and fact, concerning the applicability of Section 69A). 4. Whether the Ld. CIT(A)-NFAC erred in confirming the penalty of Rs. 5,000/- levied under Section 271F for non-filing of the return of income? (Question of law, concerning the requirement to file a return post-dissolution). Assessee's Contentions: The assessee argued that the bank account in question was operated by Chirag Barot in his individual capacity after the firm's dissolution, and he had disclosed these transactions in his individual return. The additions were therefore wrongly made in the hands of the firm. The penalty under Section 271F was not applicable as the firm had dissolved and had no assessable income for the year. Revenue's Contentions: The judgment does not explicitly record the revenue's contentions.

Which sections of the Income-tax Act were involved?

Section 69A,Section 115BBE,Section 271F,Section 250,Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD

Before: SHRI SANJAY GARG & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri Sakar Sharma, AR, Shri Ashish K Pandey, Sr. D.R
For Respondent: Shri Ashish K Pandey, Sr. D.R
Hearing: 29/07/2026

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. Nos. 942 & 943/Ahd/2026 (िनधा�रण वष� / Assessment Year : 2017-18) बनाम Shakti Enterprise, C/o Income Tax Officer / Ward 3(3)(1), Ahmedabad Chirag Barot (Ex-partner) Vs. B-21 Sattar Taluka Society, Navjivan Press Road, Income-tax, Ashram Road, Ahmedabad, Gujarat-380014 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : ACDFS9410R (Appellant) .. (Respondent) अपीलाथ� ओर से /Appellant by : Shri Sakar Sharma, AR ��यथ� क� ओर से/Respondent by : Shri Ashish K Pandey, Sr. D.R. Date of Hearing 29/07/2026 12/10/2026 Date of Pronouncement (आदेश)/ORDER Per Sanjay Garg, Judicial Member:

Both the captioned appeals relate to the same assessee are against the separate orders of even date 29.09.2025 passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi (hereinafter referred to as “CIT(A)”), under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relate to same Assessment Year (A.Y.) 2017-18.

ITA Nos.942 & 943/Ahd/2026 [Shakti Enterprise] A.Y. 2017-18 - 2 –

2.

In ITA No.942/Ahd/2026, the assessee is aggrieved by the action of CIT(A) in confirming the quantum additions made by the Assessing Officer (in short ‘the AO’), whereas, in ITA No.943/Ahd/2026 the assessee has contested the confirmation of penalty levied by the AO u/s.271F of the Act for non-filing of return of income.

ITA No.942/Ahd/2026

3.

The assessee raised the following grounds of appeal:-

“1. The Ld. CIT (A)-NFAC erred on facts and in law in dismissing the appeal of the appellant without taking appreciating the appeal submissions and remand report furnished by the Assessing Officer in right perspective. 2. The Ld. CIT(A)-NFAC erred on facts and in law in upholding addition of Rs. 11,65,000/- u/s 69A r.w.s. 115BBE of the Act being cash deposited in Punjab National Bank Account No. 3937002100009622 despite adducing evidence that the same bank account is linked to PAN: AOXPB5994H belonging to Shri Chirag Barot who has disclosed it in his return of income and said bank account do not contain any cash deposit referred to in the assessment order. 3. The Ld. CIT(A)-NFAC erred on facts and in law in upholding addition of Rs. 16,53,300/- u/s 69A being other credits in Punjab National Bank Account No. 3937002100009622 despite adducing evidence that the same bank account is linked to PAN: AOXPB5994H belonging to Shri Chirag Barot who has disclosed it in his return of income and said bank account do not contain any credits referred to in the assessment order.” 4. There was delay of 116 days in filing of appeal before ITAT. Assessee submitted non-use of old email ID post dissolution of the firm as the reason for delay in filing of appeal. In the interest of justice, delay is condoned.

ITA Nos.942 & 943/Ahd/2026 [Shakti Enterprise] A.Y. 2017-18 - 3 – 5. Brief facts of the case are that the appellant was a partnership firm formed on 09-07-2012. It was dissolved by dissolution deed dated 19-06-2015 as per which all assets and liabilities of erstwhile firm were taken over by one of the partners namely; Chirag Barot. He became proprietor of dissolved firm w.e.f. 20-06-2015. In the absence of partnership firm as on 31-03- 2017, no return of income was furnished for the firm for A.Y. 2017-18. AO issued notice u/s. 142(1) of the Act to assessee firm based on information that assessee has made huge cash deposits during demonetization period. As there was non-compliance during the proceedings, AO obtained relevant bank account details and due to non-receipt of reply made the following additions:

(i) Amount of Cash Deposits during demonetization period Rs. 11,65,000/- (ii) Other cash credit entries in the bank account Rs. 16,53,300/- Total Rs. 28,18,300/-

6.

Aggrieved by this addition, assessee filed appeal. During the course of first appeal proceedings, Shri Chirag Barot, ex-partner, filed additional evidence in support of its claim. Appeal was dismissed by CIT(A) holding that appellant’s claim of non- existence of firm was not supported by any evidence produced during the course of assessment. Further, though remand report was obtained during appeal proceedings which recommended acceptance of additional evidence, CIT(A) did not admit additional

ITA Nos.942 & 943/Ahd/2026 [Shakti Enterprise] A.Y. 2017-18 - 4 – evidence for the reason that assessee had ample chances to furnish before AO but chose not to comply.

7.

Aggrieved by this, assessee filed appeal before ITAT.

8.

We have heard both parties and perused the materials on record.

8.1 It is an admitted fact that the assessee firm, M/s. Shakti Enterprises, stood dissolved w.e.f. 19-06-2015 under a deed of dissolution. Under the terms of the dissolution deed, one of the erstwhile partners, Shri Chirag Barot, took over the assets and liabilities of the firm and continued business thereafter in his individual/proprietary capacity with the same name, M/s. Shakti Enterprises (TIN No. 24074205812and CT No. 24574205812).

8.2 The addition under consideration relates to transactions appearing in the bank account (xxxxx9622) during the previous year relevant to the assessment year 2017-18 i.e. subsequent to the dissolution of the partnership firm.

8.3 In support of its contention that the bank accounts were thereafter operated by the erstwhile partner, Shri Chirag Barot, in his individual capacity, the appellant had produced a certificate issued by the concerned bank. The bank has certified that M/s. Shakti Enterprise has been maintaining two accounts (i) xxxx4535

ITA Nos.942 & 943/Ahd/2026 [Shakti Enterprise] A.Y. 2017-18 - 5 – & (ii) xxxxx9622 and the PAN Card No. AOXPB5994H is linked with the above accounts. This PAN is that of Shri Chirag Barot in his individual capacity.

8.4 The fact that one of the bank accounts continued to have the same account number which had earlier been used by the partnership firm cannot, by itself, lead to the conclusion that the partnership firm continued to exist or that every transaction appearing in such account subsequent to dissolution represented the transaction of erstwhile firm. The character of the transaction has to be determined having regard to the dissolution deed, the person carrying on the business after dissolution, the ownership and operation of bank account during the relevant period and the other surrounding evidence.

8.5 The undisputed facts of the case are (i) the partnership firm stood dissolved on 19-06-2015 (ii) under the dissolution deed, its assets and liabilities were taken over by one of the partners who thereafter continued the business (iii) the disputed banking transactions pertained to a period subsequent to such dissolution and (iv) the concerned bank has certified that the individual was maintaining these specified accounts in his individual capacity and that his individual PAN was linked with those accounts. Shri Chirag Barot has filed his return of income for A.Y. 2017-18 in his individual capacity (PAN AOXPB5994H) for proprietary concern, Shakti Enterprise on 06-10-2017 admitting total income

ITA Nos.942 & 943/Ahd/2026 [Shakti Enterprise] A.Y. 2017-18 - 6 – of Rs. 4,88,510/-. Further, the aforesaid facts have also been verified by the AO in the remand report as called for by the Ld. CIT(A) during the appellate proceedings. The AO has also verified the above aforesaid facts from the balance sheet of Shri Chirag Barot. In these circumstances, mere continuation of earlier bank account number cannot constitute sufficient material for treating the transaction appearing therein during the previous year relevant to assessment year 2017-18 as transactions of the erstwhile partnership firm. The transactions in the said bank account have been duly taken into account by the individual Shri Chirag Barot. Therefore, the impugned addition made by the AO, in the hands of the firm, is not sustainable and the same is ordered to be deleted.

9.

In the result, appeal of the assessee stands allowed.

ITA No.943/Ahd/2026

10.

This appeal has been filed by the assessee against the action of the Ld. CIT(A) in confirming the penalty of Rs.5000/- levied by the AO u/s 271F of the Act on account of failure of the assessee in filing the return of income. As noted above, the firm stood dissolved on 19.06.2015 and there was no assessable income of the firm during the year under consideration and, therefore, the assessee firm was not supposed to file the return for the year under consideration. In view of this, the impugned penalty levied by the

ITA Nos.942 & 943/Ahd/2026 [Shakti Enterprise] A.Y. 2017-18 - 7 –

AO u/s 271F of the Act is not sustainable and the same is ordered to be deleted.

11.

In the result, the appeal of the assessee stands allowed.

12.

In the combined result, both the appeals filed by the assessee stand allowed.

This Order is pronounced on 12/10/2026

Sd/- Sd/- (NARENDRA PRASAD SINHA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 12/10/2026 a.k. / S. K. SINHA True Copy आदेश क� �ितिल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant ��यथ� / The Respondent. 2. 3. संबंिधत आयकर आयु� / Concerned CIT आयकर आयु�(अपील) / The CIT(A)- 4. �वभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad

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