SHREE STYLE CHECK,AHMEDABAD vs. ITO WARD 1(1)(3), AHMEDABAD

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ITA 2298/AHD/2025Status: DisposedITAT Ahmedabad15 October 2026AY 2017-185 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 allowed the appeal of the assessee. The Tribunal noted that the partnership firm was dissolved on 01.04.2016 and the business was continued by Shri Anand I. Shah as a sole proprietor. Shri Anand I. Shah had filed his personal income tax return for AY 2017-18 under the presumptive taxation scheme of Section 44AD, declaring a business income of Rs. 5,08,958/- on a total turnover of Rs. 63,61,975/-. The Tribunal found that the amount in dispute (Rs. 28,66,040) was already subsumed in the total turnover declared by the proprietor. The Tribunal observed that it is immaterial whether the said amount is assessed in the hands of the proprietor or the firm, as long as the same amount is offered to tax. Therefore, the addition made by the AO and confirmed by the CIT(A) was considered to be an illegal and invalid double taxation. The Tribunal did not specifically address grounds related to the ex-parte order, invocation of Section 69A, peak balance theory, breach of natural justice, interest under Sections 234A/B/C/D, and penalty proceedings under Sections 271AAC, 272A(1)(d), and 271F, as the primary issue of double taxation was resolved in favour of the assessee. The operative direction was to allow the appeal.

What were the facts?

The assessee, Shree Style Check, an erstwhile partnership firm, is in appeal against the order dated 25.08.2025 passed by the National Faceless Appeal Centre (NFAC), Delhi, for Assessment Year 2017-18. The partnership firm was dissolved on 01.04.2016 and its business was continued by Shri Anand I. Shah as a sole proprietor. No return was filed by the firm for AY 2017-18. The Assessing Officer (AO) issued a notice under Section 142(1) regarding cash transactions. Shri Anand I. Shah submitted the dissolution deed and his personal return of income. However, the AO completed the assessment ex-parte under Section 144, making an addition of Rs. 28,66,040 under Section 69A and levied tax under Section 115BBE. The CIT(A) confirmed the addition.

What were the issues?

1. Whether the Ld. CIT(A) erred in confirming the ex-parte order passed by the Ld. AO under Section 144, considering the partnership firm was dissolved and converted into a proprietary concern from 01.04.2016 as per the dissolution deed? (Mixed law and fact, turns on Section 144). 2. Whether the Ld. CIT(A) erred in confirming the addition of Rs. 28,66,040 under Section 69A on account of cash deposits, without appreciating the nature of the appellant's business and the fact that the income was already declared by the proprietor under Section 44AD? (Mixed law and fact, turns on Section 69A). 3. Whether the Ld. CIT(A) erred in confirming the action of the Ld. AO in invoking Section 69A? (Mixed law and fact, turns on Section 69A). 4. Alternatively, whether the Ld. CIT(A) and Ld. AO erred by not considering the peak balance theory? (Mixed law and fact). 5. Whether the Ld. CIT(A) erred in confirming the addition without appreciating that the cash deposits represented business turnover already declared by the proprietor under Section 44AD, leading to double taxation? (Mixed law and fact, turns on Section 44AD). 6. Whether the Ld. CIT(A) and Ld. AO erred by passing the order without properly appreciating facts and ignoring submissions, thereby breaching principles of natural justice? (Mixed law and fact). 7. Whether the Ld. CIT(A) erred in confirming the levy of interest under Sections 234A/B/C/D? (Law, turns on Sections 234A, 234B, 234C, 234D). 8. Whether the Ld. CIT(A) erred in confirming the initiation of penalty proceedings under Sections 271AAC, 272A(1)(d), and 271F? (Law, turns on Sections 271AAC, 272A(1)(d), 271F). Assessee's contentions: The partnership firm was dissolved and converted into a proprietary concern. No return was filed by the firm. The cash deposits represent business turnover already declared by the proprietor, Shri Anand I. Shah, under Section 44AD, thus the addition amounts to double taxation. The proprietor's return declared a business income of Rs. 5,08,958/- on a turnover of Rs. 63,61,975/-. Relied on Mathur Ugam and Associates v. ITO (2023) 153 taxmann.com 504 (Delhi Trib.). Alternative plea to treat submitted documents as additional evidence under Rule 46A. The order was passed without appreciating facts and ignoring submissions, breaching natural justice. Revenue's contentions: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 144,Section 69A,Section 115BBE,Section 44AD,Section 234A,Section 234B,Section 234C,Section 234D,Section 271AAC,Section 272A(1)(d),Section 271F

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD

For Appellant: Shri Tushar Hemani, Sr Advocate
For Respondent: Shri Amit Pratap Singh, Sr.DR
Hearing: 15.09.2026Pronounced: 15.10.2026

PER DR. B.R.R. KUMAR, VICE-PRESIDENT:

- Delay Condoned This appeal has been filed by the Assessee against the order dated 25.08.2025 passed by the National Faceless Appeal Centre(NFAC), Delhi (hereinafter referred to as ‘Ld. CIT (A)’ in short), under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’ in short) for Assessment Year 2017-18. ITA No. 2289/AHD/2025, AY-2017-18 - 2–

2.

The Assessee has raised the following grounds of Appeal: -

1.

The Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in passing an ex-parte order u/s 144 of the Act without appreciating that the partnership firm, Shree Style Check, was not in existence and had already been dissolved and converted into a proprietary concern w.e.f. 01.04.2016 vide dissolution deed.

2.

The Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs. 28,66,040/- u/s 69A of the Act on account of cash deposits made across the year in the bank account, without appreciating the nature of appellant's business.

3.

The Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in invoking section 69A of the Act.

4.

Alternatively, and without prejudice, The Ld. CIT(A) and Ld. AO have erred in law and on facts by not considering the peak balance theory.

5.

The Ld. CIT(A) has erred in law and on facts in confirming the action of the Ld. AO in making such addition without appreciating that the cash deposits represented business turnover already declared by the proprietor Shri Anand I. Shah (PAN: ANXPS2734D) under the presumptive taxation scheme u/s 44AD of the Act thereby taxing the same income twice.

6.

The Ld. CIT(A) and Ld. AO have passed the order without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. Their action is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed.

7.

The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the Ld.AO in levying interest u/s.234A/B/C/D of the Act.

- 3–

8.

The Ld. CIT(A) has erred in law and on facts in confirming action of Ld.AO in initiating penalty proceedings under section 271AAC, 272A(1)(d) and 271F of the Act.

9.

The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.

3.

The brief facts of the case are that the assessee was a partnership firm that was dissolved on 01.04.2016. Pursuant to the deed of dissolution dated 01.04.2016, the business was taken over and continued by Shri Anand I. Shah as a sole proprietor under the name and style of Shree Style Check. Clause 7 of the dissolution deed provided that any business activity carried out in the name of the erstwhile partnership firm would be treated as an activity of the proprietary concern until the necessary changes were made in the government records. Since the partnership firm had been dissolved and its business was continued by the proprietary concern, no return of income was filed in the name of the erstwhile firm for AY 2017-18. Subsequently, the then jurisdictional Assessing Officer, Ward 5(2)(4), now Ward 1(1)(3) (hereinafter referred to as the “ AO”), issued a notice under section 142(1) of the Income-tax Act, 1961, in connection with cash transactions during the year 2016 and called for various details and documents. In response, Shri Anand I. Shah, vide his submission dated 25.10.2019, furnished a copy of the dissolution deed and his personal return of income, wherein the profits of the proprietary concern, Shree Style Check, were duly disclosed. However, the AO did not accept the explanation and documents furnished by the assessee and completed the assessment under section 144 of the Act. While completing the - 4– assessment, the Ld. AO made an addition of ₹28,66,040 under section 69A of the Act and levied tax on the same under section 115BBE of the Act.

4.

Aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] on 24.12.2019. The Ld. CIT(A), vide order dated 25.08.2025, confirmed the addition made by the AO.

5.

In support of this claim, the appellant submitted a dissolution deed dated 08.03.2016, and the personal income tax return of Shri Anand I. Shah for A.Y. 2017-18. The proprietor's return, filed under the presumptive scheme of Section 44AD, declared a business income of Rs.5,08,958/-from a total turnover of Rs.63,61,975/-, along with a net profit of Rs.4,81,560.79 as per the appended financial statements. The appellant contends that since the income was already declared by the proprietor, the addition in the hands of the dissolved firm amounts to illegal and invalid double taxation. The appellant also cited the ITAT Delhi Bench decision in the case of Mathur Ugam and Associates v. ITO (2023) 153 taxmann.com 504 (Delhi Trib.) as a judicial precedent in support of their position. An alternative plea was also made to have the submitted documents treated as additional evidence under Rule 46A of the Income Tax Rules, 1962. It is found that either way the income has offered to tax at this juncture, it is immaterial whether the said amount is assessed in the hands of the proprietor or the firm as long as the same amount is offered to tax.

- 5–

6.

Keeping in view, the facts on record, the appeal of the assessee is allowed as amount in dispute is already subsumed in the total turnover of Rs.63,61,975/-.

The order pronounced in the open Court on 15.10.2026. - /- (DR. B.R.R. KUMAR) VICE-PRESIDENT True () Ahmedabad; Dated 15.10.2026

आदेश की "ितिलिप अ"ेिषत / Copy of the Order forwarded to : 1. अपीलाथ"/ The Appellant

2.

""थ"/ The Respondent. 3. संबंिधतआयकरआयु"/ Concerned CIT 4. आयकरआयु"(अपील) /The CIT(A)- 5. िवभागीय"ितिनिध, आयकरअपीलीयअिधकरण, अहमदाबाद/ DR, ITAT, Ahmedabad 6. गाड"फाईल /Guard file. आदेशानुसार/ BY ORDER,सहायकपंजीकार (Dy./Asstt.

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