SIDDHARTHA AGENCIES,SECUNDERABAD vs. INCOME TAX OFFICER, WARD-10(1), HYDERABAD

प्रनत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M.

The present appeal filed by the assessee firm is directed against the order passed by the Commissioner of Income-Tax (Appeals),
National Faceless Appeal Center (NFAC), Delhi, dated 19.11.2024, which in turn arises from the order passed by the Assessing

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Siddhartha Agencies, Secunderabad.

Officer (for short “A.O.”) under Section 147 r.w.s 144 r.w.s. 144B of the Income Tax Act, 1961 (for short, “the Act”) dated 23.03.2022
for A.Y. 2017-18. The assessee firm has assailed the impugned order on the following grounds of appeal before us:
“1. The learned C.I.T(A) failed to note that the entire assessment made under PAN No.ABDFS6096A related to the erstwhile partnership firm of M/s. Siddhartha Agencies which stood dissolved on 31.12.2008 and which was intimated to the department and CIT(A) and therefore the entire assessment made on an non-existent entity as a partnership firm is totally illegal, null and void and therefore ought to have annulled the assessment.
2. The learned Commissioner of Income-Tax (Appeal)/NFAC erred in setting aside the assessment by adopting an easy route instead of considering the issue on merits.
3. The learned CIT(A)/NFAC erred in confirming the following additions made by the Assessing Officer:

Indirect exports and therefore erred in adding the entire purchases of Rs. 3,78,14,023/-which is contrary to the decision of the Supreme
6. The learned CIT(A)/NFAC has passed the order u/s.250 of the I.T
Act, 1961 without application of mind on an non-existing entity while accepting the facts that the partnership firm under PAN No:
ABDFS6096A was dissolved on 31.12.2008 (Page 36/Para 8/ Decision) and in the process passing an order on an non-existing entity which is illegal, Bad in law, null and void and thereby contrary the statutory provisions relating to assessment of Income.
7. The learned CIT(A)/NFAC erred in setting aside the assessment order passed by the Assessing Officer while full submissions were made before him although the order was passed by the Assessing Officer u/s.144 of the LT Act, 1961 over/or the facts that the powers of the CIT(A)/NFAC were co-terminus with that of the Assessing Officer and therefore ought to have quashed the assessment as it was passed "PER
INCURIAM" totally contrary to the statutory provisions.
8. Without prejudice to Ground No.1 the Appellant prays suitable costs be Imposed for passing the order contrary to the provisions of the statute.
9. The learned CIT(A)/NFAC while placing total reliance on the order of the Assessing Officer by borrowing his satisfaction and in the process came to an erroneous decision to set aside the assessment thus adopted an easy route to complete the appellant proceedings.
10. The learned CIT(A)/NFAC erred in ignoring the detailed submissions made in reply dated 07.12.2022 and other submissions and therefore erred in setting aside the assessment instead of deleting the entire additions which was made on an non-existing entity.
11. The learned CIT(A)/NFAC ought to have issued a final show cause notice calling for details/clarification as requested by the Appellant at Paragraph 49 of it's submission dated 07.12.2022 and failing to do so renders the entire assessment proceedings illegal, void and bad in law.”

income for the year under consideration i.e. A.Y. 2017-18, initiated proceedings u/s 147 of the Act. Notice u/s 148 of the Act, dated
24.03.2021 was served at the registered e-mail address of the assessee firm. However, the assessee firm failed to comply with the said notice and did not file its return of income. Also, the notices which, thereafter, were issued by the A.O. u/s 142(1) of the Act, dated 28.12.2021 and 13.02.2022, calling upon the assessee firm to furnish the requisite details remained uncomplied with.

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Siddhartha Agencies, Secunderabad.

opportunity it had failed to furnish; (ii). that the assessee firm had during the year made an investment of Rs.54 lacs in fixed/time deposits with the bank, but had failed to come forth with any explanation regarding its source; and (iii) that as per the information the assessee firm had during the year under consideration made cash deposits of Rs. 6,75,470/- in its bank account, but had failed to provide any explanation regarding the source of the same. The A.O., observing that the aforementioned investments/deposits were sourced out of the assessee’s unexplained money u/s 69A of the Act, thus, vide his order u/s 147 r.w.s. 144 r.w.s 144B of the Act, dated 23.03.2022, made an addition of the same and determined the income of the assessee firm at Rs. 4,38,89,493/-.

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Siddhartha Agencies, Secunderabad.

proprietor under the same name and style i.e. M/s. Siddhartha
Agencies. The assessee firm claimed that the subject purchases, fixed/time deposits, and also the cash deposits in the bank account were accounted for by Shri. K. Vithal (supra) in the books of account of his proprietary concern during the year under consideration.

the sake of clarity, the observations of the CIT(A) are culled out as under:

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Siddhartha Agencies, Secunderabad.

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of the appeal, submitted that the A.O. had wrongly initiated the impugned proceedings in the case of the assessee firm and made the additions in its case. Elaborating on his contention, the Ld. AR submitted that the assessee firm, viz. M/s Siddhartha Agencies
(PAN No. ABDFS6096A) had come into existence vide a Partnership Deed dated 01.01.2004 with two partners, viz. (i) Shri
K. Vithal S/o Late Shri K. Narasaiah; and (ii) Shri K. Vinay Kumar,
S/o. Sri K. Vithal. The Ld. AR submitted that Shri. K. Vinay Kumar
(supra) had thereafter retired from the partnership w.e.f
31.12.2008, vide retirement deed dated 09.01.2009. The Ld. AR submitted that thereafter Shri. K. Vithal (supra), the continuing partner, had taken over the partnership business along with all its assets and liabilities and continued it as a sole proprietor, Pages
29 to 39 of APB. The Ld. AR submitted that Shri K. Vithal (supra) had w.e.f. 01.01.2009 continued the business as a proprietor under the same name and style of M/s. Siddhartha Agencies. The Ld. AR submitted that the subject purchases and also the fixed deposits/cash deposits in the bank account that had formed the very basis for initiating proceedings u/s 147 of the Act in the case of the assessee firm were duly accounted for by Shri K. Vithal

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Siddhartha Agencies, Secunderabad.

(supra) in the books of accounts of his proprietary concern i.e.
M/s. Siddhartha Agencies. The Ld. AR submitted that though the assessee firm, viz. M/s. Siddhartha Agencies, a partnership firm, was dissolved on 01.01.2009, but on account of an inadvertent omission Shri K. Vithal (supra) i.e. the continuing partner, who had taken over the business of the said concern and continued it as a proprietor, had failed to intimate and get the necessary amendments both in the bank records and also the Importer and Exporter code (IEC) that continued in the name/PAN Number of the assessee firm. The Ld. AR submitted that though the Shri. K.
Vithal (supra) had technically erred in not getting the necessary amendments in the records and had continued the business using the bank account and the IEC of the erstwhile firm, but it is a matter of fact borne from the record that all the transactions in respect of which additions were made by the A.O. while framing the assessment of the assessee firm (since dissolved) were properly recorded/accounted for in the books of accounts of his proprietary concern for the subject year. The Ld. AR to buttress his claim, submitted that the said factual position could safely be gathered on a perusal of the financial statements of the proprietary concern

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Siddhartha Agencies, Secunderabad.

that were enclosed along with the return of income filed by Shri.
K. Vithal (supra) for the subject year. The Ld. AR to fortify his aforesaid contention had taken us through the returns of income of Shri K. Vithal, Proprietor: M/s. Siddharth Agencies for A.Y.
2010-11, A.Y. 2012-13 to A.Y. 2017-18, (Page 1 to 142 of APB-II).
The Ld.
AR further to buttress his claim that the issues/transactions forming the basis for the additions made by the A.O. in the hands of the assessee firm were recorded in the “books of account” of Shri K. Vithal, Proprietor of M/s. Siddhartha
Agencies had drawn our attention to the audited financial statements of the said proprietary concern, Page Nos. 202 to 209
of APB. Elaborating further on his contention, the Ld. AR submitted that the impugned purchases of Rs. 3,78,14,023/-
(supra) actually amounted to Rs. 3,51,00,059/-, which formed part of the total purchases of Rs. 4,19,39,694/- that were made by Shri. K. Vithal (supra) in his proprietary concern during the subject year. Apart from that, the Ld. AR submitted that the fixed/time deposits of Rs. 54 lacs for which the assessee firm had been visited with an addition u/s 69A of the Act, actually amounted to Rs. 48 lacs, and the said investment made during the 12
Siddhartha Agencies, Secunderabad.

year by Shri. K. Vithal (supra) was duly disclosed by him in the books of account of his proprietary concern for the year under consideration. Further, the Ld. AR submitted that the cash deposits of Rs. 6,75,470/- that have been added to the income of the assessee firm under Section 69A of the Act were made by Shri.
K. Vithal (supra) in the normal course of his business and was accounted for in the books of account of his proprietary concern for the subject year. The Ld. AR submitted that as the subject purchases/deposits were duly disclosed by Shri. K. Vithal (supra) in the audited books of account of his sole proprietary concern for the year under consideration, therefore, the impugned additions made in the hands of the assessee firm cannot be sustained and is liable to be vacated.
10. Per Contra, the learned Departmental Representative (for short, “DR”), relied upon the orders of the lower authorities. The learned DR submitted that as the assessee firm had failed to substantiate, based on irrefutable documentary evidence, that the investments/deposits were made by Shri K. Vithal, proprietor of M/s Siddharth Agencies and not the assessee firm, therefore, the 13
Siddhartha Agencies, Secunderabad.

CIT (Appeals), in all fairness and in the interest of justice, had set aside the matter to the file of the AO with a specific direction to frame a fresh assessment after affording a reasonable opportunity of being heard to the assessee firm.
11. We have thoughtfully considered the contentions of the learned Authorized Representatives of both parties in the backdrop of the orders of lower authorities.
12. Controversy involved in the present appeal lies in a narrow compass, i.e. as to whether or not the authorities below are right in making/sustaining the impugned additions viz. (i). addition u/s 69A of unexplained money utilized for making payments for imports: Rs. 3,78,14,023/-; (ii). addition u/s 69A of the unexplained fixed/time deposits with bank: Rs. 54,00,000/- and (iii). addition u/s 69A of the unexplained cash deposits in the bank account: Rs. 6,75,472/-.
13. It is the claim of the Ld. AR that the assessee firm viz. M/s.
Siddhartha Agencies (PAN: ABDFS6096A) had come into existence vide Partnership Deed dated 01.04.2004 with two partners, viz. (i).

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Siddhartha Agencies, Secunderabad.

Shri K. Vithal, S/o Late Shri K. Narasaiah; and (ii) Shri K. Vinay
Kumar, S/o. Sri K. Vithal. Further, it is claimed by the Ld. AR, that Shri K. Vinay Kumar (supra) had thereafter retired from the partnership w.e.f. 31.12.2008, vide retirement deed dated
09.01.2009. Thereafter, Shri K. Vithal (supra), the continuing partner, is stated to have taken over the partnership business along with its assets and liabilities and continued it under the same name and style as a sole proprietor. We find that it is the claim of the assessee firm that inadvertently Shri K. Vithal (supra), who had w.e.f 01.01.2009, taken over and continued the business as a sole proprietor under the name and style, viz. M/s.
Siddhartha Agencies failed to intimate and get the necessary amendments in the bank records, and also the Importer and Exporter Code (IEC) that continued in the name/PAN number of the assessee firm (since dissolved). It is further claimed that the subject transactions which had formed the very basis for initiating the proceedings u/s 147 of the Act in the hands of the assessee firm, viz. (i). addition u/s 69A of unexplained money utilized for making payments for imports: Rs. 3,78,14,023/-; (ii). addition u/s 69A of the unexplained fixed/time deposits with bank: Rs.

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Siddhartha Agencies, Secunderabad.

54,00,000/- and (iii). addition u/s 69A of the unexplained cash deposits made in the bank account: Rs. 6,75,472/-, were accounted for by Shri K. Vithal (supra) in the books of accounts of his proprietary concern, i.e. M/s. Siddhartha Agencies. However, it is stated that because of the mistake of Shri K. Vithal (supra) in not getting the necessary amendments in the bank records and also IEC that the bank/Directorate General of Foreign Trade
(DGFT) had reported the transactions to the Income-tax
Department under the name/PAN number of the assessee firm, viz. M/s. Siddhartha Agencies (PAN No. ABDFS6096A), which, however, was dissolved way back w.e.f. 31.12.2008. 14. The Ld. AR to buttress his aforesaid contention had taken us to the “retirement deed” dated 09.01.2009 (Pages 35-45 of APB).
Also, the Ld. AR to buttress his claim that the aforesaid transactions, i.e. purchases/imports were accounted for by Shri
K. Vithal, Proprietor of M/s. Siddhartha Agencies in the books of accounts of his proprietary concern for the subject year, had taken us through the “Import Purchase account” of the proprietary concern, Pages 46-47 of APB. Also, the Ld. AR to fortify his claim

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Siddhartha Agencies, Secunderabad.

that the subject fixed/time deposits were made by Shri K. Vithal, proprietor of M/s. Siddhartha Agencies during the subject year, had taken us through the copy of the “Fixed deposit A/c” of Shri
K. Vithal, proprietor of M/s. Siddhartha Agencies, Pages 116–117
of APB. We find that it is the claim of the Ld. AR, that though the A.O. had, based on information, made an addition under Section 69A of the Act, regarding unexplained investment in fixed/time deposit of Rs. 54 lacs but the same actually amounted to Rs. 48
lacs. It is further the claim of the assessee that the cash deposits of Rs. 6,75,470/-, which have been added in the hands of the assessee firm by treating it as having been sourced out of its unexplained money u/s 69A of the Act, belonged to and were duly accounted for by Shri K. Vithal (supra) in the books of accounts of his proprietary concern viz. M/s. Siddhartha Agencies for the subject year.
15. We find that the Ld. AR had claimed that Shri. K. Vithal
(supra) i.e., the continuing partner, after the dissolution of the assessee firm, viz. M/s. Siddhartha Agencies (since dissolved) had continued the business along with all its assets and liabilities as a 17
Siddhartha Agencies, Secunderabad.

sole-proprietor under the same name and style, viz. M/s Siddharth
Agencies. The Ld. AR had further to fortify his claim that the subject imports/deposits were duly disclosed by Shri. K. Vithal
(supra) in the audited books of account of his sole proprietary concern for the year under consideration had drawn support from his return of income, financial statements of M/s Siddharth
Agencies (proprietary concern of Shri. K. Vithal), copy of the “Import Purchase A/c” and the “Fixed deposit A/c” of the aforementioned proprietary concern for the period relevant to A.Y.
2021–2022 as appearing in the books of account of the proprietary concern, Pages 56 and 57 of APB. At the same time, the Ld. AR had pointed out that there were some discrepancies both regarding the reporting of the amount of imports and investments in the fixed deposits, as against the actual amount that was accounted for by Shri. K. Vithal (supra) in the “books of account” of his proprietary concern for the year under consideration.

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Siddhartha Agencies, Secunderabad.

as a sole proprietor, w.e.f. 01.01.2009, under the same name and style, viz. M/s. Siddhartha Agencies, but as he had inadvertently omitted to get the necessary amendments in both the bank account and the Importer Exporter Code (IEC), which continued in the name/PAN of the assessee firm; therefore, it was for the said reason that the impugned transactions in question, viz.
imports/investments/cash deposits, etc., were based on the PAN number so available with the concerned authorities i.e the bank and DGFT, were reported in the name of the assessee firm.

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Siddhartha Agencies, Secunderabad.

proper examination of the evidence and affording an adequate opportunity of being heard to the assessee.

“We are of the opinion that under the present Act, the Income Tax
Officer has no option like the one he had under the 1922 Act. He can, and he must, tax the right person and the right person alone. By "right person", we mean the person who is liable to 20
Siddhartha Agencies, Secunderabad.

be taxed, according to law, with respect to a particular income. The expression "wrong person" is obviously used as the opposite of the expression "right person". Merely because a wrong person is taxed with respect to a particular income, the Assessing Officer is not precluded from taxing the right person with respect to that income. This is so irrespective of the fact which course is more beneficial to the Revenue. In our opinion, the language of the relevant provisions of the present
Act is quite clear and unambiguous. Section 183 shows that where the Parliament intended to provide an option, it provided so expressly. Where a person is taxed wrongfully, he is no doubt entitled to be relieved of it in accordance with law* but that is a different matter altogether. The person lawfully liable to be taxed can claim no immunity because the Assessing Officer
[Income Tax Officer] has taxed the said income in the hands of another person contrary to law. We may proceed to elaborate.”

(emphasis supplied by us)

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have been made in the hands of the assessee firm, viz. (i).
unexplained money utilized for making payments for imports: Rs.
3,78,14,023/-; (ii). unexplained investments in fixed/time deposits with bank: Rs. 54,00,000/- and (iii). unexplained cash deposits in the bank account: Rs. 6,75,472/-, are the transactions pertaining to Shri K. Vithal, proprietor M/s. Siddhartha Agencies, and the same had duly been accounted for by him in the “books of accounts” of his proprietary concern, but, the said claim cannot be summarily accepted and will require necessary verification. In case, the aforesaid imports/investments pertain to Shri. K. Vithal
(supra), i.e the proprietor of M/s Siddharth Agencies, then, the A.O has no option but to verify as to whether or not the same are made by him out of his disclosed sources and, in case, the same are not found so, then, he being the “right person” will be liable to be assessed and taxed for the same.

Act, set aside the matter to the file of the A.O. with a direction for making a de novo assessment, but we are unable to concur with the same. As the assessee firm had at the threshold of the proceedings before the CIT(A), claimed that neither of the impugned additions made in its case pertained/related to it as it was dissolved vide “retirement deed”, dated 09.01.2009 w.e.f.
31.12.2008, and the business, thereafter, was taken over and continued along with all his assets and liabilities by the continuing partner, viz. Shri K. Vithal (supra), as a sole proprietor, under the same name and style of M/s. Siddhartha Agencies, therefore, the CIT(A) ought to have either called for a “remand report” on the said issue from the A.O. or; in the alternative, while setting aside the matter to his file directed him to verify the veracity of the aforesaid claim of the assessee firm. Rather, we are of the firm conviction that the CIT(A) ought to have directed the A.O. that, in case the aforesaid claim of the assessee firm was found to be in order, i.e.,
Shri. K. Vithal (supra), after the dissolution of the assessee firm w.e.f 01.01.2009, had continued the business as a sole proprietor with all its assets and liabilities, under the same name and style, viz.
M/s
Siddharth
Agencies
(supra), and the subject

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Siddhartha Agencies, Secunderabad.

imports/investments belonged to him, then, the impugned additions made in the hands of the assessee firm, vide order passed u/s 147 r.w.s 144 r.w.s. 144B of the Act, dated
23.03.2022, be vacated. Further, the CIT(A) should have while disposing the appeal, returned a finding/direction that the subject imports/investments be looked into in the hands of Shri K. Vithal, proprietor of M/s. Siddhartha Agencies, i.e., the “right person”.
We, say so, for the reason that the CIT(A), in exercise of the powers vested with him under the “Proviso” to Section 251(1)(a) of the Act, by simply setting aside the matter to the file of the A.O., with a direction to frame a de novo assessment in the hands of the assessee firm, had set open the case of the assessee firm, which based on the facts available before us had ceased to exist w.e.f.
31.12.2008, and thus, was no more in existence during the year under consideration i.e. A.Y. 2017-18. 22. We thus, in terms of our aforesaid observations, are of the firm conviction that the matter requires to be set aside to the file of the A.O. with a direction that, in case the claim of the assessee firm that it was dissolved on 31.12.2008 and was no more in 24
Siddhartha Agencies, Secunderabad.

existence during the year under consideration, and the impugned transactions based on which additions have been made, in its case pertained to Shri K. Vithal (supra), proprietor of M/s. Siddhartha
Agencies is found to be in order, then, the additions made in the hands of the assessee firm be vacated and proceedings be initiated against Shri K. Vithal (supra) as per the extant law, if required.

Order pronounced in the Open Court on 6th August, 2025. (श्री मिुसूदन सावडिया)
(MADHUSUDAN SAWDIA)
लेखा सदस्य/ACCOUNTANT MEMBER (श्री रवीश सूद)
(RAVISH SOOD)
न्यायिक सदस्य/JUDICIAL MEMBER

Hyderabad, dated 06.08.2025. *TYNM/sps

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Siddhartha Agencies, Secunderabad.

आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:-

आदेशधिुसधर / BY ORDER

Sr. Private Secretary
ITAT, Hyderabad