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Facts
The assessee, originally a partnership firm, dissolved on 01/04/2016, and its business was taken over by one of its partners, Shri Sunil Kumar Goel, as a proprietorship concern. The Assessing Officer (AO) framed an assessment under Section 144 for AY 2017-18 against the non-existing partnership firm, assessing cash deposits under Section 69A, as no ITR was filed by the firm. The assessee's appeal before the CIT(A) was dismissed due to a 21-day delay in filing, which the assessee attributed to multiple family deaths of the authorized representative.
Held
The Tribunal condoned the 21-day delay in filing the appeal, accepting the reasons for the delay as beyond the assessee's control. It set aside the CIT(A)'s order and remanded the matter back to the Assessing Officer for re-adjudication, directing verification of the firm's dissolution, the continuation of the business as a proprietorship, and the income declared by the proprietor. The AO was granted liberty to initiate fresh proceedings if the income was not properly declared and was instructed to give the assessee an opportunity of hearing.
Key Issues
Condonation of delay in filing appeal before CIT(A); validity of assessment framed against a non-existing partnership firm; and the need for verification of business succession as a proprietorship and income declaration by the proprietor.
Sections Cited
144, 142(1), 139, 69A, 44AB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘ DB-A ‘ Bench, Hyderabad
Before: Shri Vijay Pal Rao, Vice-Shri Manjunatha, G.
Per Vijay Pal Rao, Vice President
This appeal by the assessee is directed against the order dated, 07/02/2025 of the learned CIT (A)-NFAC Delhi, for the A.Y.2017-18.
The assessee has raised the following grounds of appeal:
ITA 491 of 2025 Bajrang Cutpiece Centre Hyderabad
The learned Counsel for the assessee submitted that the appeal of the assessee was dismissed by the learned CIT (A) on the ground of delay as the learned CIT (A) has declined to condone the delay of 21 days in filing the appeal. The learned Counsel for the assessee has referred to the reasons explained in Form-35 for the delay of 21 days and submitted that due to a death in the family of the AR he was travelling out of the City and unfortunately, there was another death in the family of the A.R which has caused the delay of 21 days. Thus, the learned Counsel for the assessee has submitted once the assessee has explained the cause of the delay which was beyond the control of the assessee and due to unfortunate deaths in the family of the AR, the appeal could not be filed. The learned Counsel for the assessee has stated at Bar that there were deaths in his close family relations and he had to travel to KOTA (Rajasthan) which has caused the delay in filing the appeal of the assessee. Thus, he has pleaded that the delay of 21 days in filing the appeal before the learned CIT (A) may be condoned.
ITA 491 of 2025 Bajrang Cutpiece Centre Hyderabad
On the other hand, the learned DR has relied upon the orders of the learned CIT (A).
We have considered the rival submissions and carefully perused the impugned order of the learned CIT (A). The learned CIT (A) has reproduced the reasons explained by the assessee for the delay of 21 days in filing the appeal in para 2 of the impugned order as under:
“2. In Form 35, the appellant has admitted that there is delay in filing of appeal and has submitted the reason for delay in filing of appeal as under : “Sir/ Madam due to the death of the authorized representatives close family member, He was travelling to Kota for a period of 10 days and was not connected to mails. After coming back, unfortunately there was another death in the close family for which he had to travel to arm or village. Kindly oblige and accept this appeal giving the assessee a chance to explain the matter.”
Thus, once the assessee has explained the cause of delay as the repeated deaths in the family of the A.R, then before rejecting the said explanation, the learned CIT (A) ought to have called for better particulars from the assessee in support of the explanations. Before us, the learned Counsel for the assessee has stated at Bar that there were causalities in his close family during the said period that has caused the delay in filing the appeal before the learned CIT (A). Accordingly, in the facts and circumstances of the case and also in the interest of justice, the delay of 21 days in filing the appeal before the learned CIT (A) is condoned.
ITA 491 of 2025 Bajrang Cutpiece Centre Hyderabad
The learned Counsel for the assessee has submitted that the Assessing Officer has passed the assessment order against a non-existing partnership firm as the partnership firm was reconstituted and converted into a proprietary concern. The Income Tax Return was also filed by the Proprietor who have taken over the business of the partnership firm. The learned Counsel for the assessee has referred to the original partnership deed and thereafter, reconstitution/dissolution deed dated 01/04/2016 whereby the partnership ceased to exist and one of the Partners has retained the assets and liability of the partnership firm to continue with the business. The learned Counsel for the assessee has further submitted that earlier M/s. Bajrang Cutpiece Centre was a partnership firm vide partnership deed dated 26/04/1991. On 30/03/2016, the firm was dissolved and Mr. Sunil Kumar Goel, one of the Partners in the firm has taken over the business with all its assets and liabilities along with the name of the firm. Thus, from 01/04/2016, he became the sole Proprietor of M/s. Bajrang Cutpiece Centre. The erstwhile partnership firm had always filed return of income with tax audit u/s 44AB of the I.T. Act, 1961 but for the financial year 2016-17 relevant to the A.Y 2017-18 the firm has not filed the return as it ceased to exist due to the dissolution and business was taken over by one of the Partner Shri Sunil Kumar Goel. The learned Counsel for the assessee has pointed out that after the partnership was dissolved, the business was continued by Shri Sunil Kumar Goel, as a Proprietor of the business. Since he was also authorized signatory of the Bank Account, he continue to Page 4 of 8
ITA 491 of 2025 Bajrang Cutpiece Centre Hyderabad operate the Bank Account as a Proprietor. Due to mistake of PAN No of the partnership firm still linked with the said Bank Account, the Assessing Officer has framed this assessment in the name of the partnership firm. The learned Counsel for the assessee has submitted that the Assessing Officer issued show cause notice u/s 142(1) of the Act which was responded by the assessee as the Proprietor of the business and filed the reply dated 15/03/2018 placed at Page No.85 of the paper book and also explained the reasons for non-filing of the return of income by the partnership firm due to the dissolution and non-existing entity. The Assessing Officer framed the assessment in the name of the partnership firm u/s 144 of the Act as there were no return of income on behalf of the partnership firm which was challenged by the assessee before the learned CIT (A), but the appeal was dismissed as not maintainable due to delay of 21 days in filing the appeal. Thus, the learned AR has pleaded that the matter may be remanded to the record of the Assessing Officer to verify all these facts including the dissolution of the partnership firm, return of income filed by the individual assessee as a Proprietor of M/s. Bajrang Cutpiece Centre and then decide the matter as per law.
On the other hand, the learned DR has submitted that the assessee did not produce any material and record in support of the claim that the partnership firm was dissolved and business were taken over by one of the Partners of the partnership firm. The Assessing Officer has proceeded to frame the assessment on the basis of the bank account transactions of the partnership firm
ITA 491 of 2025 Bajrang Cutpiece Centre Hyderabad having the PAN of the partnership firm. He has relied upon the orders of the authorities below.
We have considered the rival submissions as well as the relevant material available on record. The Assessing Officer noted that the assessee has not filed any return of income u/s 139 of the I.T. Act and accordingly, a notice u/s 142(1) of the Act was issued on 12/03/2018 calling the assessee to prepare a true and correct return of income. The Assessing Officer further noted that there were cash deposits in the Bank Account of the assessee during the demonetization period to the tune of Rs.11,61,000/- and the assessee has not filed any return of income. Accordingly, the Assessing Officer proceeded to frame the assessment u/s 144 of the I.T. Act and assessed the total income of the assessee at Rs.1,37,73,326/- u/s 69A of the Act on account of the credit entries including the cash deposits in the Bank Account of the assessee. It is pertinent to note that the Assessing Officer has framed the assessment in the name of a Partnership Firm whereas the Assessing Officer has stated in the assessment order that the assessee is an individual in para (1) of the order as under: “The assessee is an Individual. A Notice u/s 142(1) of the Income Tax Act, 1961 was issued on 12/03/2018, calling the assessee to prepare a true and correct return of income in respect of which the assessee was assessable under the Income tax Act, 1961 (Act) during the previous year relevant to assessment year 2017-18. As per provisions of Section 142(1) of the Act, the assessee was required to furnish the said return of income as required to be furnished as per the conditions and manner prescribed in Rule 12 of the Income Tax Rules, 1962, on or before 31.08.2017. But the assessee
ITA 491 of 2025 Bajrang Cutpiece Centre Hyderabad failed to furnish return of income for A Y 2017-18 either u/s 139 (on or before 31/03/2018) and failed to furnish Income Tax Return (ITR) in response to notice issued u/s 142(1) of the Act.”
Further, the assessee has filed the original partnership deed dated 16/04/1991 as well as reconstituted/dissolution deed dated 01/04/2016 both are placed at page Nos. 74 to 76 and 77 to 81 of the paper book respectively. The assessee has also claimed that after the dissolution, one of the Partner Shri Sunil Kumar Goel has filed the return of income declaring the income from the business of the proprietary ship concern taken over on dissolution of the partnership firm. All these facts and record showing the dissolution of the partnership firm w.e.f. 01/04/2016 as well as filing of the return of income by the individual assessee in the capacity of proprietorship concern, are required to be verified and examined at the level of the Assessing Officer. Accordingly, in the facts and circumstances of the case, we set aside the impugned order of the learned CIT (A) and remand the matter to the record of the Assessing Officer for re-adjudication of the same after verification and examination of all the relevant facts as well as record in respect of the dissolution of the partnership firm and declaration of the income in the hand of the proprietorship concern by one of the Partner Shri Sunil Kumar Goe. It is made clear that in case the income assessable to tax is not properly declared by the individual partner Shri Sunil Kumar Goel as a Proprietor, the Assessing Officer is at liberty to initiate the proceedings and assess the correct income in the hand of the proprietor of M/s. Bajrang Cutpiece Centre. Needless to say,
ITA 491 of 2025 Bajrang Cutpiece Centre Hyderabad before passing the fresh order, the assessee be given an appropriate opportunity of hearing.
In the result, appeal filed by the assessee is allowed for statistical purposes.