M/S MANILAL P. SAVLA & COMPANY,PUNE vs. ACIT, CIRCLE 5, PUNE

ITA 2393/PUN/2024Status: DisposedITAT Pune24 November 2025AY 2017-1817 pages
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What did the Tribunal hold?

The Tribunal held that the reassessment proceedings were invalid and bad in law. The Tribunal reasoned that Section 189 of the Income Tax Act, 1961, is a machinery section enacted for the purpose of assessment and imposition of tax liability already incurred by the firm while in existence or during the period business was carried on. It assumes the continuance of the business or existence of the firm only for the purpose of assessment and not for any other purpose. The section cannot extend to income or profits that accrued, arose, or were received after the discontinuance of business or dissolution of the firm. In the instant case, the firm was undisputedly dissolved on 31.08.2012, and there was no evidence of business transactions after dissolution. Therefore, the reassessment proceedings against a dissolved firm for income arising post-dissolution were held to be invalid. Consequently, the addition made under Section 69A read with Section 115BBE was quashed. As the assessment order was quashed, the penalty levied under Section 271AAC(1) was also deleted as it had no basis. The assessee succeeded on the legal ground, rendering other grounds irrelevant.

What were the facts?

The assessee, M/s. Manilal P. Savla & Company, a firm, is in appeal against orders for Assessment Year 2017-18. The firm dissolved on 31.08.2012 and stopped filing returns from AY 2013-14. Based on information from a search in Shri Sachin M. Nahar's case, it was revealed that the assessee firm had given cash loans of Rs. 56,50,000/- through Shri Nahar. The Assessing Officer (AO) reopened the case under Section 147, issuing a notice under Section 148 on 31.03.2021. Despite the assessee submitting a dissolution deed and stating intimation of dissolution on 25.04.2013, the AO proceeded to make an addition of Rs. 56,50,000/- under Section 69A read with Section 115BBE, completing the assessment under Section 144 read with Section 147. The Commissioner (Appeals)/NFAC dismissed the assessee's appeal.

What were the issues?

1. Whether the reassessment proceedings under Section 147 of the Income Tax Act, 1961, are valid and legal when the Assessing Officer invoked Section 189 of the Act for income arising post-dissolution of the firm (mixed question of law and fact). The assessee contended that Section 189 does not empower the AO to assess any income arising post-dissolution of the firm, arguing that the reassessment order is without jurisdiction and bad in law. The assessee relied on the decision in M/s. Mantri Developers vs. DCII. The revenue, through the AO and as upheld by the CIT(A)/NFAC, contended that Section 189 is applicable, and the firm is liable for the cash loans given, even after dissolution, especially since the dissolution intimation was delayed and transactions occurred after business closure. The revenue also noted the admission by Shri Sachin M. Nahar regarding the cash loans.

Which sections of the Income-tax Act were involved?

Section 132,Section 147,Section 148,Section 142(1),Section 144,Section 69A,Section 115BBE,Section 189,Section 271AAC(1)

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Income Tax Appellate Tribunal, “A” BENCH, PUNE

Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA

For Appellant: Shri M.R. Bhagwat
For Respondent: Shri Vidya Ratan Kishore

PER ASTHA CHANDRA, JM : The above two appeals filed by the assessee are directed against the separate orders both dated 27.09.2024 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)”/“NFAC"] pertaining to Assessment Year (“AY”) 2017-18. For the sake of convenience, both these appeals were heard together and are being disposed of by this common order. ITA No. 2394/PUN/2024, AY 2017-18

2.

Briefly stated, the facts are that the assessee is a firm. For AY 2017-18, the assessee has not filed its return of income. The assessee firm stopped filing its return of income from AY 2013-14 onwards, as the firm got dissolved on

The order continues below.

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