M/S MANILAL P. SAVLA & COMPANY,PUNE vs. ACIT, CIRCLE 5 , PUNE
आयकर अपीलीय अधिकरण “ए” न्यायपीठ पुणे में ।
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE
BEFORE SHRI R.K. PANDA, VICE PRESIDENT
AND MS. ASTHA CHANDRA, JUDICIAL MEMBER
आयकर अपील सं. / ITA Nos.2394 & 2393/PUN/2024
धििाारण वर्ा / Assessment Year : 2017-18
M/s. Manilal P. Savla & Company,
24, Bhawani Peth, Pune-411042
PAN : AABFM9782A
Vs.
ACIT, Circle-5, Pune
अपीलार्थी / Appellant
प्रत्यर्थी / Respondent
Assessee by :
Shri M.R. Bhagwat
Department by :
Shri Vidya Ratan Kishore
Date of hearing :
03-09-2025
Date of Pronouncement :
24-11-2025
आदेश / ORDER
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 31.08.2012. Based on the information received from the office of the Dy.
Commissioner of Income Tax, Central Circle-1(1), Pune that a search and seizure action was conducted u/s 132 of the Income Tax Act, 1961 (the “Act”) in the case of Shri Sachin M. Nahar on 01.08.2017 wherein certain documents were found and seized based on which he admitted that Manilal P Savla &
Company (the assessee) had given cash loans through Sachin M. Nahar to various parties to the extent of Rs.56,50,000/-, the source of which has not been unexplained and not disclosed in the return of income as no return was 2
ITA Nos.2394 & 2393/PUN/2024, AY 2017-18
filed by the assessee for AY 2017-18. After recording the reasons for reopening the case of the assessee u/s 147 of the Act and obtaining the requisite approval, the Ld. Assessing Officer (“AO") issued notice u/s 148 of the Act on 31.03.2021 which was duly served upon the assessee electronically. The assessee was asked to file its return of income for AY 2017-18 in the said notice issued u/s 148 of the Act. The assessee was then issued and served with notice u/s 142(1) of the Act on 15.12.2021 and 07.03.2022 requesting therein to file income tax return for AY 2017-18 with proper supporting documents in support of its return and to furnish copy of all bank statements for FY 2016-17. In response thereto, the assessee filed its reply electronically on 29.01.2022 and submitted a copy of dissolution deed. The assessee in its reply (reproduced in para 6 of the assessment order) submitted that intimation of dissolution of firm has already been made to the Department on 25.04.2013. Thereafter, the Ld. AO issued a show cause notice on 24.03.2022 requesting the assessee to show cause as to why the amount of Rs.56,50,000/- may not be treated as unexplained cash hitherto undisclosed for AY 2017-18 u/s 69A r.w.s. 115BBE of the Act. Since the assessee did not furnish reply to the said show cause notice, the Ld. AO proceeded to complete the assessment u/s 144
r.w.s. 147 of the Act on total income of Rs.56,50,000/- by making an addition of Rs.56,50,000/- u/s 69A of the Act vide order dated 30.03.2022 by observing as under :
―07. As per section 189 of the Income tax Act, 1961. Section 189 read as under:-
"Section 189(1)-Firm dissolved or business discontinued Where any business or profession carried on by a firm has been discontinued or where a firm is dissolved, the (Assessing Officer) shall make an assessment of the total income of the firm as if no such discontinuance or dissolution had taken place, and all the provisions of this Act, including the provisions relating to the levy of a penalty or any other sum chargeable under any provision of this Act, shall apply, so far as may be, to such assessment.
Section 189(2)...................‖
08. Further, show cause notices dated 24.03.2022 was issued and duly served to assessee electronically through e proceedings. In the show cause it was informed to the assessee, 'intimation of dissolution of the entity needs to be submitted to the Department within 15 days of such dissolution, in your case, the same was intimated after 237 days of dissolution. Further, the assessee firm has carried out the afore-mentioned transaction(s) after closure of business activities.
In such a scenario, provisions of section 189 of the Income-tax Act, 1961 needs to be invoked and liability of tax, penalty, etc. needs to be borne by the partner(s) of the at the time of dissolution.". In view of above, assessee was requested to show cause as to why the amount of Rs. 56,50,000/- may not be treated as unexplained cash hitherto undisclosed for A.Y. 2017-18 u/s 69A r.w.s.115BBE of the Income Tax Act 1961. 3
ITA Nos.2394 & 2393/PUN/2024, AY 2017-18
On perusal of records from ITBA/E-proceedings (Systems), it is noticed that the assessee has not furnished any submission thereof till date. Therefore, the undersigned is proceeding further as per material available on records. 10. Subject of the above, total income of the assessee is computed as under: Computation of Income Sr. No. Particulars Amount (in Rs.) 1 Total income as per return of income Non filer 2 Addition: As discussed in para 3 56,50,000/- 3 Total Income assessed u/s 144 r.w.s.147 56,50,000/-
Aggrieved, the assessee carried the matter before the Ld. CIT(A)/NFAC challenging the above addition of Rs.56,50,000/- made u/s 69A of the Act by the Ld. AO and also raised an additional ground before the Ld. CIT(A)/NFAC that ―the reassessment order u/s 147 is without juri iction and bad in law because the assessing officer has wrongly invoked the provisions of section 189 which do not copower him to assess any income arising post dissolution of the firm‖. The Ld. CIT(A)/NFAC dismissed the appeal of the assessee including the additional ground raised before him by observing as under : ―5.2 Briefly, the facts of the case are that on verification of case records, it was noticed that the appellant is a partnership firm which was once a time carrying- on business of dealing in edible oils. The firm was dissolved on 31.08.2012 by executing Dissolution deed. A Search and Seizure action was conducted u/s 132 of the Act in the case of Shri Sachin M. Nahar on 01.08.2017 wherein certain documents were found and seized based on which he admitted that MANILAL P SAVLA AND COMPANY had given loans through Sachin M. Nahar to various parties to the extent of Rs.56,50,000/-. Therefore, the case of the appellant was reopened u/s 147 of the act by issuing notice u/s 148 of the Act. During the course of assessment proceedings, the appellant has contended that the firm was dissolved on 31.08.2012 and has not carried any business since then. The AO considered the submissions of the appellant but found not acceptable as the appellant firm has not intimated the dissolution within 15 days of such dissolution. Therefore, the AO invoked the provisions of Section 69A r.w.s 115BBE of the Act and made addition of Rs.56,50,000/- to the returned income. 5.3. The addition made by the AO and the submissions of the appellant have been perused. It is seen from the assessment order that the appellant had given cash loans through Sachin M. Nahar to various parties to the extent of Rs.56,50,000/-. The fact has been admitted by Sachin M. Nahar during the course of search and seizure proceedings. The appellant firm further has not intimated the dissolution of the firm to the Department within 15 days of such dissolution. The appellant contention that the firm has been dissolved on 31.08.2012 does not absolve the appellant from the liability. 5.4. The appellant raised in the additional grounds of appeal that the reassessment order u/s 147 is without juri iction and bad in law because the assessing officer has wrongly invoked the provisions of section 189 which do not copower him to assess any income arising post dissolution of the firm. The appellant places reliance on decision of the Hon'ble ITAT in the case of M/s Mantri Developers VS DCII. The contention of the appellant cannot be accepted since Sri Sachin M. Nahar during the search and seizure proceedings had admitted that the firm had given cash loans to the extent of Rs 66,50,000/. As p cash loans to the extent of Rs 66,50,000/-. As per Section 189 of the IT Act, where any business siness or profession carried on by a firm has been 4
ITA Nos.2394 & 2393/PUN/2024, AY 2017-18
discontinued or where a firm is dissolved, the AQ shall make an assessment of the total income of the firm as if no such discontinuance or dissolution had taken place. In the instant case, although the firm under consideration was dissolved as on date of assessment, the firm has carried out the transactions by advancing cash loans to the tune of Rs.56,50,000/-.
5.5. Considering the facts and circumstances of the case and following the above decision, the contention raised by the appellant is not acceptable and the ground of appeal no.2 raised in this regard is dismissed.
5.6. The additional grounds of appeal raised by the appellant is with regard to re- opening of assessment. The reasons have been recorded by the AO for escapement of income and the case was re-opened u/s 147. Notices u/s 148 and 142(1) were served on the appellant. Hence, the grounds raised by the appellant is void of any merit and the additional grounds raised by the appellant are dismissed.‖
Dissatisfied, the assessee is in appeal before the Tribunal raising the following grounds of appeal : ―1) The learned CIT(A), NFAC, DELHI has erred in sustaining the validity of the reassessment where it was without juri iction and bad in law because the assessing officer had wrongly invoked the provisions of section 189 which do not empower him to assess any income arising post dissolution of the firm.
2)
The learned CIT(A), NFAC, DELHI has erred in sustaining the validity of the reassessment where it was a)
Solely based on third party evidence collected behind assessee's back and b) against the principles of natural justice
3)
The learned CIT(A), NFAC, DELHI has erred in confirming the addition of Rs.56,50,000/- under section 69A.
4)
The reassessment may be cancelled.
5)
The addition of Rs.56,50,000/- be deleted and the appellant's total income be reduced to that extent.
6)
Such other orders be passed as deemed fit and proper.
7)
The appellant prays for leave to add to, modify or amend its grounds of appeal and lead evidence.
The Ld. AR submitted that the fact of dissolution of the assessee firm was duly intimated to the Ld. AO which he records in para 6 of the assessment order. He submitted that the assessee’s reliance on the decision of the Juri ictional Tribunal in the case of M/s. Mantri Developers Vs. Income Tax Officer in ITA No. 1053/PUN/2013, dated 19.12.2014 in support of the additional ground raised by the assessee has been rejected by the Ld. CIT(A)/NFAC. Drawing support from the said decision, the Ld. AR submitted that the reassessment order is without juri iction and bad in law because the 5
ITA Nos.2394 & 2393/PUN/2024, AY 2017-18
Ld. AO has invoked the provisions of section 189 of the Act which do not empower him to assess any income arising post dissolution of the firm. The Ld. CIT(A)/NFAC rejected this contention of the assessee for the reason that the assessee firm has carried out the transactions by advancing cash loans to the tune of Rs.56,50,000/- although the firm was dissolved as on the date of assessment and hence the Ld. AO was completely unjustified in invoking the provisions of section 189 of the Act. This observation of the Ld. CIT(A)/NFAC is unsustainable in law.
1 The Ld. AR further submitted that in respect of the alleged cash transaction of Rs.56,50,000/-, the Ld. AO has not brought on record any evidence to show that the transaction had actually taken place except the statement of a third party recorded during the course of searched person. He therefore contended that both the Ld. AO as well as the ld. CIT(A)/NFAC have failed to bring on record any transaction details in respect of the impugned addition.
2 On being directed by this Bench to produce additional evidence regarding dissolution of the assessee firm with particular reference to the bank accounts operated by the firm, the Ld. AR made the following submissions on behalf of the assessee : ―1] The firm was dissolved by a Deed of Dissolution dated 31 August 2012 whose copy is already placed on record in the paper book. 2] The firm-maintained current accounts with following banks during the course of its existence :- i) Pune Peoples Co-op Bank Ltd Laxmi Road Branch account no.100210041002502. The firm closed this account on 14/02/2011 as per bank's certificate enclosed. ii) Vidya Sahakari Bank Ltd. Current account no.201204180000100, The account remained to be closed because of the death of the working partners Mr. Arvind P. Savala on 29/10/2012 and Mr. Dheeraj P. Savala on 01/10/2013 respectively after the dissolution on 31 August 2012. The account has been classified as inoperative account by the bank since the last transaction of Rs.8000/- on 29/04/2013. The bank finally closed the account unilaterally on 30/06/2020 and the statement is enclosed. Your Honors may note that there are no transactions in the account after 29/04/2013, The appellant is also attaching the death certificates of both the partners. iii) Canara Bank Current account no. 6584: The firm filed its last return of income for assessment year 2013-2014 on 23/07/2013. This account was mentioned in the return form but despite their best efforts the surviving partners have not been able to locate any old record pertaining to such account. Therefore, it appears that the same was also probably closed at the time of the dissolution of the firm. The bank's confirmation about non existence of such an account is enclosed.
ITA Nos.2394 & 2393/PUN/2024, AY 2017-18
Besides the above the firm had informed about its dissolution to the following Government authorities:
1) Assessing officer Ward 5(3) Pune. Copy already placed on record in assessee's paper book.
2)