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Facts
The assessee is an appeal against the order confirming an addition of Rs. 96,85,000/- made under Section 69A of the Income-tax Act, 1961. The assessee claimed the firm was dissolved prior to the assessment year, and the cash deposits were explained by a proprietary concern. The Revenue contended that the partner could not establish the deposits were out of business receipts.
Held
The Tribunal noted that the firm's account was utilized by the partner who continued business of a similar nature. However, the partner failed to establish the source of deposits with sufficient evidence. The Tribunal directed the partner to produce detailed records of business conduct, failing which they would be subject to the Act's provisions.
Key Issues
Whether cash deposits in the firm's account were duly explained when the firm was allegedly dissolved prior to the assessment year, and whether the partner provided sufficient evidence to substantiate business operations and the source of funds.
Sections Cited
69A, 250
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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: DR. B.R.R. KUMAR, VICE-SHRI T.R. SENTHIL KUMAR
PER DR. B.R.R. KUMAR, VICE-PRESIDENT :
This appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as "CIT(A)" for short) dated 23.05.2025 passed under Section 250 of the Income-tax Act, 1961 [hereinafter referred to as "the Act" for short], for Assessment Year (AY) 2017-18.
The grounds of appeal raised by the Assessee are as follows:-
“The Ld. CIT(A) has erred in law and on facts in confirming the addition of Rs.96,85,000/- made under Section 69A of the Income-tax Act, 1961 in the hands of the appellant firm, without appreciating that the appellant firm was dissolved on 12.04.2010 and had no legal existence during the relevant assessment year, and further failed to consider that the cash deposits were duly explained and accounted for in the books of the proprietary concern of Mr. Asif Jafarbhai Mansuri, who had continued the business in his individual capacity under the same trade name.”
The facts reveal that the firm’s account has been utilized by the partner and the details of the accounts have been changed even in the bank. The Ld. Counsel argued that the partner, having taken over the accounts of the firm, continued business of the similar nature and used the account of the firm.
On the other hand, the Ld. DR argued that the partner, who has used the bank account, could not establish that the deposits are made out of business receipts. The Ld. DR argued that the assessee has absolutely failed to prove the factum of conducting of the business and receiving the money in cash by way of producing bills/vouchers/ purchase details/sales details. The Ld. DR argued that in the absence of crucial evidence of conducting of any business, the addition needs to be sustained and alternatively prayed that the factum of running of the business has to be established.
In these contextual facts, we deem it proper that the partner shall produce all the details of conducting of the business, by way of producing bills/vouchers/ purchase details/sales details and utilization of bank statement, failing which the partner shall be subjected to rigours of the provisions of the Act.
In the result, the appeal of the assessee is allowed for statistical purposes.
The order is pronounced in the open Court on 04.11.2025