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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI
आदेश/ O R D E R
Per B.M. Biyani, AM:
Feeling aggrieved by order of first appeal dated 04.07.2024 passed by Commissioner of Income-tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 17.03.2023 passed by Assessment Unit of Income-tax Department [“AO”] u/s 147 r.w.s. 144B of the Income- tax Act, 1961 [“Act”] for Assessment-Year [“AY”] 2018-19, the assessee has filed this appeal on following grounds:
“1. The Ld. CIT(A) NFAC has erred in upholding re-opening of assessment u/s 147. The re-opening is bad in law and hence the assessment be annulled.
That Impugned Assessment order passed by the Ld. AO and Uphold by Ld. CIT(A) is in total violation of Principles of natural justice, fairness and transparency and treated total amount of Rs. 17,36,59,610/- as unexplained income of the assessee without considering the submission and evidence submitted before the Ld. AO and facts on record.
That impugned Assessment order passed by the Ld. AO and Uphold by Ld. CIT(A) is in total violation and infringement of mandatory applicable binding CBDT Circulars Instructions. It was proved before the lower authorities that the transactions in the bank is already recorded in the individual books and the same has been already been assessed and taxed. In spite of this fact, the Ld. AO and the Ld. CIT(A) have erred in taxing the same income doubly once in the hands of the individual and secondly in the hands of the dissolved firm.
4. The assessment has been framed on the dissolved firm which does not exist as such the assessment is bad in law. The observation of the Ld. AO that no information related to the dissolution of the firm has been communicated to the Department is based on wrong footing, since the AO himself in para 3.2(b) has mentioned this fact. 5. The addition maintained without appreciating the evidence placed on record and without appreciating the facts, merely on the basis of the letter issued by the bank that the change in the partnership was not informed, is bad in law and deserves to be deleted. 6. The addition of Rs. 17,36,59,610/- may please be deleted.” 2. The background facts leading to present appeal are such that the assessee is a partnership firm. For AY 2018-19 under consideration, the assessee did not file any return because it is claiming to be non-existent.
The AO, on the basis of information available on Insight Portal of Income- tax Department, found that the assessee made total cash deposits of Rs. 43,39,610/- in an account with Axis Bank and total cash withdrawals of Rs. 16,93,20,000/- from very same bank during the previous year 2017-18 relevant to AY 2018-19. Accordingly, the AO issued notice dated 21.10.2022 u/s 142(1) to assessee followed by notice u/s 143(2) and a show-cause notice. The AO asked the assessee to explain the transactions in bank a/c. In response, the assessee furnished replies stating that the Page 2 of 12 assessee was a partnership firm w.e.f. 01.04.1989 having PAN:
AALFM2899Q but the same was dissolved w.e.f. 31.12.2009/01.01.2010 and all assets and liabilities of assessee-firm were taken over by one partner “Shri Suresh Chandra Mantri” having PAN: AATPM9266B but due to oversight the PAN in Bank A/c could not be changed by updating KYC. It was further submitted that all transactions were recorded and return of income was filed by “Shri Suresh Chandra Mantri” in his individual capacity. Certain documents including the ITR of Shri Suresh Chandra Mantri, Deed of dissolution and Statement of Axis Bank were filed to AO.
However, the AO rejected assessee’s submission and made an addition of Rs. 17,36,59,610/- by treating cash deposits of Rs. 43,39,610/- into Bank A/c as unexplained income u/s 69A (+) cash withdrawals of Rs. 16,93,20,000/- from Bank A/c as unexplained expenses u/s 69C. The reason of making such addition, as given by AO, is re-produced below:
“3.5 Point-wise rebuttal of reply of the assessee including analysis of any case law relied upon: On going through the details furnished by the assessee, it is observed that the information related to the dissolution of firm has not been communicated to the department. Further, as per letter dated 09.02.2022 issued by the Axis Bank it is noted that the KYC in account number 513010200000879 relating to Mantri brothers could not be updated at time of dissolution of firm "as it was not informed", hence operation continued in account with old PAN number i.e. AALFM2899Q. Hence, it is clearly seen that the bank was not intimated at the time of dissolution of firm. During the video conference, with regard to query relating to intimating the department about the dissolution, it was submitted by the A.R that the consultant looking after the case expired in 2020 and not in a position to produce the documents. 3.6 Conclusion drawn: In view of above facts of the case, the amount of Rs. 43,39,610/- remains unexplained and is hereby deemed to be the income of the assessee for the year under consideration in view of provisions of section 69A of the I.T. Act, 1961. The withdrawals at Rs. 16,93,20,000/- are deemed
Page 3 of 12 to be unexplained expenses u/s 69C of the Act. Penalty u/s 271AAC of the Act are initiated separately.” 3. During first-appeal, the CIT(A) approved the conclusions of AO and upheld addition.
Before us, Ld. AR for assessee made following contentions and claimed that the impugned additions made by AO in the hands of assessee- firm are not sustainable and must be deleted:
(i) That the assessee-firm stands dissolved w.e.f. 31.12.2009 and as per clause Nos. 3, 4, 5 and 7 of dissolution-deed filed at Pages 46-48 of Paper-Book (this Deed was also filed to AO), entire business of assessee-firm alongwith all assets and liabilities was taken over by one of the partners “Shri Suresh Chandra Mantri”.
(ii) That after dissolution, “Shri Suresh Chandra Mantri” carried on the business of dissolved firm under the pre-existing name and style of “M/s Mantri Brothers” as proprietorship concern. “Shri Suresh
Chandra Mantri” continued the pre-existing bank a/c of dissolved firm with original PAN of firm and made transactions of proprietorship concern in such bank a/c. “Shri Suresh Chandra
Mantri” has appropriately recorded all transactions in the books of account of his proprietorship concern.
(iii) That, the factum of dissolution was very much in the knowledge of Income-tax Department. To demonstrate this, Ld. AR referred the Page 4 of 12 notings made by assessing authority in scrutiny assessment-orders of “Shri Suresh Chandra Mantri” for AY 2011-12 to 2014-15 placed at Pages 195-208 in Paper-Book, the same are re-produced below:
Para 2 of assessment-order dated 23.12.2013 u/s 143(3) for AY 2010-11:
“2. िनधा�रती�ीसुरेशच�मं�ी, �ो. मे. मं�ी�दस�, नीमचकेनामसेकृिषउ�ादजैसे- चना, धिनया, मेथी, पो�ा, उड़द, रायड़ाआिदकाकृिषउपजमंडीसे�यकरथोक िव�यकरतेह�।�ोपरायटर�शपके�पम�यह�वसायिदनांक01.01.2010 से�ारंभ �आहै।इसकेपूव�िनधा�रतीमे. मं�ी�दस�, नीमचम�भागीदारथे।“ Para 2 of assessment-order dated 04.03.2015 u/s 143(3) for AY 2011-12:
“2. िनधा�रती�ीसुरेशच�मं�ी, �ो. मे. मं�ी�दस�, नीमचकेनामसेकृिषउ�ादजैसे- चना, धिनया, मेथी, पो�ा, उड़द, रायड़ाआिदकाकृिषउपजमंडीसे�यकरथोक िव�यकरतेह�।�ोपरायटर�शपके�पम�यह�वसायिदनांक01.01.2010 से�ारंभ �आहै।इसकेपूव�िनधा�रतीमे. मं�ी�दस�, नीमचम�भागीदारथे।“ Para 2 of assessment-order dated 29.02.2016 u/s 143(3) for AY 2013-14:
“2. िनधा�रती�ीसुरेशच�मं�ी, मं�ी�दस�दशहरामैदाननीमचके�ो�ाइटरह�।�जसम� अजवाइन, धिनया, कलोजी, म�थी, रायडा, पो�ा, उड़ददाल, सोयाबीन, गे�ंइ�ािदएवं बारदाताकामंडीसे�यिव�यिकयाजाताहै। Para 2 of assessment-order dated 06.06.2016 u/s 143(3) for AY 2014-15:
“2. िनधा�रती�ीसुरेशच�मं�ी, मं�ी�दस�दशहरामैदाननीमचके�ो�ाइटरह�।�जसम� अजवाइन, धिनया, कलोजी, म�थी, रायडा, पो�ा, उड़ददाल, सोयाबीन, गे�ंइ�ािदएवं बारदानाकामंडीसे�यिव�यिकयाजाताह�।“
Ld. AR also narrated an important point that the assessment of assessee-firm for immediate preceding AY 2017-18 was also re-opened by AO u/s 147 but ultimately the same was closed with following Order-Sheet dated 26.02.2022, copy at Page 57 of Paper-Book:
Reading the contents of above order-sheet word by word, Ld. AR submitted that the case of assessee-firm was re-opened on the footing of very same
Page 6 of 12 reason i.e. the cash deposits and cash withdrawals made into/from same bank a/c and ultimately the AO closed the proceeding of section 147 initiated against assessee-firm taking note of the very same facts as discussed in above submissions.
Replying to above, Ld. DR for revenue relied upon the orders of lower- authorities and made a limited submission that the AO may carry out factual examination as to the recording of transactions in the books of proprietorship concern.
In rejoinder, Ld. AR submitted that the assessee filed Cash-Book & Bank-Book forming part of books of account of proprietorship concern and Bank Statement of Axis Bank to AO, the same are available at Pages 99- 194 of Paper-Book. He also drew us to a Certificate issued by Auditors of assessee filed to AO, copy at Page No. 94 of Paper-Book, certifying that all transactions of Axis Bank A/c were duly considered in audit of Shri Suresh Chandra Mantri (PAN: AATPM9266B). The said certificate is scanned and re-produced below for an immediate reference:
Ld. AR further drew us to a letter filed by assessee to AO during assessment-proceedings wherein entire facts were clearly informed including a clear-cut submission that all transactions of Axis Bank were duly recorded in the books of Shri Suresh Chandra Mantri, copy of letter is scanned and re-produced below:
Page 10 of 12 Thus, Ld. AR submitted that there is no and there cannot be any doubt as to the recording of transactions in the books of Shri Suresh Chandra Mantri.
We have considered rival submissions of both sides and perused the orders of lower authorities as also the documents held in Paper-Book to which our attention has been drawn. The dispute in present case relates to the addition made by AO on account of cash transactions made in an account with Axis Bank which was standing in the PAN of assessee-firm.
The facts are, however, very clear and do not have any ambiguity. The assessee-firm was dissolved w.e.f. 31.12.2009/01.01.2010 and thereafter “Shri Suresh Chandra Mantri”, one partner, carried business of assessee- firm in the same name. These facts were very much in the knowledge of department as is manifest from as many as four scrutiny-assessment orders of “Shri Suresh Chandra Mantri” re-produced above. In fact, the AO also initiated re-opening proceeding u/s 147 against assessee-firm for immediate preceding AY 2017-18 for the very same reason that there were cash deposits/withdrawals in the Axis Bank in the name and PAN of assessee but ultimately closed the re-opened assessment accepting the dissolution of firm and taking over business by “Shri Suresh Chandra Mantri”. The assessee has also filed sufficient documents of “Shri Suresh Chandra Mantri” in the form of Cash-Book, Bank-Book, ITR, etc. wherein the transactions of Axis Bank are recorded. Thus, in these set of facts, we do not find any justification in making addition in the hands of assessee-
Page 11 of 12 firm merely because the PAN was not updated in KYC documents of bank.
We, therefore, have no hesitation in deleting the addition made by AO fully and accordingly direct the AO to delete the same. The assessee succeeds in this appeal.
Resultantly, this appeal is allowed.
Order pronounced in open court on 26/03/2025