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Facts
The assessee, M/s Mangalam Sarees, a partnership firm, did not file a return for AY 2019-20. The AO received information about cash deposits aggregating to ₹2,05,53,983/- in the firm's bank account. It was submitted that the business was taken over by a partner, Shri Pramod Kumar Kashera, and was run as a proprietary concern, with the bank account and assets/liabilities also transferred. The deposits were explained as arising from sales proceeds of this proprietary concern.
Held
The Tribunal held that the same income cannot be taxed twice. The deposits in the bank account were explained as sale proceeds from the proprietary concern, which were duly incorporated in its audited accounts and balance sheet. The addition made by the AO under Section 69A was thus not sustainable as the source of the funds was explained.
Key Issues
Whether cash deposits in the bank account of a partnership firm, when the business and its assets/liabilities were taken over by a proprietary concern, can be treated as unexplained cash credit under Section 69A when the source is explained by the sales of the proprietary concern.
Sections Cited
69A, 115BBE, 148A, 148, 143(2), 142(1), 147, 144B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “PATNA” BENCH, PATNA
O R D E R Per Rajesh Kumar, AM:
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 21.02.2025 for the AY 2019-20.
At the time of hearing, ld. Counsel for the assessee pressed ground no.6,7,8 & 9, which is extracted as under: - “6. For that the learned CIT (A) has failed to consider that cash deposit totaling to ₹2,05,53,980/- made in the current bank A/c No. 50200001165678/- have been dulyincorporated and shown in audited accounts of Mr. Pramod Kumar Keshari (PAN AGHPK9849C) 7. For that the Ld. CIT(A) has failed to consider that source of deposits in the bank account was out of sale proceeds of the proprietorship firm and was fully explained and entered in the books of the proprietorship firm of Mr. Pramod Kumar Keshari (PAN AGHPK9849C) and therefore could not be considered as unexplained money.
2.2. In the appellate proceedings, the learned CIT (A) also affirmed the order of the learned CIT (A) by holding that the assessee has failed to offer any plausible explanation before the learned AO as well as before the learned CIT (A) in the appellate proceedings qua genuineness of the claim and therefore, there is no infirmity in the order of the learned AO.
2.3. After hearing the rival contentions and perusing the materials available on record, the undisputed fact as culling out of the records before us are that the assessee M/s Mangalam Sarees was carrying on business of saree till A.Y. 2018-19 and during the year the business was taken over by one of the partners Shri Pramod Kumar Kashera and thus, the business was running as a proprietary concern with all assets and liabilities being taken over from assessee by the proprietary concern owned by the partners Shri Pramod Kumar Kashera. Consequently, the cash credit account 1165678 with HDFC bank was also taken over and shown in the balance sheet of the property concern. The cash sales made during the financial year by the proprietary concern were partly deposited into this cash credit
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 09.12.2025.