Partners can’t be Taxed for the Transaction made by Firm: ITAT [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Pune bench has held that the partners cannot be taxed for transaction made by the Firms.

The assessees are partners of a Firm. The assessees were aggrieved by the order of the Assessing Officer wherein they were assessed for the sale consideration received by the Firm.

The Assessing Officer took a view that Rs.7,88,63,213 was the cash component received by M/s. B.U. Bhandari Real Estate Development Group towards the sale of land situated at Wakad, Plot No.143R from M/s. Cornetstene Estate Pvt. Ltd. of M/s. Pooja Export Group. He was of the opinion that since Shri C.U Bhandari (HUF) is the partner in M/s. B.U. Bhandari Real Estate Coporation and along with 8 others as per agreement dated 29.11.2007 received the cash of Rs.7,88,63,213/- and not shown his share of cash receipt in his return of income and therefore, re-opened the assessment.

The assessees claimed that when sale consideration is received by partnership firm and the same is reflected in the books of account of the partnership firm and has been offered to tax. It was contended that the same amount cannot be assessed in the hands of the individual partners for the purpose of taxation.

After hearing the facts and in the light of judicial pronouncements, the Tribunal observed that the cash payment was made by the M/s. Pooja Export and credited to the firm M/s. B.U. Bhandari Real Estate Corporation.

“Transaction of the amount was assessed in the hands of the M/s. B.U. Bhandari Real Estate Corporation. In such scenario, terming the assessee as ultimate beneficiary is not appropriate as evident through the facts on record. That the Hon’ble Supreme Court in the case of ITO Vs. Ch. Atchaiah (supra.) has clearly held that assessment has to be done in the right hands. Therefore, in the present case, when sale of land transaction has been done by the partnership firm, addition cannot be made in the hands of the individual assessee even though he is a partner of the firm,” the Tribunal said.