Income Assessed in Proprietor’s Hands cannot Be Assessed again in Dissolved Partnership : ITAT [Read Order]
The CIT(A) deleted the addition, observing that all transactions were carried out and disclosed by the sole proprietor, Shri Balraj Bansal, and the bank account was linked to his PAN, not the dissolved firm’s.
Dissolved Partnership - ITAT - taxscan
Dissolved Partnership - ITAT - taxscan
The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) ruled that income assessed in the proprietor's hand cannot be assessed again in dissolved partnership.
The Revenue-appellant appealed against the Commissioner of Income Tax (Appeals)[CIT(A)] order dated 11.11.2024 for the Assessment Year 2017-18. In this case ,Chaukers,respondent-assessee, was a partnership firm dealing in Hindustan Petroleum LPG cylinders. The AO found that Rs. 79,78,730/- in specified bank notes had been deposited in the firm’s account during demonetization and opened a scrutiny assessment.
The assessee submitted that one partner had died in 2011 and the firm continued under the sole partner, Sh. Balaraj Bansal, who carried out all transactions in his own capacity. Since the firm did not exist in the year under appeal, it argued that no addition should be made in its hands.
Despite this, the Assessing Officer (AO) made a protective addition of Rs. 4,67,17,233/- as unexplained income under section 69A and applied section 115BBE. The CIT(A) deleted the addition, holding that income should be taxed in the hands of the rightful entity. The Revenue appealed to the Tribunal.
The two member bench comprising Satbeer Singh Godara (Judicial Member) and Manish Agarwal (Accountant Member) heard both parties, perused the lower authorities’ orders, and examined the materials on record. It was noted that the assessee had not filed a return of income for the year under appeal because the firm ceased to exist after the death of one partner in 2011.
The AO had made additions on a protective basis for cash and credit entries in the bank account, which actually belonged to the other partner, Shri Balraj Bansal, who became the sole proprietor of the firm after the partner’s death.
The CIT(A) observed that all transactions were carried out by Shri Balraj Bansal, who had already disclosed them. On reviewing the submissions and documents, CIT(A) noted that the partnership was dissolved on 23.04.2011 and the bank account was linked to Shri Balraj Bansal’s PAN, not the dissolved firm’s PAN.
Since the income had already been assessed in the hands of the rightful entity, it could not be taxed again in the name of the dissolved partnership. CIT(A) deleted the additions.
Before the tribunal, the Revenue failed to challenge these findings. As the transactions were carried out by Shri Balraj Bansal and not the firm, the tribunal found no reason to make any addition on a protective basis in the hands of the assessee. The tribunal upheld the CIT(A)’s order and dismissed the Revenue’s grounds.
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