Manilal P. Savla & Company ACIT (ITAT Pune)
The appeals concerned a dissolved partnership firm M/s Manilal P. Savla & Company, which had ceased to exist after 31.08.2012. Despite the dissolution being duly intimated to the Department in 2013, the AO reopened AY 2017-18 on the basis of a third-party search statement of one Shri Sachin M. Nahar, who allegedly stated that the firm had given cash loans of Rs.56,50,000. Relying solely on this statement & without supplying a copy to the Assessee, AO made an addition u/s 69A r.w.s. 115BBE & completed assessment u/s 147 r.w.s. 144 on a non-existent firm.
Before CIT(A), the Assessee raised an additional legal ground that section 189 cannot be invoked to assess income arising after dissolution, but CIT(A)/NFAC rejected the contention holding that late intimation of dissolution justified the invocation of s.189.
Before Tribunal, the Assessee produced (i) dissolution deed, (ii) evidence of closure/inoperability of bank accounts after 2013, (iii) death certificates of partners, & (iv) proof of intimation to multiple govt. authorities, all confirming complete cessation of business after 31.08.2012.
Tribunal noted that there was no evidence whatsoever from Revenue to show that any business transaction occurred after dissolution. Applying the Pune ITAT decision in Mantri Developers & High Court rulings in United Trading Co., Banyan & Berry, George Talkies, etc., Tribunal held that section 189 is only a machinery provision that allows assessment of income earned before dissolution, not income alleged to have arisen years after the firm ceased to exist. Since the alleged loan transaction related to 2017—long after dissolution—the reassessment was invalid & without jurisdiction. Accordingly, Tribunal quashed the reassessment u/s 147 & deleted the entire addition of Rs.56,50,000. As a consequence, the penalty u/s 271AAC(1) also stood deleted, as the quantum assessment itself was annulled.
