ITO Vs Chaukers (ITAT Delhi)
No Addition in Dissolved Firm’s Hands – Cash Deposits Taxable Only in Hands of Proprietor, Not Partnership: ITAT Delhi
Assessee was a partnership firm dealing in LPG cylinders under dealership of Hindustan Petroleum. One partner, Shri Avinash C. Kakar, expired on 23.04.2011, after which the firm effectively dissolved & business continued solely under Shri Balraj Bansal as proprietor. During demonetisation period, heavy cash deposits of Rs.79.78 lakh were made in the bank account, along with other credit entries totaling Rs.4.67 crore. AO held the firm still liable & made protective addition u/s 69A for entire deposits, invoking section 115BBE.
CIT(A) deleted the addition holding that transactions belonged to Shri Balraj Bansal in his individual capacity, supported by bank confirmation linking the account with his PAN, not the firm’s.
Revenue argued that CIT(A) erred in quashing addition without giving AO opportunity to verify if same income was taxed twice (in firm’s case & in proprietor’s case).
Tribunal noted that partnership firm Chaukers stood dissolved in 2011 after death of partner. Bank account was continued by proprietor Shri Balraj Bansal in his individual capacity; certificate from SBI confirmed account was linked to his PAN. Assessment of Shri Balraj Bansal for AY 2017-18 already completed under scrutiny including these transactions. Income cannot be assessed in two different hands – once taxed in correct entity, no protective addition could survive in another. Well settled principle: tax must be levied on rightful entity to whom income pertains.
