Kalptaru Cotton Co Vs ITO (ITAT Ahmedabad)
Cash Deposit After Firm’s Dissolution Unexplained: ITAT Ahmedabad Confirms ₹25 Lakh Addition u/s 69A
Assessee, Kalptaru Cotton Co., a partnership firm dissolved on 30.04.2015, had not filed a return for AY 2017-18. During demonetisation (Nov–Dec 2016), ₹25,00,000 was deposited in the firm’s SBI bank account. Based on AIR information, AO issued several notices u/s 142(1) from December 2017 onwards. Assessee finally replied on 27.06.2019, stating that the firm had ceased business long ago & the cash was from pre-dissolution cash balance. AO examined bank statements obtained u/s 133(6) and found that no evidence supported the claim of old cash balance; nor was any business income offered for AY 2017-18. AO therefore treated the cash deposit as unexplained money & made an addition of ₹25 lakh u/s 69A.
CIT(A)/NFAC affirmed the ex-parte assessment.
Before Tribunal, Assessee raised multiple legal grounds: invalidity of 142(1) notice on a dissolved firm, applicability of section 283, and that the cash belonged to the partner who allegedly took over the firm’s assets on dissolution. Tribunal examined the Dissolution Deed which showed that assets & liabilities were to be distributed among partners but noted that no evidence was produced to prove that:
