Bahri Auto Service Vs CIT ( ITAT Mumbai)
Double Taxation Not Permitted: ITAT Mumbai Deletes 2% Estimated Profit Added in Hands of Partnership Firm
Assessee-firm, Bahri Auto Service, faced reassessment u/s 147 r.w.s. 144/144B after AO noticed cash deposits in its partnership bank account & treated 8% of total credits (₹48,27,830) as taxable income, alleging no return was filed in the firm’s name. CIT(A) examined the entire factual matrix & found that the petrol pump business was originally a sole proprietorship of Late Shri Somraj H. Bahri. After his demise on 21.04.2014, legal heirs formed a partnership firm, but due to ongoing procedural formalities with BPCL, the dealership continued in the proprietor’s name. Purchases & sales of petrol were recorded only in the proprietorship books & return of income was duly filed in that status, which stood accepted u/s 143(1).
CIT(A) held that all cash sales were already accounted for in the proprietorship & corresponding taxes were paid. Though the firm used separate bank accounts, such deposits represented the same petrol pump sales already offered to tax. AO himself accepted that deposits were from petrol sales. However, CIT(A) restricted estimation from 8% to 2% considering low margins in petrol retailing.
Before Tribunal, Assessee argued that once income was fully disclosed & taxed in the proprietorship, bringing the same receipts to tax again in the firm’s hands amounted to impermissible double taxation. ITAT accepted this contention, noting that:
• proprietorship return declaring ₹17,00,051, with tax of ₹3,61,218, was filed & accepted;
• cash deposits in firm’s bank account were part of the same already-taxed business turnover;
• Revenue never disputed the nature of deposits or the accuracy of proprietorship accounts;
• taxing the same income again merely because ROI was not filed in firm’s name is unsustainable.
Tribunal held that technical lapses cannot justify double taxation when the underlying income has already suffered tax. Therefore, the 2% estimated addition of ₹2,06,958 sustained by CIT(A) was directed to be deleted in full.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
