ITO Vs Mahabir Solvent Oil (ITAT Delhi)
LTCG on Alleged Firm Dissolution Requires Fresh Verification – ITAT Delhi Remands Matter to CIT(A)
The Delhi Bench of the ITAT set aside the order of the CIT(A), Karnal, and remanded the matter for fresh adjudication in a case involving alleged long-term capital gains arising from change in constitution of a partnership firm for AY 2008-09. The AO had treated the conversion of a partnership firm into a proprietorship concern as a transfer of capital assets, and accordingly made additions aggregating over ₹3.16 crore as LTCG on land and building.
The CIT(A) had deleted the additions, holding that the partnership came into existence on 31.03.2008 and that there was no taxable transfer. However, the Tribunal noted serious factual inconsistencies highlighted by the Revenue, including non-production of original partnership deed and audit report, ambiguity regarding the status of one partner (Sh. Anil Sahni), and contradictions between partnership deeds of different years.
Holding that these aspects were not properly examined or verified by the CIT(A), the ITAT found merit in the Revenue’s contention that the issue required deeper factual scrutiny. In the interest of natural justice, the matter was restored to the file of the CIT(A) with directions to re-examine the entire issue afresh after giving adequate opportunity of hearing to the assessee. Consequently, the Revenue’s appeal was allowed for statistical purposes
FULL TEXT OF THE ORDER OF ITAT DELHI
