2024 (2) TMI 695 - AT - Income Tax

Unexplained cash credit/bank transaction in case of firm - partnership firm has been dissolved and the business of the firm was taken over a sole proprietorship concern - In the absence of dissolution deed and such bank account is not reflected in the balance-sheet having its old PAN , AO treated the transaction in the bank account as unexplained cash credit - Assessee submitted that the partnership firm stand closed on 01.04.2008 and the ex-partner of assessee-firm filed his affidavit and contended that original dissolution deed in not traceable as more than 10 years have passed - CIT(A) confirmed the action taking view that source of deposits in the bank account is unexplained as the assessee ailed to discharge his onus to explain the nature and source - as submitted mistake was committed by bank authority, the account is account of proprietary of M/s Vasant Traders and PAN of partnership firm was inadvertently mentioned in the account. HELD THAT - We find that before AO as well as ld. CIT(A), the assessee categorically contended that in bank account of proprietorship, the PAN of erstwhile partnership firm was inadvertently migrated at the time of data migration. The assessee in the statement of fact also categorically contended that such PAN of firm was wrongly mentioned by its banker. We find that banker of assessee has given certified that while migrating the data of PAN was inadvertently mentioned as AAEFV7806M instead of PAN of proprietary concern of Mr. Dilipbhai Vasantlal Sheth. We find that such evidence was furnished by assessee before Ld.CIT(A). No verification of fact was conducted by Ld.CIT(A) either of their own or through Assessing Officer. On perusal of books of account of proprietary concern of Dilipbhai Vasantlal Sheth, we find that such bank account was duly disclosed in the audit report and all the transactions are considered by while filing return of income in the proprietary concern. AO was not justified in making addition without verification of all facts. This ground of assessee s appeal is allowed.

Summary

Issues Involved:
1. Addition of Rs. 1,27,61,000/- on account of entire credit entries in bank.
2. Deletion of penalty under section 271(1)(c) r.w.s. 274 for concealment of income.

Summary:

Issue 1: Addition of Rs. 1,27,61,000/- on account of entire credit entries in bank:

The appeal is directed against the order of the National Faceless Appeal Centre (NFAC), Delhi, which arises from the assessment order passed by the National Faceless Assessment Centre under section 144 r.w.s. 147 of the Income Tax Act, 1961. The Assessing Officer (AO) had added Rs. 1.27 crores as unexplained cash credit based on information that the assessee had made cash deposits in its bank account. The assessee contended that the partnership firm was dissolved on 01.04.2008, and the business was taken over by a sole proprietorship concern. The AO did not accept the explanation due to the absence of the original dissolution deed and treated the bank account as belonging to the partnership firm.

The Tribunal found that the assessee had provided sufficient evidence, including a certificate from the bank, indicating that the PAN of the partnership firm was erroneously linked to the bank account during data migration. The Tribunal noted that the bank account was duly disclosed in the audit report of the proprietary concern and that all transactions were considered in the return of income. The Tribunal concluded that the AO was not justified in making the addition without verifying all facts and allowed the appeal on this ground.

Issue 2: Deletion of penalty under section 271(1)(c) r.w.s. 274 for concealment of income:

The Tribunal did not specifically address the issue of penalty under section 271(1)(c) r.w.s. 274, as the primary ground of appeal was allowed. The adjudication on the alternative submissions regarding the penalty became academic.

Conclusion:

The appeal of the assessee was allowed as the Tribunal found that the addition of Rs. 1.27 crores was not justified without proper verification of facts. The order was pronounced in the open court on 05/02/2024.