2023 (7) TMI 119 - AT - Income Tax

Assessment of partnership firm - HELD THAT - Considering the fact that the partner of assessee brought to notice of lower authorities regarding dissolution of partnership firm, we deem it proper to set aside the impugned order and restore the assessment to the AO to verify the veracity of claim of the assessee and frame assessment afresh in accordance with law. Thus, grounds raised by the assessee in this appeal are allowed for statistical purposes.

Summary

Issues:
1. Assessment order challenged before ITAT Delhi by the assessee for AY 2011-12.
2. Non-attendance of the assessee during proceedings.
3. Discrepancy in treatment of income between erstwhile partnership firm and individual.
4. Additions made by AO and alleged double taxation.
5. Application of Sec. 44ADA despite not being on the statute book.
6. Penalty proceedings under Sec. 271F and 271(1)(c).

Analysis:

Issue 1: Assessment Order Challenge
The assessee challenged the order of Ld. CIT(A)-20, New Delhi dated 31.10.2019 before ITAT Delhi for the assessment year 2011-12.

Issue 2: Non-Attendance of Assessee
Despite multiple notices and adjournments, the assessee did not attend the proceedings, citing reasons like Covid-19 infection. The appeal was decided based on the material on record.

Issue 3: Discrepancy in Treatment of Income
The AO reopened the assessment under Sec. 147, questioning the professional receipts of the partnership firm. The firm claimed dissolution in 2005, but the AO treated it as still operational, leading to additions in income.

Issue 4: Alleged Double Taxation
The AO's actions resulted in taxing the same income twice, once in the hands of the individual and again in the hands of the erstwhile partnership firm, raising concerns of double taxation.

Issue 5: Application of Sec. 44ADA
Ld. CIT(A) directed the AO to treat a percentage of gross receipts as income of the assessee under Sec. 44ADA, despite this section not being applicable in the assessment year under consideration, leading to a dispute over the correct application of tax provisions.

Issue 6: Penalty Proceedings
The penalty proceedings under Sec. 271F and 271(1)(c) were upheld by Ld. CIT(A), despite the assessee's claim of no fault on their part and full tax payment as per IT Act provisions.

In the final judgment, ITAT Delhi set aside the impugned order and restored the assessment to the AO to verify the dissolution claim of the partnership firm, allowing the grounds raised by the assessee for statistical purposes. The appeal of the assessee was allowed for statistical purposes.