Reopening due to bank’s mistake in reporting PAN of partnership firm in bank account of proprietorship– ITAT deleted additions made
In a recent judgment, ITAT has deleted additions made in reopening proceedings based on reporting of cash deposit against PAN of partnership in place of proprietorship.
ABCAUS Case Law Citation:
ABCAUS 3858 (2024) (02) ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) of National Faceless Assessment Centre (NFAC) in confirming addition of unexplained credits u/s 68 of the Income Tax Act, 1961 (the Act) towards cash deposit in the bank account.
The assessee was a partnership firm and no return of income was filed for the assessment year under consideration.
The Assessing Officer (AO) was having information by way of ITD/ITA data that assessee has made large amount of cash deposits in its bank account. The Assessing Officer issued notice under section 133(6) of the Act to the assessee for seeking clarification about the deposits in the said bank account. No response was made by assessee. The AO after recording reasons that income of assessee had escaped assessment within scope of Section 147 of the Act issued notice under section 148 of the Act.
The erstwhile partner of assessee firm filed reply and contended that firm had already dissolved one year before. Hence, no return of income was required to be filed for relevant assessment year. The assessee was asked to submit source of cash deposits and copy of dissolution deed for closure of firm. However, accordimg to the AO, the documents required were not furnished by assessee. The Assessing Officer rejected the objection filed against reopening and again issued show cause notice to assessee as to why the amount deposited in bank account should not be treated as unexplained cash credit.
The assessee filed its reply and reiterated that partnership firm was dissolved, and stated that the copy of his affidavit had already been given in this regard. The assessee further submitted that copy of account ownership certificate from bank was also issued that such bank account is of other assessee. The assessee submitted that impugned bank account was not belonged to the firm but belonged to individual assessee and they had not conducted any business in the name of firm during the year under consideration, there was no question of deposit of cash by the firm.
On considering reply of assessee, the Assessing Officer issued summons under section 131 to the main partner. His statement was recorded. In the statement, he stated that partnership firm was dissolved two years before. He submitted the bank account number under consideration belonged to his proprietorship in individual capacity and not to the firm. He stated that while opening such bank account he had duly disclosed his PAN and name of the firm.
However, the AO held that cash deposits in his regular business transaction in the proprietary concern was not acceptable. The Assessing Officer treated the said transaction in the name of firm by holding that as unexplained cash credit while passing assessment order under section 144 r.w.s. 147 of the Act
Before CIT(A) the assessee stated that the bank account under consideration belonged to his proprietorship and not to the firm. It was stated that the said bank account was reflected in the books of accounts of proprietary concern with similar name.
It was submitted that when the software of bank was migrated to CBS system, PAN of partnership firm was erroneously migrated in the said account instead of PAN of the proprietor. A letter was obtained from the bank by the assessee. The assessee intimated about dissolution of the partnership firm to the VAT Department. As more than 10 years have been passed from the date of dissolution of partnership firm, so copy of dissolution deed could not be traced.
The Tribunal observed that the Assessing Officer had not accepted the explanation of assessee due to similarity in the name of proprietorship with partnership. The fact remained same that partnership firm dissolved. The assessee also filed copy of dissolution deed, copy of original dissolution was not traced out due to laps of period for more than 10 years. The Assessing Officer insisted for filing original dissolution deed, which was not traced. The Assessing Officer simply made the addition by holding that credit in bank account as unexplained on the ground that original dissolution deed was not produced and such bank account was not reflected in the balance-sheet having its PAN of the partnership firm.
The Tribunal further observed that the mistake was committed by bank authority, the concerned bank account was of proprietary firm and PAN of partnership firm was inadvertently mentioned in the account. The banker of assessee had given certificate certifying about the PAN of the partnership firm and the PAN of the proprietorship. In the impugned bank account, wherein credit was reported in ITD/ITD data, the PAN of individual assessee was mentioned as proprietary concern. The assessee had duly disclosed all the transactions in the audited balance-sheet of the proprietary concern.
The Tribunal further observed that evidence was furnished by assessee before CIT(A). No verification of fact was conducted by CIT(A) either of their own or through Assessing Officer. The Tribunal found that the bank account was duly disclosed in the audit report and all the transactions were considered by while filing return of income in the proprietary concern. Accordingly, it was held that the Assessing Officer was not justified in making addition without verification of all facts.
The Tribunal allowed the ground of assessee’s appeal.
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