Mander Jain vs Income Tax Officer, Ward-59(5)

PER VIKAS AWASTHY, JM:

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short 'the CIT(A)'] dated 12.09.2025, for AY 2017-18.

The assessee in appeal has assailed addition of Rs.33,83,000/- made by the Assessing Officer (AO) u/s 69A r.w.s. 115BBE of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') on account of alleged unexplained cash deposits during demonetization and confirmed by the CIT(A).

Shri Kailash Khemani, appearing on behalf of the assessee narrating facts of the case submitted that the assessee had entered into partnership with Shri Rajveer Singh on 14^th July, 1999 to run a petrol pump under the name and style of M/s. Adarsh Service Station at Ghaziabad. A copy of partnership deed is at pages 27 to 31 of the paper book. As per the partnership deed, the assessee was having 51% share in the partnership firm and the remaining 49% share was held by Shri Rajveer Singh. The said partnership firm was dissolved by both the partners with mutual consent vide dissolution deed dated 26.08.2016 (at pages 38 to 40 of the paper book). Prior to execution of deed of dissolution, both the partners had entered into an agreement to dissolve the partnership firm on 26.08.2016, a copy of the said agreement is at pages 35 to 37 of the paper book. As per balance sheet of the firm drawn on 26.08.2016, the capital account of the assessee showed balance of Rs.38,99,513.62/-. The firm paid Rs.37,26,823.65/- in cash to the assessee to settle the account. Thereafter, partnership firm under the name and style of M/s. Adarsh Service Station was dissolved and its business was entirely taken over by Shri Rajveer Singh as sole proprietor of the firm. The ld. AR further referred to the letter from Indian Oil Corporation allowing reconstitution of dealership of M/s. Adarsh Service Station indicating Shri Rajveer Singh as 100% owner of the firm. The said letter is at page 41 of the paper book. The ld. AR submitted that the amount deposited by the assessee in his bank account Rs.33,83,000/- during the period of demonetization was the amount received from Shri Rajveer Singh on dissolution of the partnership firm. The ld. AR submits that the facts were explained before the AO. However, the AO failed to appreciate the documentary evidences filed by the assessee in the right perspective and made addition of cash deposited in the bank account of the assessee by rejecting assessee’s contentions. The assessee carried the issue in appeal before the CIT(A), but remained unsuccessful. The ld. AR submits that the assessee had furnished relevant documents before the authorities below to substantiate that the partnership firm between the assessee and Shri Rajveer Singh stood dissolved and the amount received by the assessee on dissolution of partnership firm was deposited by the assessee in his bank account, which is now sought to be taxed as unexplained money credited in the bank account u/s 69A of the Act.

Per contra, Shri Dayainder Singh Sidhu representing the Department vehemently defending the impugned order submits that during assessment proceedings, the assessee was asked to furnish bank statement of M/s. Adarsh Service Station indicating withdrawal of amount of Rs.38,99,513/-, copy of balance sheet, capital account, trading and profit & loss account of the firm, confirmation from M/s. Adarsh Service Station, PAN and income-tax particulars of Shri Rajveer Singh for further verification. The assessee failed to furnish relevant documents before the AO. Therefore, in absence of any documentary evidence to support the assessee’s contentions, the AO made the addition. Thus, the ld. DR prayed for dismissing appeal of the assessee.

Both sides heard, orders of the authorities below examined. Various documents referred to by the ld. AR of assessee during the course of submissions have been considered. A perusal of the assessment order reveals that the partnership deed and copies of dissolution deed and agreement were furnished by the assessee before the AO. The AO rejected the same pointing out certain defects in execution of the said documents. However, considering the entire factual matrix and also the fact that letter was issued by IOCL accepting M/s. Adarsh Service Station as sole proprietorship concern of Shri Rajveer Singh, it can be inferred that the partnership firm between Shri Rajveer Singh and the assessee was dissolved. The infirmities pointed by AO in execution of Deed of Dissolution of partnership are not fatal for adjudication of the issue in hand. What is required to be established is the nexus between the amount received by the assessee on dissolution of partnership firm and the amount deposited in the bank account of the assessee. Considering entire facts of the case, we deem it appropriate to restore this issue to the AO for de novo examination.

The assessee shall furnish confirmation from Shri Rajveer Singh regarding the amount paid to the assessee in cash and shall also furnish relevant documentary evidence to establish creditworthiness of Shri Rajveer Singh at the time of payment of said amount.

The AO before deciding this issue afresh shall grant reasonable opportunity of making submissions to the assessee, in accordance with law.

In the result, impugned order is set aside and appeal of the assessee is allowed for statistical purpose, in the terms aforesaid.