Mathur Ugam And Associates, New Delhi V. ITO ward-61(2), New Delhi

ITA 223/DEL/2020

AI Insights

The case involves Mathur Ugam and Associates, a partnership firm that was allegedly dissolved but continued to receive professional receipts. The Assessing Officer reopened the assessment for the year 2011-12 under section 147 of the Income Tax Act, 1961, based on information that the firm had professional receipts and had not filed an Income Tax Return (ITR). The AO made an addition of Rs. 33,50,000 to the income of the assessee, which was contested. The CIT(A) upheld the AO's decision but directed the AO to treat a portion of the receipts as income under specific sections applicable to proprietorships. The Tribunal, after considering the affidavit and submissions regarding the dissolution of the partnership, decided to set aside the CIT(A)'s order and remand the matter back to the AO for a fresh assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 113004 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 11-01-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 12-01-2020
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS; Set aside
• Section: 148; 271(1)(c); 194C; 250; 194J

Judgement Text

1 | Page IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “SMC” BENCH: NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER ITA No.223/Del/2020 [Assessment Year : 2011-12] Mathur Ugam and Associates, A-1/294, Safdarjung Enclave, New Delhi-110092. PAN-AAJFM9097N vs ITO, Ward-61(2), New Delhi. APPELLANT RESPONDENT Appellant by None Respondent by Shri Ramdhan Meena, Sr.DR Date of Hearing 12.01.2023 Date of Pronouncement 30.01.2023 ORDER PER KUL BHARAT, JM : The present appeal filed by the assessee for the assessment year 2011- 12 is directed against the order of Ld. CIT(A)-20, New Delhi dated 31.10.2019. The assessee has raised following grounds of appeal:- 1. “For that the Hon'ble CIT (Appeals) - 20 New Delhi erred on facts as well as in law in passing the impugned order u/s 250 of the Income Tax Act, 1961. 2. For that the Hon'ble CIT (Appeals) - 20 New Delhi erred on facts as well as in law in not considering the reconciliation statement of erstwhile partnership firm's income and the assessee's individual income with the income returned by him in his individual return. 3. For that the Hon'ble CIT(Appeals) - 20 New Delhi erred on facts as well as in law in holding that the erstwhile partnership firm is alive and still earning income. 4. For that the Hon'ble CIT (Appeals) - 20 New Delhi erred on facts as well as in law in sustaining the additions made by the AO, and thereby taxing the same income twice - once in the hands of Mr. 2 | Page Ashish Mathur, Individual and second time in the hands of erstwhile partnership firm. 5. For that the Hon'ble CIT (Appeals) - 20 New Delhi erred on facts as well as in law in directing the AO to treat 50% of the gross receipts' u/s 194J of the Act as income of the assessee as per the provisions of Sec. 44ADA of the Act, despite that this section was not on the statute book in the year under assessment. 6. For that the Hon'ble CIT (Appeals) - 20 New Delhi erred on facts as well as in law in upholding the penalty proceedings against the assessee u/s 271F and 271(1)(c) no fault on his part despite having paid full tax as applicable under the provisions of the Income Tax Act. 7. The Assessee craves leave to put, alter and/or amend the ground(s) at the time of hearing.” 2. At the time of hearing, no one attended the proceedings on behalf of the assessee. It is seen from the records that no one has been attending the proceedings on behalf of the assessee since 20.04.2021. It is also seen that vide letter dated 09.09.2021, the assessee had sought adjournment on the ground of having infection of Covid-19. Even thereafter also, the assessee has not been attending the assessment proceedings. Therefore, the appeal is taken up for hearing in the absence of the assessee and is being decided on the basis of the material placed on record. 3. Facts giving rise to the present appeal are that the assessee is a partnership firm and in the case of the assessee, assessment was re-opened u/s 147 of the Income Tax Act, 1961 (“the Act”). In response to the statutory notices, no one attended the assessment proceedings on behalf of the assessee. However, a copy of Dissolution Deed was sent to the Office of the Assessing Authority and it was intimated that the assessee’s firm has been dissolved vide 3 | Page Dissolution Deed dated 31.03.2005 and it is run by Shri Ashish Mathur as proprietorship firm. The AO thereafter, called upon the assessee to explain the amount of Rs.33,50,000/- received as professional receipts by the partnership firm on which the tax has been deducted. However, no one responded the query raised by the Assessing Officer (“AO”). Thereafter, the AO made addition of Rs.33,50,000/- and assessed income of the assessee at Rs.33,50,000/-. 4. Aggrieved by the action of Assessing Authority, the assessee carried the matter before Ld.CIT(A), who after considering the submissions, directed the AO to treat 50% of gross receipts u/s 194J of the Act and 8% of gross receipts u/s 194C of the Act be treated as the income of the assessee in consonance of the provision of section 44ADA and 44AD. 5. Aggrieved against the order of Ld.CIT(A), the assessee preferred appeal before this Tribunal. 6. Apropos to Grounds of appeal raised by the assessee, Ld. Sr. DR supported the order of the AO and submitted that the AO was justified in making the addition. 7. I have heard Ld. Sr. DR and perused the material available on record. I find that Ld.CIT(A) has decided the issue by observing as under:- 6.1 Ground No.1:- 6.1.1 The Assessing Officer had issued notice u/s 148 of the Act and opened the case of the appellant u/s 147 of the Act on the basis of AIR/NMS information 'that the appellant had professional receipts u/s 194J to the tune of Rs. 33,50,000/- during the impugned year and has not filed the ITR. To assess the escaped income the Assessing Officer had 4 | Page issued notice u/s 148 of the Act. The appellant did not comply with the notices sent by the Assessing Officer. A copy of dissolution deed of the assessee firm was sent to the Assessing Officer but no other information was submitted by the appellant. It is ascertained during appeal hearing that the receipts were received by Sh. Ashish Mathur in his Individual capacity in his individual PAN and also through the PAN of the firm. Under such, circumstances, it is not possible to believe that the firm is dissolved. Dissolution of the firm might have happened five years back i.e. in 2005, in pen and paper but actually the firm is alive and still earning income u/s 194C and 194J. Thus showing such income in the individual capacity cannot absolve the appellant from filing its own ITR when it is receiving amount in the same PAN. Therefore the action of the Assessing Officer is sustained. However the AO is directed to treat 50% of the gross receipts u/s 194J of the Act and 8% of the gross receipts u/s 194C of the Act as income of the appellant in congruence to provisions of Sec. 44ADAand 44AD of the Act.” 8. The assessee has placed an affidavit on record that Shri Ashish Mathur had filed an affidavit stating that he was partner of the assessee’s firm and the assessee firm was dissolved w.e.f 01.04.2005 vide Deed of Dissolution dated 31.03.2005. It was further stated that he has been carrying out the business of erstwhile partnership firm in the trade name of M/s. Mathur Ugam and Associates Architects as proprietor. For the sake of clarity, relevant contents of the affidavit are reproduced as under:- 4. “That after Dissolution of the partnership firm, I took all necessary steps to communicate the change of legal status of the firm from partnership to proprietorship concern to the clients of erstwhile partnership firm, and requested them to update my PAN (as individual) in their records. Accordingly, most of the clients updated the new PAN of the proprietorship firm in their records. However, in spite of my communication in the matter, few big Government 5 | Page organizations such as GAIL, NBCC India Ltd, NHPC, Rites Ltd. etc. have failed to update their records, and even in the years post execution of Deed of dissolution, they have continued the use of PAN number of erstwhile partnership firm and furnish the TDS returns accordingly. 5. That from Assessment Year 2006-07 (Financial year 2005-06) onwards, I have been furnishing my returns of income duly incorporating the Income and TDS as reflecting in my PAN as well as the PAN of erstwhile partnership firm as my professional/contractual income, and have paid full tax as per the applicable provisions of Income Tax Act, 1961. Also, all the returns of income filed in my capacity as proprietor of M/s Mathur Ugam and Associates have been duly assessed by the Income Tax Department. 6. That when I received a notice from ITO ward 61(2), New Delhi, for non-filing of Income Tax Return of erstwhile partnership firm, I submitted a copy of the dissolution deed of the firm and also clarified to the Assessing Officer: • that the erstwhile partnership firm stood dissolved with effect from 01.04.2005 itself • that- in view of this, no ITR was filed by the erstwhile partnership firm for the Assessment year 2011-12. • that I have been filing ITRs in my individual capacity for incomes reflected in 26AS of the erstwhile partnership firm as well as in my 26AS and that the same has been duly assessed. • that some government organizations had not updated their records and issued TDS with PAN of the dissolved firm. I also clarified that all such receipts had been duly accounted for in the books of my proprietorship as well as the ITR of the year. 6 | Page • that I had claimed credit of TDS deducted by such parties in my ITR. However, refund of the same was still pending. 7. That the AO had acknowledged the receipt of the dissolution deed of the firm in his assessment order. 8. That although the Ld. AO has acknowledged the receipt of dissolution deed in his order, both the AO and the Hon'ble CIT(A) have chosen to ignore the dissolution of the partnership firm and held that the firm is alive and still earning income totally dismissing my humble and genuine submission without any reasonable basis. 9. That the Ld. AO had required me to inform whether the receipts reflected in the 26AS of erstwhile partnership firm have been accounted for by any other person, and also required me to file a reconciliation statement in this regard. Since the same could not be submitted to the AO, I submitted the same before Hon'ble CIT(A). However, the Hon'ble CIT(A) has totally ignored the reconciliation statement submitted by me without any reason or basis. 10. As such, a grave injustice has been meted out to me in so far as I have paid full tax due on entire income of myself as well as the erstwhile firm, but I have been denied the refund of Rs. 3,63,100/- claimed by me in my ITR. To further aggravate the matters, the Hon'ble CIT (A) has confirmed further liability on me by ignoring the reconciliation statement submitted by me and wrongly applying the provisions of Section 45ADA of the Income Tax Act, 1961, even though this section was not on the statute book in the assessment year 2011-12, totally ignoring the fact that my taxable income was just about 13% of the turnover.” 9. Considering the fact that the partner of assessee brought to notice of lower authorities regarding dissolution of partnership firm, I deem it proper to 7 | Page 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. 10. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 30 th January, 2023. Sd/- (KUL BHARAT) JUDICIAL MEMBER * Amit Kumar * Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR NEW DELHI, ITAT