KALPTARU COTTON COMPANY,AHMEDABAD V. THE ITO, WARD-2(2)(2), AHMEDABAD

ITA 1625/AHD/2025

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Kalptaru Cotton Co, a partnership firm, did not file a return of income for the Assessment Year 2017-18. It was reported that the firm made a cash deposit of Rs. 25 Lakhs during the demonetization period. The AO issued multiple notices under Section 142(1) of the Income Tax Act, 1961, demanding the filing of the return, which the firm did not comply with satisfactorily. The firm claimed that the cash deposit was from funds available before its dissolution on April 30, 2015, and that it had no business or income thereafter. The CIT(A) confirmed the AO's addition, leading to the firm's appeal to the Tribunal, which also dismissed the appeal, agreeing with the lower authorities.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 790404 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: misc
• Appeal Filed On: 26-08-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ROHIT AA SUDA NI
• Assessee Lawyers: PRASHANT B. SHAH
• Keywords: Business income; Opportunity of being heard; Corroborative evidences; Validity of assessment
• Section: 144; 142(1); 2

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH BEFORE: DR. BRR KUMAR, VICE PRESIDENT & SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER ITA No. 1625/Ahd/2025 (Assessment Year: 2017-18) Kalptaru Cotton Co through erstwhile Partner Jagdishkumar Soni 101, Masuri Park, Opp. Vishwakosh Trust, Nr. Sindhi High School Cross Roads, Usmanpura, Ahmedabad - 380013 V/S The ITO Ward-2(2)(2), Ahmedabad PAN NO. : AANFK1330J (Appellant) (Respondent) Appellant by : Shri Prashant B. Shah, AR Respondent by : Shri Rohit Aasudani, Sr.DR (आदेश)/ORDER Date of hearing : 13-11-2025 Date of Pronouncement : 25-11-2025 PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER: This appeal is filed by the assessee against the appellate order dated 25.07.2025 passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (in short ‘CIT(A)’) arising out of the exparte assessment order passed under Printed from counselvise.com ITA No. 1625/Ahd/2025 (Kalptaru Cotton Co vs. ITO) A.Y. 2017-18 2 Section 144 of the Income Tax Act, 1961, (hereinafter referred to as ‘the Act’) relating to Assessment Year 2017-18. 2. Brief fact of the case is that the assessee is a partnership firm has not filed return of income for the A.Y. 2017-18. Information received that the assessee made cash deposit of Rs.25 Lakhs during the demonetization period. The notice u/s.142(1) of the Act was issued on 21.12.2017 calling the assessee to file the return of income. The assessee was further issued 142(1) notice on five occasions and final show cause notice on 23.09.2019. In response, the assessee vide its letter dated 27.06.2019 replied that the partnership firm was dissolved w.e.f. 30.04.2015 and the firm did not have any business or any business income, therefore, no return of income filed for 2017-18. However, regarding the cash deposit, the assessee claimed that it was deposited out of cash on hand available with the assessee firm before the firm was dissolved. The assessee also submitted the return of income filed for the A.Y. 2014-15 with Audit Report and other details. Thereafter, the AO issued a notice u/s.133(6) of the Act to the Branch Manager of State Bank of India calling for the assessee’s bank details. Perusal of the same, clearly depicts the assessee received credit entries made in cash deposit but has not filed return of income and not offered income from the business activities and also not paid taxes due thereon. Therefore, the AO made addition of Rs. 25 Lakhs u/s.69A of the Act and demanded tax thereon. Printed from counselvise.com ITA No. 1625/Ahd/2025 (Kalptaru Cotton Co vs. ITO) A.Y. 2017-18 3 3. Aggrieved against the exparte assessment order, the assessee filed an appeal before the Ld. CIT(A) who has confirmed the addition made by the AO. 4. Aggrieved against the same, the assessee is in appeal before us raising the following grounds of appeal: “1. The Ld. CIT(A) has erred in Law and on Facts in dismissing the Appeal without granting any reasonable and proper opportunity of being heard. The Order is therefore bad in Law, liable to be quashed. 2. The Ld. CIT(A) has erred in Law and on Facts in dismissing the Appeal without any application of mind at all to the facts, submissions and evidences on record. The Order is therefore bad in Law, liable to be quashed. 3. The Ld. CIT(A) has erred in Law and on Facts in confirming the validity of issue of notice u/s 142(1) to file Return of Income for the year next to the relevant year of dissolution. Assessment proceedings are void ab initio and the Order following it is therefore bad in Law, liable to be quashed. 4. The Ld. CIT(A) has erred in Law and on Facts in confirming the validity of issue of notice u/s 142(1) for A. Y. 2017-18 on the Partnership Firm already dissolved on 30-04-2015, quite contradictory to his own admission that the Notice can be issued only for the relevant Previous Year in which the firm is dissolved. Assessment proceedings are void ab initio and the Order following it is therefore bad in Law, liable to be quashed. 5. That the Ld. CIT(A) has erred in Law and on Facts in not considering the provisions of Sec. 283 of the Income Tax Act. Assessment proceedings are therefore void ab initio and the Order following it are bad in Law, liable to be quashed. 6. That the Ld. CIT(A) has erred in Law and on Facts in upholding the validity of Assessment Order u/s 144 of the Act on the ground of failure to file a Return when the Appellant Firm stood dissolved way back on 30-04-2015. Order is therefore, bad in Law, liable to be quashed. Printed from counselvise.com ITA No. 1625/Ahd/2025 (Kalptaru Cotton Co vs. ITO) A.Y. 2017-18 4 7. That the Ld. CIT(A) has erred in Law and on Facts in confirming the addition of Rs. 25,00,000/- u/s 69A of the Act on the ground that the Appellant had not offered any acceptable and cogent explanation inspite of the fact that all explanations and documentary evidences were filed and on record. Order is therefore, bad in Law, liable to be quashed. 8. That the Ld. CIT(A) has erred in Law and on Facts in confirming the addition of Rs. 25,00,000/- u/s 69A of the Act holding the deposit in bank as \"Income\" in nature when it is a simple contra entry, (i.e., cash on hand deposited in Bank). Order is therefore, bad in Law, liable to be quashed.” 5. We have heard the rival submissions and perused the materials available on record. The above assessee partnership firm was constituted on 01.04.2013 consisting of two partners namely; father and son, Rajan Jagdishkumar Soni and Jagdishkumar Manubhai Soni. The partnership firm was dissolved on 30.04.2015, whereby, clearly mentioned that the Profit & Loss account and balance sheet of the firm as on 31.03.2024 has been duly drawn up and the assets and liabilities of the firm have been distributed among the partners upon dissolution and as per the balance of capital account standing in the books of accounts of the firm. Clause 4 of the Dissolution Deed further makes it clear the name and style of the dissolved partnership firm (M/s. Kalptaru Cotton Co.) will not be used by any other partners after this date of dissolution. However, it is apparent from the record that during demonetization period the assessee made use of its bank account in State Bank of India for the purposes of depositing cash to the tune of Rs.25 Lakhs. Now the submissions made by the assessee the assets and liabilities of the firm are taken over by one of the partner, namely Jagdishkumar Manubhai Soni as per mutual understanding is also not supported with proper evidence. Further, Printed from counselvise.com ITA No. 1625/Ahd/2025 (Kalptaru Cotton Co vs. ITO) A.Y. 2017-18 5 Jagdishkumar Manubhai Soni has not demonstrated that the above cash deposit is reflected in his return of income. Thus, the submissions made by the assessee are baseless and without any corroborative evidences. In the absence of proper evidences, the ground nos. 7 & 8 raised by the assessee are devoid of merit and are liable to be dismissed. 5.1 Other grounds raised by the assessee are also against the provisions of Section 189 of the Act and therefore liable to be dismissed. 6. In the result, appeal filed by the assessee is hereby dismissed. Order pronounced in Open Court on 25- 11-2025 Sd/- Sd/- (Dr. BRR KUMAR) (T.R. SENTHIL KUMAR) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad: Dated 25-11-2025 S. K. SINHA True Copy आदेश कì ÿितिलिप अúेिषत/Copy of the Order forwarded to : 1. अपीलाथê / The Appellant 2. ÿÂयथê / The Respondent. 3. संबंिधत आयकर आयुĉ / Concerned CIT 4. आयकर आयुĉ(अपील) / The CIT(A)- 5. िवभागीय ÿितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडª फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad Printed from counselvise.com "