Tribunal allows appeal, condones delay due to COVID-19, directs Assessing Officer to prevent double taxation

The appeal was allowed by the Tribunal. The delay in filing the appeal was condoned due to the COVID-19 pandemic, and the appeal was admitted for adjudication. The Tribunal directed the Assessing Officer to delete the enhanced income of the individual partner, as it had already been taxed in the partnership firm's hands to prevent double taxation. Consistent accounting practices were emphasized to segregate income correctly between the individual partner and the partnership firm.

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Issues:
1. Condonation of delay in filing appeal.
2. Taxation of interest income received by individual partner from partnership firm.
3. Segregation of income between individual partner and partnership firm.

Analysis:

Issue 1: Condonation of delay in filing appeal
The appellant filed an appeal 61 days late due to the COVID-19 pandemic. The appellant contended that the delay was unintentional, which was accepted after considering the condonation petition and hearing both parties. The delay was condoned, and the appeal was admitted for adjudication.

Issue 2: Taxation of interest income received by individual partner
The appellant, a partner in a construction firm, received interest income from banks but did not disclose it in the return of income, explaining that the income was already reflected in the firm's accounts. However, the Assessing Officer enhanced the income, which was upheld by the CIT(A) based on 26AS statements. The Tribunal noted that the firm consistently showed all income sources in its accounts, and since the amount was already taxed in the firm's hands, taxing it again in the partner's hands would result in double taxation. The AO was directed to delete the amount and allow the appeal.

Issue 3: Segregation of income between individual partner and partnership firm
The appellant argued that all income, including interest income, received in the partner's name belonged to the firm, as evidenced by the consistent practice and supported by previous tribunal decisions. The contention was accepted by the Tribunal, emphasizing that the principle of consistency in accounting practices must be recognized. The Tribunal directed the AO to delete the amount from the partner's income, as it had already been taxed in the firm's hands, preventing double taxation.

In conclusion, the Tribunal allowed the appeal, emphasizing the importance of consistent accounting practices and avoiding double taxation by ensuring income is appropriately attributed to either the individual partner or the partnership firm.

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