TaxTMI 
TaxTMI 
2025 (12) TMI 1219
X X X X Extracts X X X X
X X X X Extracts X X X X
....w and facts in deleting the addition made by the Assessing officer u/s 69A of the I.T. Act, 1961 of Rs. 4,24,66,232/-on account of unexplained cash withdrawals. 3. The Ld. CIT(A) has erred in law and facts in deleting the addition made by the Assessing officer u/s. 69A of the 1.T. Act, 1961 of Rs. 8,45,00,000/- on account of unexplained investments in time deposits. 4. The Ld. CIT(A) has erred in law and facts in deleting the addition made by the Assessing officer u/s 69B of the I.T. Act, 1961 of Rs. 2,53,58,000/- on account of unexplained investments in mutual funds. 5.. The Ld. CIT(A) has erred in law and facts in deleting the addition made by the Assessing officer u/s. 69A of the 1.T. Act, 1961 of Rs. 1,42,03,419/- on account of unsecured loans treated as unexplained money. 6. The Ld. CIT(A) has erred in law and facts in deleting the addition made by the Assessing officer of interest income of Rs. 7,879/- under the head income from other sources. 7. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the assessing officer be restored to the above extent. 8. The findings of the assessing officer ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....her than a time deposit made through renewal of another time deposit) of Rs. 8,45,00,000/- and (d) Other interest u/s 194A of Rs. 7,879/-. The case was reopened by issue of notice u/s 148 dated 30.03.2021. During the course of hearing of the case it was submitted that M/s Kanji Ambabhai Cotton Industries (PAN: AAIFK1676L) and M/s Kanji Ambabhai & Co (PAN: AACFK2391J) are two separate firms with the same set of partners; M/s Kanji Ambabhai Cotton Industries (PAN: AAIFK1676L) has been projected as a separate entity only to obtain textile modernization subsidy from the Ministry of Textiles as the said subsidy was not admissible to the already existing M/s Kanji Ambabhai & Co (PAN: AACFK2391J). It was also contended that though the major portion of business has been done in the name of M/s Kanji Ambabhai Cotton Industries (PAN: AAIFK1676L), the results of such business has been consolidated in the hands of M/s Kanji Ambabhai & Co (PAN: AACFK2391J) and return of income for the assessment year (AY) 2017-18 has also been filed in the name of the said company; no return of income has been filed in the name of M/s Kanji Ambabhai Cotton Industries (PAN: AAIFK1676L) for the assessment year (A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Kanji Ambabhai Cotton Industries (PAN: AAIFK1676L) is considered as a separate firm, the additions made cannot sustain, as having been declared in the consolidated accounts of M/s Kanji Ambabhai & Co. (AACFK2391J). Therefore, ld.CIT(A) deleted the addition. 7. Aggrieved by the order of ld. CIT(A), the revenue is in appeal before us. 8. Learned CIT-D.R. for the revenue, argued that these are two partnership firms, having separate partnership deed and separate bank account, therefore, they should be assessed as a separate legal entity and therefore profit of these two partnership firms should not be clubbed for the purpose of taxation. Sub-section 31 of section 2 of the Income Tax Act, 1961, recognizes a partnership- firm, as a separate legal entity, therefore, both the partnership- firms, should have filed return of income separately and pay the income tax separately. No doubt, in both the partnership firms, the partners are common and same, and they are sharing the profit and losses equally, despite of this fact, since that the partnership- firm, which is having separate PAN number should be considered a separate legal entity and a separate person, under the Income Tax Act. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... passed by the learned CIT(A) may be upheld. 10. Without prejudice, ld.Counsel stated that the entire reassessment proceedings are based on information reported by Banks. The first issue taken up by assessing officer was of Cash Deposit in Bank accounts. The cash deposits in the bank account is not Rs. 41,410,751/- but the correct figure is that of Rs. 40,45,000/-. The same is evident from the Bank Statement attached with submission, dated 29.03.2022 wherein cash deposits have been highlighted in yellow colour and the total of the same comes to Rs. 40,45,000/-. The second issue with regards to cash withdrawals from bank account. Here also the statistics reported by the assessing officer are erroneous to the extent that the correct figure for cash withdrawal should be Rs. 82,85,000/- instead of Rs. 4,24,66,232/-. Therefore, most of the figures taken by the assessing officer contain typographical error. Besides, there is separate books of accounts for each partnership firm, each partnership firm got separate audit report, however, at the end to offer the income tax, the net profit of both the partnership firms have been clubbed and paid the taxes thereon, hence there should not be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ms are not a separate legal person. The provisions of subsection 31 of section 2 of the Income Tax Act, 1961, which recognizes a partnership- firm, as a separate legal entity, have been followed by the assessee- under consideration, however, at the year end, just to transfer the revenue and profit of one partnership -firm in the books of other partnership firm, where profit sharing ratio and remuneration of partners are same, and same persons are partners in both the partnership firms and then offer the tax on consolidated profit and that does not mean that there is escapement of income from tax, under the Income Tax Act, 1961. This has been done by the assessee for the purpose of convenience. The provisions of sub-section 31 of section 2 of the Income Tax Act, 1961, which recognizes a partnership- firm, as a separate legal entity, have been followed by the assessee under consideration. At the year end, just to transfer the revenue and profit of one partnership firm in the books of other partnership firm, and then offer the tax on consolidated profit, does not mean that there is escapement of income from tax. 13. If two genuine partnership firms (each a separate assessee under t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rtment. 15. We note that following documents and evidences were submitted by the assessee, before the lower authorities: (i) Cash Book highlighting cash deposited and withdrawn from Bank accounts. (paper book page-27 to 43) (ii) Bank Statements highlighting cash deposited and withdrawn. (paper book page-44 to 136) (iii) Ledger copy of PGVCL, Interest income recorded in books. (paper book page-137) (iv) Ledger Copy, ITR-V, Bank Statements for unsecured loans. (paper book page-138 to 152 & 158 to 163) (v) ITR-5, Computation of Income & Audit Report of Kanji Ambabhai & Co. (PAN-AACFK2391J) (paper book page-167 to 216 & 229 to 243) (vi) Copy of Audit Report for Kanji Ambabhai Cotton Industries (AAIFK1676L) (paper book page-224 to 228) (vii) Copy of investment Ledger. (paper book page-247 to 250) (viii) Copy of VAT returns. (paper book page-435 to 438) (ix) Reassessment order for A.Y.2013-14 in the case of assessee (AAIFK1676L) paper book page-445 & 446). (x) Partnership deed of the assessee (AAIFK1676L). (paper book page-447 to 451)." 16. It is evident from the above documents and evidences ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessing officer has started from the book results of M/s Kanji Ambabhai & Co. (AACFK2391J) and made the additions on the basis of the information available in respect of M/s Kanji Ambabhai Cotton Industries (PAN: AAIFK1676L). While all these transactions were explained with reference to the books of accounts of M/s Kanji Ambabhai & Co. (AACFK2391J) at the assessment stage, additions were made in the hands of M/s Kanji Ambabhai Cotton Industries (PAN: AAIFK1676L), holding it as a firm distinct and separate from M/s Kanji Ambabhai & Co. (AACFK2391J). Such a double addition based on same facts and figures is erroneous because it was within the knowledge of the assessing officer that the transactions have been reflected by way of consolidation of accounts in the hands of M/s Kanji Ambabhai & Co. (AACFK2391J). However, the assessing officer was under an apparent compulsion since PANs of the two firms were different and details of transactions were uploaded in the systems in the name of M/s Kanji Ambabhai Cotton Industries (PAN: AAIFK1676L), for which no return of income was filed. This entire episode is the result of using two PANs for the same entity for the purpose of availing go....
X X X X Extracts X X X X
X X X X Extracts X X X X
....required to possess electricity connection in the name of Kanji Ambabhai Cotton Industries and State Electricity Board required a PAN in the name of applicant, it obtained a PAN in the name of Kanji Ambabhai Cotton Industries. The partnership deed of Kanji Ambabhai & Company authorized to open a branch or a separate business in the name of partnership firm or any other name, it applied and started a modernized business in the name of Kanji Ambabhai Cotton Industries. Resultantly, the entire business of Kanji Ambabhai & Company was diverted to Kanji Ambabhai Cotton Industries. Separate accounts, in the name of Kanji Ambabhai Cotton Industries was maintained and were duly audited after transferring the profits to the accounts of Kanji Ambabhai & Company and getting its accounts also audited. Such both audit reports of both partnership firms have been duly submitted to department within the statutory rime limit. Return of income for all the previous years, and till date are being filed based on such accounts after including the profits of both the firms and duly assessed accordingly under scrutiny assessment. Both the partnership firms, are maintaining separate books of accounts, both....