Business Receipts Taxed in Proprietor’s Hands Cannot Be Reassessed: ITAT

Court : Income Tax Appellate Tribunal (ITAT), Delhi Bench

Brief :

Assam Logistics, a partnership firm, was dissolved on April 28, 2015. Its business was subsequently taken over by the surviving partner, Raja Singh, who continued operations as a proprietorship under the same trade name.

For Assessment Year 2017–18, contract receipts of ₹18.37 crore from Maruti Suzuki India Ltd. appeared against the PAN of the erstwhile partnership firm through TDS entries. As the dissolved firm had not filed an income-tax return, the Assessing Officer reopened the assessment and made an addition by applying a profit rate to the receipts.

The assessee explained that the entire receipts had been recorded in the books of Raja Singh’s proprietorship and offered to tax in his individual capacity. The TDS entries continued to appear under the firm’s old PAN because Maruti Suzuki India Ltd. had not updated its records after the firm’s dissolution.

The Commissioner of Income Tax (Appeals) reduced the profit rate but sustained an addition of ₹1.05 crore. The matter was subsequently challenged before the ITAT Delhi.

Citation :

Assam Logistics v. Income Tax Officer, ITA No. 4549/Del/2025, 2026 LLBiz ITAT(AHA) 113; Order dated April 24, 2026

Judgement :

The ITAT Delhi directed the Assessing Officer to delete the ₹1.05 crore addition. The Tribunal held that no addition could be made in the hands of a partnership firm that had already been dissolved before the relevant assessment year, particularly when the same receipts had been duly disclosed and taxed in the hands of the surviving partner’s proprietorship.

The Tribunal observed that Raja Singh had demonstrated that the receipts from Maruti Suzuki India Ltd. formed part of the gross receipts declared in his return and that tax had been paid after claiming the relevant freight expenditure.

It further clarified that the continued reflection of TDS in the PAN of the erstwhile firm resulted solely from Maruti Suzuki India Ltd.’s failure to update its records. Since the substantive income had already been taxed in the hands of the successor proprietorship, making another addition in the dissolved firm’s hands would amount to impermissible double taxation. Accordingly, the addition of ₹1.05 crore was deleted. CA Sansaar