Post-Dissolution Income Taxable Only in Surviving Partner’s Hands, Not Dissolved Firm: ITAT Delhi

Court : Income Tax Appellate Tribunal, Delhi Bench ‘B’

Brief :

Assam Logistics, a partnership firm comprising four partners, was dissolved through a dissolution deed dated 28 April 2015. Following the dissolution, the surviving partner, Shri Raja Singh, continued the same business under the same name as a proprietorship.

During Assessment Year 2017–18, contractual receipts from Maruti Suzuki Ltd. were deposited into the proprietor’s bank account and recorded in his audited books. However, TDS was mistakenly deducted against the PAN of the dissolved partnership  firm.

Relying on the TDS records, the Assessing Officer treated contractual receipts of ₹18.37 crore as belonging to the dissolved firm and estimated a profit addition of ₹1.47 crore at 8%. Interest income of ₹75,723 was also added. The CIT(A) subsequently reduced the profit rate to 5.76%, restricting the addition to ₹1,05,86,540.

The assessee challenged the additions, contending that the receipts were never earned or received by the dissolved firm and had already been disclosed and taxed in the hands of the surviving proprietor. CA Sansaar

Citation :

Assam Logistics v. Income Tax Officer, ITA No. 4549/Del/2025, decided on 24 April 2026

Judgement :

The ITAT Delhi allowed the assessee’s appeal and directed deletion of the additions of ₹1,05,86,540 towards estimated business profit and ₹75,723 towards interest income.

The Tribunal observed that the partnership firm had ceased to exist after its dissolution on 28 April 2015. Bank statements, audited financial accounts, an affidavit from the surviving proprietor and email correspondence with Maruti Suzuki established that the receipts were actually received and accounted for by the proprietorship.

It held that the deduction of TDS against the dissolved firm’s PAN, arising from an administrative error, could not determine the real ownership of the income. The same receipts could not be taxed again in the hands of the dissolved firm when they had already been offered to tax by the surviving proprietor. Accordingly, the Tribunal applied the principle of substance over form and prevented double taxation of the same income.