ITAT Delhi Deletes ₹1.05 Crore Addition On Dissolved Firm, Says Income Taxed In Surviving Partner's Hands

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, directed deletion of a Rs. 1.05 crore addition on a partnership firm, holding that no addition could be made in the hands of a dissolved firm when the same receipts had already been offered to tax in the hands of the successor proprietorship.

Judicial Member Sudhir Kumar and Accountant Member Manish Agarwal observed, "no addition could be made in the hands of the assessee firm which has already been dissolved in preceding year for the contract receipts from M/s Maruti Suzuki India which are offered for tax by the surviving partnership Sh. Raja Singh in his proprietorship under the same name & style as M/s Assam Logistics. Any further addition for the same receipts in the hands of the assessee firm tantamount to double taxation of an income which is not permitted.”

The order was passed on April 24, 2026.

The case concerned Assam Logistics, a partnership firm that stood dissolved on April 28, 2015. Thereafter, its business was taken over by the surviving partner, Raja Singh, who continued operations as a proprietorship under the same name and style.

For Assessment Year 2017–18, the Assessing Officer (AO) noted that contract receipts of Rs.18.37 crore from Maruti Suzuki India Ltd. were reflected in the PAN of the erstwhile firm through TDS entries. Since no return was filed by the firm, the case was reopened, following which the AO treated these receipts as its income by applying a profit rate and making an addition.

The firm, however, contended that the receipts were duly recorded in the books of the proprietorship concern of Raja Singh and had already been offered to tax in his individual capacity. It was further explained that the TDS continued to reflect in the old PAN because Maruti Suzuki India Ltd. had not updated its records after the dissolution of the firm.

Despite these submissions, the Commissioner of Income Tax (Appeals) reduced the profit rate but sustained an addition of Rs.1.05 crore.

Before the ITAT, the firm reiterated that the firm had ceased to exist prior to the relevant assessment year and that the entire receipts had already been accounted for and taxed in the hands of the proprietorship concern.

After considering the material on record, the ITAT accepted these submissions and observed that the receipts formed part of the gross receipts declared by Raja Singh, on which due taxes had been paid after claiming expenditure on account of freight charges.

The tribunal further stated that "action of the lower authorities in holding the receipts from M/s Maruti Suzuki Ltd as income of the erstwhile partnership firm is not correct, more particularly when surviving partner Shri Raja Singh has been able to demonstrate that these receipts are forming part of the gross receipts declared by him and due tax were paid after claiming expenditure on account of freight charges paid"

It also noted that the reflection of TDS in the PAN of the erstwhile firm was due to non-updation of records by Maruti Suzuki India Ltd., while the substantive income had already been offered to tax in the hands of the proprietorship concern.

Accordingly, the ITAT held that sustaining the addition would result in double taxation and, therefore, directed the AO to delete the addition.

For Appellant: Advocate Aarzoo Aneja

For Respondent: Rajesh Kumar Dhanesta, Sr. DR