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2011 (4) TMI 885 - AT - Income TaxAssessment of firm on protective basis - search u/s 132 - Whether AO has power to examine the genuineness of the firm - Held that:- Unable to accept the assessee's contention that it is not open to AO to examine the genuineness of the firm as that here has been a development after the completion of the assessments for the earlier years and this is that on 26-3-2003 there was a search under section 132. The assessee had filed its return on 19-9-2002 itself and the assessment was pending and it is during the pendency of the return that a search was conducted in the group cases and they were centralized in Mumbai. It is after the search that the AO took up the assessment of the return filed by the firm and proceeded to examine whether there was a genuine firm in existence. In such circumstances when there was material before him which throws considerable doubt as to the genuineness of the firm, it is not open to invoke the provisions of section 184(3) to contend that since the firm has been assessed as such in the earlier years, its genuineness cannot be examined in the assessment for the assessment year under appeal. AO was therefore well within his powers to examine the genuineness of the firm in the light of the materials gathered during the search. His powers cannot be curtailed merely because of sub-section (3) of section 184, which only provides for the rule of consistency. AO has been able to get statements from about 10 partners and they have been compiled in the paper book - a cursory perusal of some of the statements of partners shows that some basic and relevant details including the capital, activities of the firm, etc., have been given by the partners. They have also in some cases referred to their profit share. It is not proper to brush aside the statements. Thus the fact that the assessee firm had claimed to have taken Government contracts is also relevant because before awarding contracts the genuineness or credentials of the assessee firm would have been examined by the Government. All these are relevant considerations which the AO ought to have kept in mind - restore the matter to the file of the AO with directions to him to decide the assessment afresh - assessee's appeal allowed by of remand to AO.
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