1991 (1) TMI 180 - AT - Income Tax

Summary

Issues:
1. Assessment of M/s Shree Gita Tea Trading Co. and M/s Jay Jagdish Corporation.
2. Refusal of registration under section 185 of the Income Tax Act, 1961.

Assessment:
The appeals were against the CIT(A)'s orders on assessment and registration under section 185 of the Income Tax Act, 1961. The firms in question were M/s Shree Gita Tea Trading Co. and M/s Jay Jagdish Corporation. The ITO noted significant sales between the two firms, suspecting the latter to be a sham concern created to reduce tax liability. The ITO estimated profits diverted to the sham concern and made protective assessments. The CIT(A) overturned the ITO's decision, stating lack of evidence to deem the concerns as sham. The Revenue argued that both firms were controlled by the same group, with capital contributions from related sources. However, the Tribunal found no grounds for interference, noting separate existence, assessments, and lack of evidence to support the Revenue's claims. The appeals against assessments were dismissed.

Registration:
Regarding registration under section 185, the ITO refused registration for M/s Shree Gita Tea Trading Co. due to alleged profit diversion and benami concerns. The CIT(A) disagreed, finding M/s Jay Jagdish Corporation genuine and directing registration for both firms. The Revenue supported the ITO's decision, while the assessees cited legal precedents to support the CIT(A)'s orders. The Tribunal upheld the CIT(A)'s decision, emphasizing the genuine nature of M/s Jay Jagdish Corporation and the partners' prior assessments. The Tribunal found no grounds for refusal of registration and dismissed the appeals. The CIT(A)'s findings on the HUF representation by P.O. Desai were also supported, further solidifying the decision to grant registration to both firms.

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