1982 (8) TMI 122 - AT - Income Tax

Summary

Issues Involved:
1. Registration of M/s Ramesh Metal Industries.
2. Clubbing of income of M/s Ramesh Metal Industries with M/s Jaikishan Raghunath.
3. Direction to make two separate assessments for M/s Jaikishan Raghunath.

Detailed Analysis:

1. Registration of M/s Ramesh Metal Industries:

The Income-tax Officer (ITO) refused the registration of M/s Ramesh Metal Industries, asserting it was not a genuine firm but a branch of M/s Jaikishan Raghunath. The ITO noted that the control and management of M/s Ramesh Metal Industries were under M/s Jaikishan Raghunath, with financial transactions and management overlapping. He highlighted that the funds for M/s Ramesh Metal Industries were sourced from M/s Jaikishan Raghunath, and even the rent was just a book entry. The Appellate Assistant Commissioner (AAC), however, accepted the claim of M/s Ramesh Metal Industries, noting that the firm had separate sales-tax numbers and was independently managed by Shri Raghuwar and Shri Radheyshyam. The AAC directed the ITO to grant registration to M/s Ramesh Metal Industries, finding no substantial evidence to support the ITO's claim of non-genuineness.

2. Clubbing of Income:

The ITO clubbed the income of M/s Ramesh Metal Industries with M/s Jaikishan Raghunath, reasoning that the former was a branch of the latter. He argued that the operations, management, and financial control were interlinked, thus justifying the clubbing. The AAC, however, found that after the death of Shri Kajorimal, M/s Ramesh Metal Industries was established as a separate entity with a new partner, Shri Rameshwar. The AAC noted that the nature of business, management, and control of the two firms were distinct, and hence, the income of M/s Ramesh Metal Industries should not be clubbed with M/s Jaikishan Raghunath. The AAC's decision was upheld, with the Tribunal finding no material evidence to support the ITO's view that M/s Ramesh Metal Industries was not a genuine firm.

3. Direction to Make Two Separate Assessments:

The AAC directed the ITO to make two separate assessments for M/s Jaikishan Raghunath, one for the period up to the death of Shri Kajorimal and another for the subsequent period. This direction was based on the decision of the Hon'ble Madhya Pradesh High Court in the case of Ganesh Dal Mill. The Revenue contended that the AAC erred in this direction, arguing that only one return was filed for the whole year, and thus, two assessments could not be made. However, the Tribunal upheld the AAC's direction, noting that the computation of income for the two periods was provided along with the return, and the AAC's application of the High Court's decision was appropriate.

Conclusion:

The Tribunal dismissed the appeals by the Revenue, affirming the AAC's decisions. The registration of M/s Ramesh Metal Industries was validated, the clubbing of income with M/s Jaikishan Raghunath was rejected, and the direction to make two separate assessments for M/s Jaikishan Raghunath was upheld. The Tribunal found no substantial evidence to contradict the AAC's findings and decisions.