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TMI Blog2015 (7) TMI 990X X X X Extracts X X X X X X X X Extracts X X X X ..... of six HUFs. The share of income from these HUFs has been shown at Rs. 3,23,646/-. The Ld. Assessing Officer observed that these HUFs appear to have been ceased and, therefore, these HUFs are being treated as AOP. Accordingly, ld. Assessing Officer has made addition of Rs. 3,23,646/- in the hands of the assesseee. 4. On appeal, ld. Commissioner of Income Tax (Appeals) has deleted the addition by observing as under:- "2.3 I have carefully considered the facts of the issue. From the submissions of the appellant it is clear that all the HUFs have been filing their returns of income for several years in the past and no objections were raised by AOs questioning the genuineness during their assessment proceedings. The assessee has filed the copy of intimation u/s. 143(1) as old as for A.Y. 1986-87 which proves the genuineness and existence of the HUFs. On the other hands, AO has drawn his conclusions only on presumptions. He could not give any specific reason to treat these HUFs as bogus or ingenuine. Further, these HUFs are being assessed with the different AOs and treating them as AOP would tantamount to double taxation. Moreover, creating the separate HUFs have been held legally ten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by making a disallowance of 50% of labour charges paid by the assessee. The ld. Assessing Officer has observed that assessee has claimed labour expenses of Rs. 32,26,044/-. The assessee has paid labour charges to five family members. These family members have purchased the machinery in the current year and have carried out the job work for the assessee. The Assessing Officer formed an opinion that assessee syphoned his profit in the shape of job work to the family members and accordingly, he disallowed 50% of the job work charges. 7. On appeal, ld. Commissioner of Income Tax (Appeals) has deleted the disallowance. The finding recorded by the Commissioner of Income Tax (Appeals) reads as under:- "3.3 I have carefully considered the facts of the issue. From the submission of the appellant, it is clear that appellant had produced all the relevant evidence in respect of expenses claimed by him. It is also submitted that all the four family members are separately assessed and have taken separate registrations with SMC, have executed separate rent deeds, bills raised separately and purchased machines independently. The appellant produced the proof of individually filling the returns by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brief facts of the case are that assessee has paid job work charges to Mrs Vaishali Tarun Jain and Mrs Vishakha Ritesh Jain. They are the daughters in law of the assessee. The Assessing Officer formed an opinion that assessee has planned his activities in such a way that tax burden would minimize, therefore, he distributed his taxable income amongst the family members by making payment of larbour chases. The income in the hands of daughters in law requires to be clubbed with the income of the assessee u/s. 64(1) of the income tax act, 1961. Accordingly, ld. Assessing Officer has clubbed the income of these two daughters in law with the income of the assessee and made an addition of Rs. 4,60,560/-. 11. On appeal, ld. Commissioner of Income Tax (Appeals) has deleted the addition by observing as under:- "4.3 I have considered the facts on the issue and found that, as explained by appellant, daughters-in-law of the assessee namely Smt. Vaishali Jain and Vishakha Jain are not beneficiaries of assessee. Any movable and/or immovable asset has not been transferred by appellant to them. Rather, as per evidences given by appellant, it reflects that Smt. Vaishali and Smt. Vishakha have adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... weeping. He could not prove that cash sales are bogus or ingenuine. Just by saying that in the month of March cash sales are made for the amount if more than 10 lacs, does not prove that the accounts of assessee are lliable to be rejected. Similarly, the conclusion of AO in respect of transport expenses and vatav kasar expenses is also vague and irrelevant. No specific defect has been found by him in the books of account and bills and vouchers produced by the appellant. In view all these observations, it is held that the addition made by AO on account of low GP is without any basis and deserves to be deleted. Therefore, I, delete the addition of Rs. 26,30,205/- and allow the ground taken by appellant. Thus ground is allowed." 16. With the assistance of ld. representatives, we have gone through the record carefully. Section 145 has a direct bearing on the controversy, therefore, it is salutary upon us to take note of this provision. "145(1) Income chargeable under the head 'Profits and gains of business or profession' or 'Income from other sources' shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The first reason assigned by him is that assessee has shown low GP. The second reason assigned by him is that transport charges incurred by the assessee are being taken as a part of sales. According to the understanding of the Assessing Officer, in the city of Surat, there is a practice where goods are being supplied and the purchaser would got released from transporter after payment of transport charges. Therefore, according to the Assessing Officer, the transport charges should be borne by the purchaser. The third reason assigned by him is that vatav and kasar expenses are taken in profit and loss account. As far as the first reason is concerned, this is the first year of assessee's business in this line. So, there is no comparative result available for the assessee. The result can be compared with any other similarly situated assessee. But ld. Assessing Officer has not made reference to any such similarly situated assessee in the impugned order. He also observed that profit margin in grey manufacturing activity remains between 5 to 15%. What is the basis of this reference not discernable. The Assessing Officer ought to have referred the cases of similarly situated assessee but ..... X X X X Extracts X X X X X X X X Extracts X X X X
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