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2015 (7) TMI 990 - ITAT AHMEDABAD

2015 (7) TMI 990 - ITAT AHMEDABAD - TMI - Addition on share of income from HUFs - CIT(A) deleted the addition - Held that:- Section 171 of the Income Tax Act provides assessment after partition of a Hindu undivided family. In the present case, the ld. Assessing Officer did not adhere to any proceedings. He simply observed that assessee failed to prove that HUFs were existing prior to 31st March, 1978. The Commissioner of Income Tax (Appeals) on other hand has observed that assessee has produced .....

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inding of Commissioner of Income Tax (Appeals) as well as the written submissions of the assessee reproduced by Commissioner of Income Tax (Appeals) we do not see any reason to interfere in this ground of appeal. - Decided in favour of assessee.

Disallowance of 50% of labour charges - CIT(A) deleted the addition - Held that:- Assessing Officer, except, making a reference of payment of labour charges to family members did not collect any specific evidence falsifying the stand of the as .....

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o our notice by the department. - Decided in favour of assessee.

Clubbing the income of the two daughters in law with the income of the assessee - CIT(A) deleted the addition - Held that:- The ld. Assessing Officer failed to bring any evidence on the record demonstrating the fact that assessee has transferred any income generating asset to the daughters in law. He simply harboured a belief that assessee has distributed his profit to his daughters in law. The Assessing Officer failed t .....

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xpenses are taken in profit and loss account - CIT(A) deleted the addition - Held that:- 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 activi .....

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r identify, whether that purchaser has borne the expenses or not? This is such an issue which is dependent upon a person how to carry his business. We failed to understand the approach of Assessing Officer, without collecting any evidence, how he can assume that this expenditure ought not to have been incurred by the assessee. The third reason is also similar which is taken by the Assessing Officer on the basis of his experience of dealing with the assessees engaged in grey cloth marketing in Su .....

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. Sonia Kumar, Sr. D.R. For the Respondent : Shri S.B. Vaidya, A.R. ORDER PER : RAJPAL YADAV, JUDICIAL MEMBER:- Revenue is in appeal before us against the order of ld. Commissioner of Income Tax (Appeals) dated 27-12-2011 passed for assessment year 2009-10. 2. In the first ground of appeal, revenue has pleaded that ld. Commissioner of Income Tax (Appeals) has erred in deleting the addition of ₹ 3,23,646/-. 3. The brief facts of the case are that assessee is an individual engaged in the man .....

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d. 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 ₹ 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 .....

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them as AOP would tantamount to double taxation. Moreover, creating the separate HUFs have been held legally tenable and accepted by department in the earlier years which justify the existence of these HUFs as independent entities. In such situation, treating them as AOP by AO and adding the proportionate shares to the income of appellant is not justifiable, therefore addition made by AO is deleted. This ground is allowed. 5. With the assistance of ld. representatives, we have gone through reco .....

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ther contemplates that on the completion of the inquiry, the Assessing Officer shall record a finding as to whether there has been a total or partial partition of the joint family property and, if, there has been such a partition, the date on which it has taken place. In the present case, the ld. Assessing Officer did not adhere to any such proceedings. He simply observed that assessee failed to prove that HUFs were existing prior to 31st March, 1978. The Commissioner of Income Tax (Appeals) on .....

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ssessee as false. Therefore, after looking to the finding of Commissioner of Income Tax (Appeals) as well as the written submissions of the assessee reproduced by Commissioner of Income Tax (Appeals) in para no. 2.2, we do not see any reason to interfere in this ground of appeal. It is rejected. 6. Ground No. 2. In this ground of appeal, the grievance of the revenue is that ld. Commissioner of Income Tax (Appeals) has erred in deleting the addition of ₹ 16,13,022/- which added by the Asses .....

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cordingly, 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 an .....

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family members, on the other hand he is not able to reject the documentary evidences in respect of independent and separate business activity carried on by family members as distinct entities. The AO has failed to establish that it was not a tax planning rather it was tax evasion by assessee. Further, if the labour expenses have wrongly being claimed by assessee, them why only 50% was disallowed by AO. He should have disallowed whole of the expenses. Moreover, the books of account and bills and .....

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pt, making a reference of payment of labour charges to family members did not collect any specific evidence falsifying the stand of the assessee. All the family members have recognized these labour charges as their income. They are also assessed to tax. The treatment of payment of 50% charges as bogus at the end of Ld. Assessing Officer is based upon his assumption only without making reference to any concrete material. On the other hand, ld. first appellate authority has appreciated the controv .....

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that ld. Commissioner of Income Tax (Appeals) has erred in deleting the addition of ₹ 4,65,960/-. 10. The 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 paymen .....

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ed 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 advanced loans to the appellant in his business activity styled as Arham Arts" as shown in the balance sheet. So, as per provisions of section 64(1), unless the assessee has transferred .....

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he record demonstrating the fact that assessee has transferred any income generating asset to the daughters in law. He simply harboured a belief that assessee has distributed his profit to his daughters in law. The Assessing Officer failed to collect any evidence for substantiating his belief. Ld. Commissioner of Income Tax (Appeals) has rightly held that unless it is proved that income earning asset were transferred by the assessee to the daughters in law, their income cannot be clubbed in the .....

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issioner of Income Tax (Appeals) has deleted the addition by observing as under:- 5.3 I have considered the facts on the issue and found that the AO has estimated the gross profit on the basis of misplaced grounds. He has not given any specific comparable case to show that the GP shown by appellant is less than any other case of the same line of business. He has made general remarks that in the line of this business, GP of 5 to 15% are shown. Further, for rejecting the books of account, he has t .....

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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 ₹ 26,30,205/- and allow the ground taken by appellant. Thus ground is allowed. 16. With the assistance of ld. representatives, .....

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al gazette from time to time accounting standards to be followed by any class of assessees or in respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 1 .....

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nment may notify in the Official Gazette from time to time the accounting standard required to be followed by any class of assessee in respect of any class of income. Thus, it indicates that income has to be computed in accordance with the method of accountancy followed by an assessee, i.e., cash or mercantile. Such method has to be followed keeping in view the accounting standard notified by the Central Government from time to time. Sub-clause (3) provides a situation, i.e., if the Assessing Of .....

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ed and Assessing Officer would compute the income according to his estimation keeping in view the guiding factor for estimating such income. 18. In the light of above, let us examine the facts of present case. From perusal of the assessment order, it will reveal that Assessing Officer has basically assigned three reasons. 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 pa .....

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ear 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 .....

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