2017 (4) TMI 1334 - HC - Income Tax

Incomes from fees of students assessable in the hands of the firm OR partners - Receipts in the hands of individual partners - Held that - Additions were rightly made by the authorities below in the hands of the assessee firm because these receipts pertained to the assessee firm only. The findings of the fact recorded by the Assessing Officer have not been rebutted through any evidence. No substantial question of law.

Issues Involved:
1. Appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for the assessment year 2008-09.
2. Taxation of receipts in the case of individual partners.
3. Impounding of documents during survey proceedings.
4. Dispute over accounting of receipts in the books of the firm.
5. Legal aspects of diverting income from the firm to partners.
6. Application of Partnership Act, 1932 in determining personal profits earned by partners.

Issue 1: Appeal under Section 260A
The appellant-assessee filed an appeal under Section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal for the assessment year 2008-09, raising substantial questions of law regarding the legality of the impugned orders and the incorrect taxation of certain receipts.

Issue 2: Taxation of Receipts
The dispute revolved around the taxation of receipts in the case of individual partners of the firm. The Assessing Officer made additions to the income of the firm based on unaccounted receipts, which the appellant claimed belonged to the individual partners and were already accounted for in their personal capacity.

Issue 3: Impounding of Documents
During survey proceedings, various documents were impounded, including receipt books and a diary detailing fees received from students. The authorities found discrepancies in the accounting of these receipts, leading to additions in the income of the firm.

Issue 4: Dispute over Accounting
The appellant failed to provide sufficient evidence to support the claim that the unaccounted receipts belonged to the individual partners and were not part of the firm's income. The lower authorities upheld the additions based on the lack of evidence provided by the appellant.

Issue 5: Diverting Income
The authorities concluded that the income from student fees, which remained unaccounted for in the firm's books, was being diverted to the partners. The Tribunal affirmed the findings of the Assessing Officer and the CIT(A) in making the additions to the firm's income.

Issue 6: Partnership Act Application
The Tribunal referred to Section 16 of the Partnership Act, 1932, which governs personal profits earned by partners. The Tribunal highlighted the absence of a specific contract between the partners regarding the business conducted in the same premises, leading to the decision to tax the unaccounted receipts in the hands of the firm.

In conclusion, the Tribunal dismissed the appeal, stating that no substantial question of law arose based on the findings of the authorities below. The decision was based on the failure of the appellant to provide evidence to rebut the additions made to the firm's income. The application of the Partnership Act and the principles established in relevant case laws supported the decision to tax the unaccounted receipts in the hands of the firm.

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