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2017 (6) TMI 643 - AT - Income TaxAssessment of income in the hand of assessee-individual instead of HUF - Held that - As in the case on hand when no transfer of license by the holder of the licensee is involved then the decisions of Hon ble Supreme Court as relied in the case of Biharilal Jaiswal Vs. CIT 1995 (11) TMI 2 - SUPREME Court and CIT Vs. Rangila Ram & Others 2000 (8) TMI 11 - SUPREME Court are not applicable in the case of the assessee. In view of the above discussion, the orders of the authorities below qua this issue are set aside and the claim of the assessee is allowed to the extent that the income offered in the hand of the HUF cannot be assessed in the hand of the individual-assessee. Gross Profit (GP) addition - Held that - For the year under consideration the assessee has offered the income which is equal to GP at 11.43%. Accordingly when the assessee itself has shown GP at 11.43% then making addition by taking an estimate of GP at 14% is not justified as there is no significant difference. Even otherwise, the authorities below have not brought on record any specific reason for not accepting the GP shown by the assessee. The only reason by the Assessing Officer is the direction obtained from ACIT under Section 144A of the Act regarding assessment to be made in the hand of the assessee-individual. These directions are based on the data made available by KSBCL and therefore there is always a scope of tolerance range of fluctuation of GP of individual cases and if the assessee s GP is falling within the reasonable range of fluctuation of GP then no addition can be made by taking GP on estimate basis. Hence the GP addition made by the authorities below is deleted. Addition made on account of difference between the sales shown in VAT return and regular books of accounts - Held that - It is noted that the difference of sales as per the VAT Return and books of accounts has not been disputed by the assessee therefore the sales shown in the VAT Return cannot be ignored. However the entire sale cannot be treated as income of the assessee and therefore only GP addition of such excess sale as per the VAT Return has to be added as income of the assessee. The Assessing Officer is directed to make the addition by taking the GP as declared by the assessee.
Issues Involved:
1. Assessment of income in the hands of the assessee-individual instead of HUF. 2. Gross Profit (GP) addition. 3. Addition made on account of the difference between sales shown in VAT return and regular books of accounts. Detailed Analysis: 1. Assessment of Income in the Hands of Assessee-Individual Instead of HUF: The primary issue was whether the income from the business should be assessed in the hands of the assessee as an individual or as part of the Hindu Undivided Family (HUF). The assessee, a widow, succeeded her late husband in holding the excise licenses for liquor shops. The assessee contended that the income from M/s. Pisale Wines, which was previously considered HUF income, should continue to be assessed as HUF income, not individual income, despite the license being transferred to her name for convenience. The authorities below relied on the Supreme Court decisions in Biharilal Jaiswal Vs. CIT and CIT Vs. Rangila Ram, which held that a license issued in the name of an individual cannot be transferred to a partnership firm, thus the income should be assessed in the hands of the individual. However, the Tribunal noted that the transfer of the license to the assessee was due to the law of succession and not a voluntary transfer by the holder. The Karnataka High Court in CIT Vs. S B Pannalkar & Co. had held that if there is no intention to contravene the law and the license is treated as a partnership asset, no transfer is involved. Applying this rationale, the Tribunal concluded that the income offered in the hands of HUF cannot be assessed in the hands of the individual-assessee, thereby setting aside the orders of the authorities below on this issue. 2. Gross Profit (GP) Addition: The second issue concerned the addition to the Gross Profit (GP) declared by the assessee. The Assessing Officer (AO) noted a low GP declared by the assessee compared to the data from Karnataka State Beverages Corporation Limited (KSBCL) and estimated a GP of 14% instead of the 11.43% declared by the assessee. The CIT (Appeals) partially upheld this, directing the AO to adopt a GP of 14%. The Tribunal found that the assessee had offered a GP of 11.43%, and there was no significant difference to justify an addition based on an estimated GP of 14%. The authorities did not provide specific reasons for not accepting the GP shown by the assessee. Given the tolerance range of GP fluctuations, the Tribunal held that no addition can be made on an estimate basis if the GP falls within a reasonable range. Consequently, the GP addition made by the authorities was deleted. 3. Addition Made on Account of Difference Between Sales Shown in VAT Return and Regular Books of Accounts: The third issue was the addition of ?66,950 due to the difference between sales shown in the VAT return and the regular books of accounts. The assessee argued that the sales figure in the VAT return was erroneous, and the correct figure was in the books of accounts. Alternatively, the assessee suggested that only the GP on the differential amount should be added as income. The Tribunal noted that the difference in sales figures was undisputed, and the sales shown in the VAT return could not be ignored. However, it agreed that the entire difference could not be treated as income. Instead, only the GP on the excess sales as per the VAT return should be added as income. The AO was directed to make the addition based on the GP declared by the assessee. Conclusion: The appeal was partly allowed. The Tribunal ruled in favor of the assessee on the assessment of income issue, directing that the income offered in the hands of HUF cannot be assessed in the hands of the individual-assessee. The GP addition was deleted, and the addition due to the difference in sales figures was limited to the GP on the differential amount.
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