2021 (5) TMI 206 - AT - Income Tax

Estimation of turnover of the assessee s benami firms - A.O. estimated the income of all the benami firms @ 5% of their aggregate turnover - HELD THAT - Assessee is holding 95% share in all the 10 firms. The so-called partners of those firms have also conceded that they are only employees of the assessee and not the partner of the assessee. The assessee has also not brought out any materials on record to establish that the profits of the firms were distributed to the partners of the firm according to their profit-sharing ratio i.e. in the ratio of the capital held by the assessee and the other partners - it is apparent that all the ten partnership firms are the assessee s benami firms. Therefore We are of the view that the Learned Revenue Authorities had rightly treated all the relevant firms as the assessee s benami firms. As these firms have also not maintained their books of accounts properly and produced cogent evidence for the expense incurred before the Ld. Revenue Authorities. Under these circumstances the Learned Revenue Authorities has estimated 5% of the aggregate turnover of all the relevant firms as the income of the assessee which We are of the view is quite reasonable and fair. Therefore we do not find it necessary to interfere with the order of the Learned Revenue Authorities on this issue. Disallowance u/s. 40(a)(ia) - Interest paid by the assessee to various entities without deducting TDS - HELD THAT - At this stage the Ld. AR could not controvert to the findings of the Learned Revenue Authorities on this issue. In this situation We are of the view that the Learned Revenue Authorities had rightly invoked the provisions of section 40(a)(ia) of the Act which is in accordance with the provisions of the Act. Hence we do not find it necessary to interfere with the orders of the Learned Revenue Authorities on this issue also. Therefore Groundraised by the assessee are also devoid of merits.

Summary

Issues:

1. Whether the CIT(A) erred in confirming the AO's order treating the partnership firms as benami and assessing their income in the hands of the assessee.
2. Whether the CIT(A) erred in confirming the estimation of 5% of aggregate turnover of benami firms as income of the assessee.
3. Whether the CIT(A) erred in confirming the disallowance of interest paid without deducting TDS under section 40(a)(ia) of the Act.

Analysis:

Issue 1 & 2 - Benami Partnership Firms:
The assessee, engaged in retail liquor trade, filed an appeal against the CIT(A)'s confirmation of the AO's order assessing income from ten partnership firms as benami income of the assessee. The AO estimated 5% of the firms' aggregate turnover as the assessee's income. The partners in these firms admitted to being employees of the assessee, not actual partners, and the firms lacked proper bookkeeping. The AR argued that the firms were independent, not benami, but failed to provide evidence. The tribunal held that since the assessee held 95% share in all firms, with partners confirming their employee status, and lack of profit distribution evidence, the firms were benami. The estimation of income at 5% of turnover was deemed fair, and the appeal was dismissed.

Issue 3 - Disallowance under section 40(a)(ia) of the Act:
The AO disallowed interest payments totaling &8377; 17,41,978/- and &8377; 84,66,183/- for non-deduction of TDS under section 40(a)(ia) of the Act. The AR failed to challenge this finding. The tribunal upheld the AO's decision, stating it was in line with the Act's provisions. Consequently, the appeal on this issue was also dismissed.

In conclusion, the tribunal upheld the orders of the revenue authorities regarding the treatment of benami firms and the disallowance under section 40(a)(ia) of the Act. The appeal filed by the assessee was dismissed, and the decision was pronounced on April 22, 2021.