2023 (6) TMI 1130 - AT - Income Tax

Clubbing of business income of trading of bidis of husband and wife - business income of the wife of the assessee by clubbing it with the assessee s income - HELD THAT - Accounts of the assessee have been duly subjected to tax audit in terms of section 44AB of the Act. When the assessee s wife is independently assessed to income tax, having separate sales tax registration number and conducting the trading of bidis business at totally different addresses with that of the assessee and more especially when she had offered the business income from trading of bidis in her individual capacity in her income tax returns, it would be unfair to club her income with that of the business income of the assessee. We find that the assessee is already in high tax bracket and there is no need for him to split the profits between him and his wife. Hence, there is absolutely mala fide sic on the part of assessee. No contrary evidence to this fact has been brought on record by the Revenue, except relying on statement recorded during survey proceedings. Thus action of the lower authorities in clubbing the business income of assessee s wife with that of the assessee is dismissed. Decided in favour of assessee.

Summary

Issues involved:
The only effective issue is whether the learned CIT(A) was justified in confirming the addition made by the learned Assessing Officer in the sum of Rs. 5,53,535/- representing business income of the wife of the assessee by clubbing it with the assessee's income.

Summary:
The appeal was filed against an order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2010-11. The main issue was the addition of Rs. 5,53,535 representing the business income of the assessee's wife being clubbed with the assessee's income.

The assessee was engaged in trading bidis under the name 'Ram Lal Batra & Sons'. A survey revealed that the wife of the assessee was also involved in trading bidis under the name 'Sonia Batra', but it was found that the entire business was actually carried out by the assessee. The Assessing Officer proceeded to club the wife's business profit with the assessee's income, a decision upheld by the CIT(A).

It was argued that both the assessee and his wife were independently carrying on bidi trading businesses, each having separate PAN numbers and filing their own Income Tax Returns. The assessee claimed to be assisting his wife in the business. The accounts of the assessee had undergone a tax audit, and the wife had consistently declared business income from bidi trading in her returns.

The Tribunal found that since the wife was independently assessed, had a separate sales tax registration number, and operated from a different address, it was unfair to club her income with that of the assessee. The Tribunal also noted that there was no evidence of mala fide intent on the part of the assessee, and statements recorded during the survey proceedings were not considered as reliable evidence. Citing legal precedents, the Tribunal dismissed the clubbing of the wife's income with that of the assessee.

Therefore, the Tribunal allowed the appeal of the assessee, ruling in favor of not clubbing the wife's business income with that of the assessee.