1995 (7) TMI 108 - AT - Income Tax

Summary

Issues:
1. Registration of the assessee-firm
2. Addition of Rs. 1,75,000 to gross profit (GP)

Analysis:

Issue 1: Registration of the assessee-firm

The case involved an appeal by the Revenue against the CIT(A)'s order directing the Assessing Officer to grant registration to the assessee-firm and delete an addition of Rs. 1,75,000 from the firm's total income. The Assessing Officer had raised concerns about the genuineness of the firm due to the inability to produce all partners for examination. Despite producing only two partners, the Assessing Officer concluded that the firm was not genuine. However, the CIT(A) reversed this decision, emphasizing that the partners were long-time income tax payers and their ignorance about other partners did not make the firm bogus. The CIT(A) also cited various legal precedents to support the genuineness of the firm. The Revenue appealed the CIT(A)'s decision, arguing that the firm was not genuine based on partners' statements and non-production of all partners. The assessee's counsel supported the CIT(A)'s decision, highlighting that partners' absence did not imply a bogus firm and referring to legal precedents. The Tribunal upheld the CIT(A)'s decision, noting that partners' existence was verified through assessment orders, ruling out the firm being benami.

Issue 2: Addition of Rs. 1,75,000 to GP

The second issue pertained to the addition of Rs. 1,75,000 to the gross profit of the assessee, which the CIT(A) had deleted. The Assessing Officer had raised concerns about the low declared GP, lack of proper bookkeeping, and payments to a sister concern in cash. The CIT(A, however, found that the books of accounts were maintained properly, audited as per legal provisions, and lacked defects. The Revenue failed to provide evidence supporting the excess payments to the sister concern or the low GP rate. The Tribunal agreed with the CIT(A), stating that the Assessing Officer's additions were baseless and lacked concrete evidence. The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 1,75,000 to the GP.

In conclusion, both issues were decided in favor of the assessee, with the Tribunal dismissing the Revenue's appeals.