1992 (5) TMI 63 - AT - Income Tax

Summary

Issues:
Treatment of assessee as a benami of another entity; Assessment of income and expenses in the hands of the assessee; Proper accounting basis for inclusion of amounts in assessment.

Analysis:
The appeal involved the challenge of treating the assessee, a proprietor of a consultancy firm, as a benami of another entity. The assessee had entered into contracts with the other entity to conduct market research and develop fashion garments. The Assessing Officer observed discrepancies in the transactions, including all purchases being made by the other entity and billed to the assessee. The authorities concluded that the assessee's business was a benami operation of the other entity, leading to the inclusion of income and expenses in the hands of the assessee. The assessee contended that if she was a benami, any additions or deductions should have been made in the other entity's assessment. The plea was based on the accounting year ending in June 1982 and the cash basis followed by the assessee.

The Departmental Representative failed to provide clarity on the assessment status of the other entity, M/s Junach Agencies. The Tribunal noted that when a concern is treated as benami, the assessment can be made on a protective basis, but the amount assessed should not exceed the returned figure. However, due to the lack of information on the assessment status of M/s Junach Agencies, the Tribunal set aside the CIT(A)'s order. The Tribunal directed a rehearing to examine the assessment in the hands of M/s Junach Agencies, especially regarding the dealings between the assessee and the other entity. The Tribunal emphasized the need to consider the assessee's cash basis accounting and provide adequate opportunity for the assessee to present her case.

Ultimately, the Tribunal allowed the appeal of the assessee on the condition of reassessment based on a thorough examination of the dealings between the assessee and the other entity, M/s Junach Agencies. The reassessment was directed to be conducted in accordance with legal principles, considering the cash basis accounting followed by the assessee and providing the assessee with a fair opportunity to present her case.