9911796707
TMI Blog1995 (4) TMI 310X X X X Extracts X X X X X X X X Extracts X X X X ..... e of ₹ 2,60,000. The assessment was completed on 16th March, 1985 computing the total income at ₹ 2,62,646. The assessment was set aside under section 263 of the Act by the Commissioner vide order dated 24th March, 1987 on the ground that registration was granted to the said firm without examining the basic facts and the ITO had not brought to tax the real and actual incomes derived by the assessee. A fresh assessment was made vide assessment order dated 31st March, 1989 in which the income for assessment year 1984-85 was determined at ₹ 8,24,206. 4. Survey operation under section 133A was carried out on 9th July, 1986 at the business premises situated at 169, New Cloth Market, Ahmedabad. It has been observed by the Assessing Officer (AO) in the assessment order that there are 4 sister-concerns of the assessee-firm. These concerns are (i) Hiralal Chandulal Chokshi, (ii) Hirabhai & Sons, (iii) Bhagwati Textiles Proprietor Hiralal H. Bhagwati (HUF) and (iv) Prakash Textiles. The Assessing Officer inter alia, observed that (a) during the course of survey it was found that entire cash of all the sister-concerns was kept together under the control of one single person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee's claim for grant of registration/continuation of registration was also refused. In the cases of the sister-concerns, the Assessing Officer gave reference of the order under section 263 passed by the Commissioner in the case of H. Bhagwati & Sons. He also relied on the material gathered as a result of survey under section 133A on 9th July, 1986. The Assessing Officer thereafter came to the conclusion that income in the hands of the assessee- firm is to be assessed on protective basis without prejudice to the finding as may be given in the case of H. Bhagwati & Sons. Certain additions and disallowances were also made in the cases of the sister-concerns. The registration to the three sister-concerns which are partnership firms was also refused on similar grounds. One of the sister-concerns is not a partnership firm but that is a sole proprietorship concern owned by Mr. Hiralal H. Bhagwati (HUF) (Bhagwati Textiles). 5. The Commissioner (Appeals) vide his common order passed in the case of H. Bhagtwati & Sons for assessment years 1984-85 to 1986-87 in relation to refusal to grant continuation of registration under section 184(7) held that the assessee-firm as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of this group of persons. The learned Departmental Representative also placed reliance on following other judgments : 1. Commissioner v. Durga Prasad More (1971) 82 ITR 540 (SC); 2. Simhadri Narasingh Prusty v. Commissioner (1971) 79 ITR 219 (Ori.); 3. S.P. Gramophone Co. v. Commissioner (1986) 158 ITR 313 (SC); 4. Manilal Dharmchand v. Commissioner (1970) 78 ITR 96 (Bom.); 5. Commissioner v. Ravi Constructions (1988) 169 ITR 662 (AP); 6. Commissioner v. Kanaiyalal Ram Chand (1979) 119 ITR 377 (P&H); 7. Addl. Commissioner v. Jay Engineering Works Ltd. (1978) 113 ITR 389 (Del.). On the strength of the aforesaid judgments and in view of the elaborate reasons mentioned in the orders passed by the assessing authority, the learned Senior Departmental Representative strongly urged that the orders of the Commissioner (Appeals) should be cancelled and that of the Assessing Officer should be restored. 8. The learned counsel for the assessee strongly supported the order of the Commissioner (Appeals). He reiterated almost similar arguments as were advanced on behalf of the assessee before the learned Commissioner (Appeals). It was further pointed out that out of the four sister-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & Co. v. Commissioner (1971) 82 ITR 680 (SC); 3. Kanoi Udhyog v. ITO (1987) 28 TTJ (Cal.) 288 : (1987) 20 ITD 347 (Cal.); 4. Vijeta Engg. Works v. ITO (1989) 34 TTJ 546; 5. ITO v. H. Ajitbhai & Co. (1989) 35 TTJ (Ahd.) 476. 9. The learned representatives of both the parties submitted that other grounds raised in remaining appeal relate to petty additions made in different years. The learned Senior Departmental Representative submitted that he would like to rely upon the reasons mentioned in the assessment order in relation to those additions which have been deleted by the Commissioner (Appeals). The counsel for the assessee relied on the reasons and conclusion mentioned in the order of the Commissioner (Appeals). 10. We have given a very thoughtful consideration to the arguments advanced before us by the learned representatives and have also carefully gone through the orders of the learned Departmental authorities as well as the various decisions cited by the learned representatives. 10.1 The main grounds on the basis of which the Assessing Officer refused to grant registration/continuation of registration to the main firm as well as to the three other partnership firms which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce on 29th July, 1975. The other firm Prakash Textile Associates came into existence on 1st June, 1976 and has been regularly assessed to tax as a separate and independent taxable entity and was treated as a genuine partnership firm ever since its inception upto assessment year 1983-84. Likewise Hirabhai & Sons was also formed on 1st April, 1980 with five partners and was assessed to tax as a separate taxable entity and was also treated as a genuine partnership firm upto assessment year 1983-84. 10.2 The stock inventory found during the course of survey operations conducted under section 133A dated 9th July, 1986 has been placed at page 14 of the compilation. The said stock inventory clearly indicated that which particular bale of the cloth found in its stock belonged to which firm. The inventory prepared by the officers of the Department itself indicate the name of the different concerns to which the particular lot of stock belongs. This has been indicated by mentioning the name of the respective concerns in an abbreviated form like PTA, HCC, BT, HBS, HCC, etc. The Assessing Officer has not indicated anything in the assessment order showing that any unaccounted stock was found du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not have common partners nor the three families have equivalent shares in different partnership firms. The assessee has also submitted the details of various employees employed by different business concerns which does not support the contention of the Revenue that the employees are common. One or two employees may be common in some of the business concerns but that by itself cannot lead to the conclusion that the four sister-concerns are benamis of the main firm. 10.4 The reliance placed by the learned Senior Departmental Representative on the various judgments also do not in any manner support the Revenue's contention. The main case which was relied upon by him is that of Ladhuram Taparia v. Commissioner (supra). The facts of that case are totally different and distinguishable. In that case it was, inter alia, found that each of the sister-concerns had been considerably financed by the other sister-concerns and huge purchases have been made from them and huge sales have been made to allied concerns. Most of the outside parties to whom goods had been sold and from whom goods had been purchased were the same for each of those firms. The bank accounts on behalf of different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the supervision of a few individuals belonging to the three groups of families would not justify a conclusion that the four sister-concerns are benamis of the main firm. 10.5 It would be worthwhile to make a useful reference to some of the judgments relied upon by the learned counsel for the assessee. In the case of Dy. CST (Law) Board of Revenue Taxes v. K. Kelukutty (supra), the Hon'ble Supreme Court held that where it is claimed that there are two partnership firms and not one constituted by the same persons and carrying on different businesses, the Assessing Officer must test the claim in the light of the partnership law. It is only after that question has been first determined, viz., whether in law there is only one partnership firm or two partnership firms, that the next question arises, viz., whether the turnover is assessable in the hands of the partnership firm as a taxable entity, separate and distinct from the partners. There is first a decision under the law of partnership and thereafter, the second question, the question as to assessment, arises under the tax law. Similarly, the Hon'ble Supreme Court in the case of K.D. Kamat & Co. v. Commissioner (supra), in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re benami concerns. Such burden can be discharged only if it is proved that the capital employed in the four sister-concerns floated from the main firm and the destination of the profit derived by the four sister-concerns had directly or indirectly flown back in favour of the main firm. The Department has not brought any material on records to prove any of these aspects. The burden further lies on the Department to prove not only that the four sister-concerns are benami concerns but it has also to prove by bringing some positive or definite material on records to prove that the main firm is the real owner of the entire income earned by those four sister-concerns and the main firm is the real owner of such income and none else. Such a burden has not been discharged by the Department by bringing any material or evidence whatsoever on records. On the other hand, the material available on records clearly indicate that the Department has not disputed the genuineness and the correctness of capital contributions made by the respective partners in the respective firm. The Department has also not disputed the correctness and genuineness of the capital contributed by the HUF in the sole prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e view taken by the learned Commissioner (Appeals) with regard to grant of registration to the partnership firm, with regard to genuineness of all the four sister-concerns, the deletion of disallowance of interest made by him is also approved. 11.2 The facts relating to ground No. 4 regarding addition made in the declared gross profit has been discussed by the Commissioner (Appeals) in paras 8 and 9. The Assessing Officer made a lump sum addition of ₹ 25,000 in the declared gross profit as per discussion in para 5 of the assessment order. The Commissioner (Appeals) has observed that the addition made by the Asstt. Commissioner by presuming that stock of each concern was manipulated to adjust the book results is not valid. He has further observed that all the sales and purchases were vouched and stock of the assessee-firm is identifiable and separate from the stock of other sister-concern. The accounts of the assessee- firm are only audited after taking into consideration all such relevant facts and circumstances, he directed the Assessing Officer to delete the lump sum addition of ₹ 25,000. In our view, the learned Commissioner (Appeals) has rightly deleted the lump su ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
