TaxTMI 
TaxTMI 
2012 (11) TMI 624
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....payable in respect of acquisition of rights/interest resulting into undisclosed expenditure of the assessee. 2. The facts in brief borne out from the record are that the assessee is a firm engaged in the business of running jewellery shop with partners, Shri. Mahesh Chand Jain, Smt. Karuna Jain and Shri. Prasant Jain representing M/s Prasant Jain (HUF) in the profit sharing ratio of 35%, 35% and 30% respectively. On 5.10.2007 the assessee-firm was reconstituted and M/s Prasant Jain(HUF) retired. Accordingly, the profit share ratio of the remaining partners increased to 50% each. On retirement, the balance in the capital of the account of the retiring partner was paid or credited to his account along with proportionate share in profit for....
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....oks was paid by the assessee-firm to the retiring partner. It is merely an assumption and presumption of the Assessing Officer that the assessee-firm has made alleged payment to the retiring partner. It was further contended before the ld. CIT(A) that the Assessing Officer has himself observed that provisions of section 45(4) of the Act is not applicable in the given situation. He developed his own theory and worked out the notional sale of share of the retiring partner and that too for a notional consideration of Rs.2,07,25,297 based on assumed value of assets by ignoring that all the assets are accounted for in the books of account and that there are liabilities against the assets belonging to the firm. Presumption of the Assessing Office....
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....r liability is distributed or transferred to the retiring or any other partner. The AO has thus himself held that the provisions of section 45(4) of the Income Tax Act do not apply in the present case. 6.5.2 The case of the AO is that on retirement, the retiring partner had relinquished his interest in the assets of the firm which is considered as notional sale of assets in the hands of the firm for which the assessee firm made payment of Rs.2,07,25,297/- being fair market value of the assets of the firm relating to the retiring partner. He considered the said expenditure as unexplained and made addition under section 69C of the Income Tax Act, 1961. 6.5.3 On careful consideration of the matter and records, it is observed that (i) the....
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....based on merits; and (vii) there is no evidence or material brought on record by the AO to substantiate and prove that alleged payment of Rs. 2,07,25,297/- is actually made by the firm to the retiring partner. 6.5.4 Hon'hle Delhi High Court in CIT vs. Lubtech India limited (2009) 311 ITR 175 has held that:- "what is postulated in section 69C of the Act is that first of all the assessee must have incurred that expenditure and thereafter, if the explanation offered by the sssessee about the source of such expenditure is not found satisfactory by the Assessing Officer, the amount may be added to his income." 6.5.5 In the present case, there is nothing to show that the alleged expenditure was in fact incurred by the appellant firm. &nb....
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....The showroom was owned by the retiring partner and the assessee-firm continued to pay rent to the retiring partner. Though the firm has individual identity for the purpose of income-tax, but it would not get any benefit of the retirement of the third partner i.e. M/s Prasant Jain(HUF). There is no evidence on record, on the basis of which the Assessing Officer can assume or presume that any amount over and above the declared amount in the books of account has been paid to the retiring partner. The goodwill and closing stock was of the firm and it would remain in the firm. Moreover, there was no actual payment to the retiring partner to gain any benefit in the hands of the assessee-firm. Therefore, addition made by the Assessing Officer is t....