TaxTMI 
TaxTMI 
TaxTMI 
1985 (4) TMI 326
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....tax Act, 1961 ('the Act') but the assessee has challenged the reopening only for the assessment year 1974-75. We take up the question of the validity of the reopening of the assessment for the assessment year 1974-75 first. 3. For the assessment year 1974-75, originally, the assessment was completed on 4-6-1976 on a total income of ₹ 1,92,246. The assessment was reopened by giving a notice dated 22-3-1979 to the assessee on the ground that the commission of ₹ 5,611 paid to Samrat Sales had been wrongly allowed. In pursuance of the notice under section 147(b)/148, the assessee filed its return on 1-5-1979 returning an income of ₹ 1,95,246 at which amount the assessment had been originally completed. The assessment was reopened for the reason and under the belief that Samrat Sales was nothing but a part and parcel of the assessee-firm and that all the partners of the assessee-firm had substantial interest in Samrat Sales. For the same reasons, the assessment for the assessment year 1973-74 had also been reopened. The reopening of the assessment was upheld by the learned Commissioner (Appeals). 4. Before us, Shri P.N. Chopra, the learned counsel for the assessee, c....
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.... commission were inadmissible. Possibly this is so, as the ITO had obtained the directions of the IAC under section 144A of the Act in this regard. The IAC was influenced by the following factors : (i) The business premises of the assessee and of Samrat Sales were the same, namely, 5239, Sadar Thana Road, Delhi, (ii) no rent was being paid by Samrat Sales to the assessee for the use of the premises, (iii) there was only one telephone in the premises for the use of which no payment was being made by Samrat Sales to the assessee, (iv) there were no employees of Samrat Sales and it was only incurring a nominal expenditure on printing, stationery, legal charges, miscellaneous expenses and bank charges, (v) there was no written agreement for payment of commission, and (vi) in both the firms, members of the same family were partners, Shri Narain Das Chopra and his brother Shri Narinder Dass, being common partners in both the firms. The view taken by the IAC was that the assessee had appointed as its agent, a concern in which the partner of the assessee-firm was substantially interested and that it was a device to evade tax by splitting profits. 7. In appeal, the learned Commissioner (A....
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....to their profit and loss account and that it was for the ITO dealing with their case to examine the same. He pointed out that Shri Narain Das Chopra and Shri Narinder Dass were working actively for both the firms and that was the reason why Samrat Sales did not consider it necessary to have any permanent employees of their own. Lastly, he pointed out that commission at a rate higher than that paid to Samrat Sales was being paid by the assessee to certain other agents and, therefore, the payment of commission could not be said to be excessive or unreasonable. He submitted that the mere fact that two of the partners of the assessee-firm were also partners in Samrat Sales or that the partners were related was not enough. Reliance was placed by him in this connection on the following decisions-CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC), CIT v. Andhra Prabha (P.) Ltd. [1980] 123 ITR 760 (Mad.), Voltamp Transformers (P.) Ltd. v. CIT [1981] 129 ITR 105 (Guj.) and G.W. Lawrie & Co. v. ITO [1983] 4 ITD 273 (All.)(TM). Reference was also made by him to the decision of the Hon'ble Allahabad High Court in Prakash Narain v. CIT [1982] 134 ITR 364 for the proposition that the burden of p....
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....nived, when the facts and circumstances as compared to the earlier years had not changed and no evidence had been brought on the record to prove that the recipient-firm did not render any services. It is a settled proposition that the burden of proof is on the party which alleges benami. Samrat Sales are selling agents of Lajpat Potteries. It is a firm which was constituted in the assessment year 1971-72 and has been assessed to tax since then. The ITO had examined the common partner Narain Das Chopra but besides suspicion, nothing tangible came out of his statement. Nothing is mentioned in the orders of the income-tax authorities in that regard. It appears from the letter dated 27-4-1983 of the assessee before the Commissioner (Appeals) that in pursuance of a query raised by him, certificates had been filed from the following parties in proof of services having been rendered by Samrat Sales : (i)Jain Crockeries (ii)Hindustan Distributors (iii)Sethi General Stores (iv)Amar Nath & Sons (v)Punjab Crockery House (vi)Crockery Centre (vii)Kanwar Bhan Kundan Lal The certificates were to the effect that these parties were dealers of crockeries and placed orders for the same with S....