1980 (6) TMI 29

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.... is a registered firm and the relevant year of assessment is 1970-71. During the assessment year 1969-70, the firm had comprised of five partners, namely, Kedarnath, Rameshlal, Dineshlal, Maheshlal and Sureshlal. The first four partners made gifts of varying amounts to their respective wives on October 19, 1968, appertaining to the assessment year 1969-70 and the alleged gifts were made by book transfers and the respective capital accounts of the partners were debited and consequent credit entries were found in the names of the ladies. Interest was paid to the ladies on the loans. In the assessment year 1970-71, the firm claimed deduction of interest to the tune of Rs. 39,000 said to have been paid to the ladies on their loans. On August 26....

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....e made by the partners to their wives, in which case the payment of interest has to be allowed. If the payment of interest is made to the partners,it cannot be allowed by virtue of s. 40(b). It is definitely with a view to get over s. 40(b) that the assessee resorted to the scheme, namely, to show the gifts in favour of the wives of the partners. Therefore, there is no doubt, in our minds that the revenue has established the case against the assessee for concealment of income. At any rate, the assessee is clearly liable for furnishing inaccurate particulars of income ......... " Mr. Mohapatra, for the assessee, contends that all primary facts had been placed before the ITO before the original assessment had been completed. The ITO on being....