AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (1) TMI 1539
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....al order has been passed by the Ld. CIT (A), NFAC. The same is prayed for restoration. 2. The Ld. CIT (Appeals) has erred in invoking provisions of section 45 (3) in case of transferee which is not permitted by statute, especially when the similar provisions are invoked in case of transferor on substantive basis. The addition of Rs. 43,41,79,329/- is prayed for deletion. 3. The Ld. CIT (appeals) has erred in taxing the difference between market value and book value of the shop being Rs. 2,95,09,518/- whereas the fact is the value credited to capital account of the proprietor is book value and no assessment is framed in the hands of proprietor. A substantive assessment is framed in the hands of transferee invoking provisions of section 45(3). The addition of Rs. 2,95,09,518/- is prayed for deletion. 4. The appellant reserves its rights to add, amend, alter or modify any of the grounds on or before the time of final hearing. 3. The relevant material facts, as culled out from the material on record, are as follows. Return of income, declaring an income of Rs. 33,45,45,640/- was filed by the assessee, on 23.09.2015. The assessee derives income from the sel....
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....ka Jewellers, with effect from 01.07.2014, as going concern. The closing stock as on 30.06.2014 with all assets and liabilities which include stock and shop the value of the closing stock as on 30.06.2014 was Rs. 34,33,38,821/- which was carried over trading account of firm as stock transfer and credited to the capital account of Shri Ashokkumar M Zinzuwadia with the firm. The copy of the general entry passed accordingly on 01.07.2014, was submitted before the assessing officer. The details of the opening stock, purchase, sales in the desired format were also submitted before the assessing officer. 5. However, the assessing officer rejected the above contention of the assessee and was of the view that there should be protective addition in the hands of the partnership- firm and there should be substantive addition in the hands of the respective partners. The assessing officer observed that the assessee has shown the valuation of the stock in the partnership- firm at Rs. 77,75,10,150/-, as on 01.07.2014 through capital account of following partners: Sr. No. Name of the Partner Value of Stock Remarks 1 Shri. Ashok Kumar Zinzuwadia 34,33,30,821 The person Pr....
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.... 2,95,09,518/- in the hands of assessee- firm on protective base and substantive addition on the same amount is to be made in the hands of Shri Ashokkumar M Zinzuwadia, partner. 7. In response thereto, the assessee filed its reply before the assessing officer on 27.12.2017. The assessee stated in its reply that there is no transfer of shop as alleged. In fact, it is taking over proprietor business as going concern by the partnership- firm. Since, there is no transfer, no capital gain can be computed, as per the provision of section 48 and 45(3) of the I.T. Act, 1961. The assessee further, argued that even as on today asset stands in the name of Shri Ashokkamar M Zinzuwadia. No sale deed has been executed. Copy of the ledger account for shop as appearing in the books of proprietorship concern and as appearing in the books of firm were submitted before the assessing officer, wherein, the amount credit of Rs. 29,92,482/- in both the cases and as such no capital gain arises. 8. However, the assessing officer rejected the above reply of the assessee and held that the provisions of section 45(3) of the Act are clearly applicable to the assessee, and therefore, assessing officer hel....
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.... vehemently argued that substantive additions were already made in the hands of the respective partners, therefore, protective addition, so made by the assessing officer, in the hands of the partnership -firm, should be deleted. There should not be two additions for the same issue, therefore, if the protective addition is not deleted, then it amounts to double taxation on the same issue, which is not permitted by the law. Since the substantive additions were already made in the hands of the respective partners, by the assessing officer and learned CIT(A) also confirmed the substantive additions in the hands of the partners, therefore protective addition made in the hands of the partnership- firm may be deleted. 12. Shri Samir Jani, also argued that conversion of proprietorship concern into a partnership-firm and transfer of assets and liabilities of proprietorship concern to a partnership- firm, do not amount to transfer and therefore provisions of section 45(3) of the Act do not apply to the assessee, under consideration. The ld.Counsel further stated that in the assessee`s case, what has been introduced by the partners, is stock-in-trade and not capital asset, since partners a....
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....ay assess the income in the hands of either A or B and at the same time, he may make a protective assessment on B or A, as the case may be. The protective assessment is kept as a stand by and it will spring into action only if the other assessment is held to be incorrect. If the other assessment is found to be correct and the inclusion of the income in that assessment is upheld, the protective assessment will be cancelled. In the assessee`s case under consideration, we find that assessing officer has identified the partners, as the persons in whose hands the substantive addition should be made. And in fact, the assessing officer made the substantive addition in the hands of the partners, and the substantive addition, so made, in the hands of the partners, were confirmed by the learned CIT(A) also. The partners of the firm have acknowledged and accepted the responsibility of the substantive addition, therefore, since the substantive addition have already been made in the hands of the partners, therefore, protective addition made in the hands of the partnership-firm, should be deleted, as the revenue is fully protected by the substantive addition made by the assessing officer in the ....